1. INTRODUCTION

Working Table II (WTII) has made progress across all its initiatives over the course of 2004. The mid-year meeting in Portoroz on 7 June provided an opportunity to take stock of progress made to date and to highlight areas where increased efforts were required.

While this document serves as a progress report on the implementation of WT II’s activities over 2004, it mainly focuses on those activities that took place between June and November. These have been undertaken in line with the conclusions agreed at the WT II meeting on 7 June. The report also summarises some of the key challenges for 2005 and is supplemented by individual progress reports on the respective initiatives that have also been prepared for the WT II meeting.

The key message that emerged from the Portoroz meeting was the need to press on with the implementation of socio-economic reforms; through many of WT II initiatives the relevant criteria and guidelines have been agreed; the Stability Pact (SP) beneficiary countries and their partners must now deliver on implementation. A good example of this is the network of 28 free trade agreements. Securing these agreements was a substantial achievement, but it is only through full implementation that they will actually make a tangible contribution to improving the economic climate in SEE.

Another key point stressed at the meeting was that each initiative in WT II directly or indirectly contributes to job creation in the region. Improvement of the business/investment climate, ensuring a reliable supply of energy, developing infrastructure, enhancing social cohesion - all of these contribute to establishing an environment which can generate and sustain employment for all sectors of society. The WT meeting stressed the need for more communication, convergence and cross-fertilisation among the WT II initiatives under the umbrella theme of “enterprise development and employment generation”

2. OVERALL OBJECTIVE, STRATEGY AND APPROACH OF WORKING TABLE II

The overall objective of Working Table II is to promote economic reconstruction, development and co-operation in South Eastern Europe, as part of the Pact’s overall objective of contributing to the stabilisation of the countries of the region and to their progressive integration into European and international structures.

The specific objectives of Working Table II are to facilitate sustainable economic development through modernising infrastructure, particularly energy and transport, as well as through trade liberalisation and investment promotion. A particular aim is to ensure that both the countries of SEE and the international community take a regional strategic approach to economic development in order to make full and effective use of the public and private sector financial resources available. The Working Table also seeks to ensure that the need to underpin necessary economic reforms with measures to enhance social cohesion is addressed by all.

Throughout 2004, we have continued to maintain our focus on improving the policy environment and to build on the progress achieved to date. There is no doubt that the regional co-operation dimension – which, in the case of energy, will now take the form of a multilateral treaty - emphasised in each of our initiatives, is conducive to a more effective use of resources, including donors’ resources, and stimulating policy reforms. We have also, as requested, paid increased attention to the areas of SME development, entrepreneurship, government - business dialogue and have sought to improve co-ordination among our different initiatives. The review approved earlier this year of our Initiative for Social Cohesion is leading to a renewed dynamism and a more focused overall strategy; it offers an ideal platform for the exchange of experiences, the launching of regional projects and the promotion of best practice in specific social policy areas. Closer co-operation and co-ordination with other WT II activities, e.g. the regional core transport network and the regional energy market, are already becoming effective, particularly in the areas of employment and social dialogue, giving the WT II’s social cohesion activities a higher profile with all Stability Pact (SP) partners both in the region and internationally.

In line with all SP activities and as highlighted in the Thessaloniki Agenda, the various initiatives under WT II complement the on-going EU processes - the Accession Process for Bulgaria and Romania, the Stabilisation and Association Process for the five Western Balkans countries and the Partnership and Co-operation Process for Moldova. They also strengthen processes originating in the region, particularly the SEECP and those that secure regional involvement in international structures, e.g. WTO membership.

3. ACTIVITIES

WT II activities are divided among three areas: - (i) Energy and Other Regional Infrastructure (ii) Trade and Investment and (iii) Social Cohesion and Housing and Urban Management. Our activities in infrastructure, energy, trade and investment are core objectives for the Stability Pact. The three areas should also be seen as clusters of complementary activities (e.g. adequate infrastructure will underpin the free flow of trade which in turn will stimulate investment.) WT II staff assigned to one initiative can thus contribute to several activities in the same area.

3.1 ENERGY AND OTHER REGIONAL INFRASTRUCTURE

3.1.1 Overall Objective

The aim within this area of activity is to ensure that both the countries of SEE and the international community take a regional strategic approach to infrastructure development. This should be based on co-financing and institutionalised partnership and should cover transport, energy and telecommunications, with a view to prioritising capital investment in order to benefit from economies of scale.

The Infrastructure Steering Group (ISG), created under the auspices of the Stability Pact and chaired by the European Commission, is the main co-ordinating body for regional infrastructure, including energy. The ISG meets approximately three times per year.

3.1.2 Activities and Achievements 2004

(i) Energy

In the field of energy, the Stability Pact is fully involved in the so-called “Athens process” leading to the development of a regional energy market. Building on political commitments undertaken by the countries of the region (including Turkey) and UNMIK for Kosovo, pursuant to UN Resolution 1244 and in the framework of two Memoranda of Understanding (MoUs) signed in Athens, in November 2002 and December 2003 respectively, the process is now moving towards the negotiation of a legally binding international treaty involving the European Union, represented by the European Commission, and the signatories of the MoUs, in view of creating what will be known as the Energy Community in South Eastern Europe (ECSEE). The European Commission leads this process and the Stability Pact’s role is a complementary one that seeks to ensure regional political support and ownership, promote a common strategy among the donors and encourage private sector involvement to foster restructuring and investment in this sector.

Throughout 2004, the Office of the Special Co-ordinator worked on gathering political support for this ambitious process. This included promoting implementation of the commitments agreed under the two Athens MoUs and also advocating and subsequently supporting the eventual decision of the European Council in June to grant a mandate to the European Commission to negotiate the proposed legally binding agreement with the participating SEE countries.

After an intense preparation phase, negotiations on the treaty were formally launched in October and the European Commission and the participating governments hope to reach agreement on the key provisions of the text of the treaty by the end of 2004 or in early 2005. A specific calendar will have to be agreed for the full liberalisation of the electricity and gas markets for industrial customers and ultimately for households. In the course of the process, SEE governments will adopt all relevant EU acquis communautaire not only on energy but also on related environmental standards, competition rules and renewable energy resources, and hope to undertake comprehensive modernisation projects with the help of international financial institutions (IFIs) and foreign investors. Once EU standards are implemented, SEE countries will also gain access to the EU’s internal energy market, irrespective of the status of their membership negotiations.

In July, prior to the official launch of the negotiation process, WT II organised a meeting of senior advisers to SEE Prime Ministers to highlight the key political issues that would emerge during the negotiations. At the request of the European Commission, WT II also organised, in conjunction with the Romanian Chairmanship of the SEECP, a conference for the region’s parliamentarians and social partners to inform them about the Athens process and the forthcoming ECSEE treaty.

Held in Bucharest in October, the conference discussed the challenges facing the restructuring of the energy sector, including the costs and benefits of creating a regional energy market in line with the EU’s single market and its implications for tariffs and employment. Delegates also examined the technical modernisation needed to ensure the security of energy supply in the region, as well as the reforms necessary to comply with the EU’s acquis. Over a hundred participants attended the event from the region as well as representatives of the International Financial Institutions (IFIs) and representatives of the observers to the future ECSEE treaty.

Furthermore, Working Table II participated to the two SEE “Energy Weeks” organised by the European Commission in 2004 – the most recent meeting taking place on 24-27 October. Hosted by the Greek government in Athens, the events served as forums for a series of meetings by different governing and co–ordination bodies established under the Athens MoUs. Working Table II has also taken advantage of its participation in several other international conferences aimed at high level public and private sector decision makers to highlight the significance of the proposed Energy Community both in political terms and in terms of enhanced legal certainty for private sector investors.

(ii) Regional Infrastructure – Infrastructure Steering Group (ISG)

As previously reported, a High Level Meeting of the ISG on 6 February saw all members (EC, Council of Europe Development Bank, EBRD, EIB, Stability Pact and World Bank) express their satisfaction with the evolution of the ISG towards developing and implementing regional strategies for the different infrastructure sub-sectors. In addition to reaffirming their continued support for the Group, the members also formally extended the ISG mandate to cover environmental infrastructure, in particular water and water management projects.

The ISG has met twice to date in “regular” format, on 20 January and 13 May. In addition to reviewing progress across the different sectors, the first meeting served to prepare for the High Level Meeting on 6 February while the 13 May meeting allowed the Group to agree on how best to implement the decisions made on 6 February. In October, the European Commission appointed Michel Peretti, as the new Chair of the ISG.

Regarding the status of the list of agreed Regional Infrastructure Projects, in June this stood at 51 current projects (several completed projects were removed from the list), at a total cost of € 4.1 billion, of which 39, valued at € 3.45 billion, are under construction. The EC/WB Joint Office for SEE is currently updating the list of Regional Infrastructure Projects and will report on these shortly.

(iii) Transport

The Memorandum of Understanding on the Core Transport Network was signed on 11 June by the five Stabilisation and Association Process (SAP) countries and UNMIK/ Kosovo. This MoU encapsulates the agreed regional strategy for this key infrastructure sector, developed by the ISG and the SEE countries over the past two years and based on the EC-funded study on regional transport infrastructure in the Western Balkans (REBIS – Transport).

The implementation of this MoU was the key focus of the EC-led High Level Meeting on Transport that took place at the Council of Europe Development Bank in Paris on 25 and 26 October. The meeting took stock of progress since the signature of the MoU, which establishes the principle and modalities of cooperation on regional transport. At this meeting key donors and government representatives from the region had an opportunity to discuss progress on (i) the establishment of the South East European Transport Observatory (SEETO); (ii) the EC-funded Transport Project Preparation Facility (TPPF); (iii) transport policies and activities in support of the Core Transport Network; and (iv) a proposed World Bank Framework for the Development of the Transport Sector in the SEE Region. The regional chair of the Steering Committee established under the MoU should be appointed in the near future.

As part of the Stability Pact’s mandate to facilitate resolution of project implementation issues, an expert from the Office of the Special Co-ordinator has participated in some joint field missions with the EIB and the EBRD – most recently to Bosnia and Herzegovina in July, in order to study the problems regarding the implementation of specific infrastructure projects. In addition, WT II has begun to develop contacts with different social partners such as the European Transport Workers’ Federation to discuss the social impact of the regional transport strategy.

(iv) Regional Infrastructure – Other

Public Private Partnerships

In July, the Office of the Special Co-ordinator organised a meeting to launch an informal task force on Public Private Partnerships (PPPs) in SEE: the objective of the task force is to promote PPP projects in SEE through the implementation of pilot projects. It will work in close co-operation with the SEE Balkan Infrastructure Development (BID) Facility, funded by the IFC, the US and a number of European bilateral donors, which will soon become operational in Sofia. The task force will seek to promote pilot projects in different infrastructure sectors and in different SEE countries. Taskforce members are drawn from IFIs and the business community, particularly members of the Business Advisory Council for SEE (BAC) and work is underway to develop a shortlist of potential projects.

Transboundary Water Management – Sava River Basin:

After the completion of the parliamentary ratification process in Bosnia–Herzegovina, Croatia, Serbia–Montenegro and Slovenia, the Office of the Special Co-ordinator participated in a ceremony establishing the Sava River Commission in Belgrade in June. The multilateral treaty establishing the Commission, the seat of which is in Zagreb, was signed in Kranjska Gora (Slovenia) in December 2002. It introduces a very comprehensive river basin management concept addressing the needs of navigation, sustainable water management, hydro–electricity and environmental protection. The Sava countries signed legal documents, which state that the Republic of Slovenia will serve as depositary for the Sava Commission’s legal instruments.

Danube Co-operation Process

The second Ministerial Conference on the Danube Co-operation Process (DCP) took place in Bucharest on 14 July 2004. Together with Austria, Romania and the European Commission, the Stability Pact is one of the four parties responsible for the co-ordination of the process, launched in May 2002. This second Conference noted that “the current and possible future enlargements of the EU will bring the Danube region closer to the European integration process”. The Conference final document listed a number of recommended actions in the following areas (i) economic development, navigation and sustainable transport; (ii) environment and river basin management; (iii) tourism; (iv) cultural co-operation; and (v) sub-regional co-operation. The Special Co-ordinator insisted on the role that “Corridor VII” - the Danube - should play as an in-land waterway, in the context of the overall Trans European Corridors. He outlined a number of concrete steps that could be taken, particularly in the context of the Steering Committee of Corridor VII and urged the Ministers of Transport of the DCP countries to strengthen their regional co-operation.

Regional Environmental Reconstruction Programme for South Eastern Europe (ReRep):

The report on the external review of the ReRep conducted for the European Commission issued in January concluded that “The REReP succeeded in bringing in speedy funding for rebuilding environmental management capacity in SEE countries”. The audit evaluates the results of the donor assistance, as well as REReP’s management, content and impact and the final report recommends new directions for REReP. In general the projects implemented under the REReP programme have followed their timeframes and agreed outputs with continuous support of both the leading and target countries. Country ownership has been vital in addressing specific countries’ needs efficiently throughout the implementation of the programme.

3.1.3 Future Challenges and Aims for 2005

In addition to providing whatever support necessary to the ISG to realise its reinforced mandate, supporting the EC in the ECSEE negotiations and the implementation of the MoU on the Core Transport Network are key challenges for WT II in 2005. As outlined earlier, the Stability Pact’s role in each of these processes is to foster political consensus, create better awareness among the social partners and secure private sector interest. The implementation of several pilot PPP projects will provide valuable experience on the capacity of the region to utilise this form of investment. The Stability Pact will continue to press for the full implementation of the Sava River Basin Treaty and for substantive content in the DCP, the ReRep and other regional co-operation processes in the various infrastructure sectors.

3.2 TRADE AND INVESTMENT

3.2.1 Overall Objective

The overall objective is to support a business climate conducive to investment, trade and employment, through the implementation of the free trade agreements and the use of the monitoring process and in particular, the critical time bound targets of the Investment Compact, thereby fostering capital and know-how transfer and thus the basis for sustainable economic development in South Eastern Europe.

In order to support the development of a business climate conducive to investment, trade and employment and hence ensure sustainable economic development, the Stability Pact uses a variety of interlinked instruments designed to address the weaknesses in the policy framework, overcome political obstacles, tackle administrative and bureaucratic barriers and highlight the commercial opportunities and business potential in the region. These instruments include the Stability Pact Trade Working Group, the Investment Compact, the Business Advisory Council and the electronic SEE (eSEE) Working Group as well the activities of the Special Co-ordinator, the Chair and the Director of the Working Table in fostering political consensus and participating in high profile promotion activities.

3.2.2 Activities and Achievements 2004

(i) Trade Liberalisation

In the field of trade, the Trade Working Group (TWG) continued to be the key forum to implement the regional strategy for trade liberalisation, as set out in the Trade Memorandum of Understanding of June 2001. The TWG provides a forum for co–ordination among senior trade policy officials from the SEE countries, the European Commission, World Bank, World Trade Organisation and several bilateral donors. During 2004, the TWG held three meetings – in Budapest (March), Brussels (July) and Belgrade (October) – reviewing progress on the ratification and implementation of the 28 free trade agreements as well as looking at options for further liberalisation.

The year also saw considerable progress on the EC and Swiss funded project to assist SEE countries to identify and eliminate non–tariff barriers (NTBs) that was launched at the request of the TWG. The Sida/OECD project to promote and liberalise trade in services in the region was completed in June and follow–up to this important project will now be undertaken through another EC/CARDs project. A range of various workshops/seminars funded by donors such as Germany and the US have been held under Stability Pact auspices in 2004 to promote the FTA process. In August and September, the Office of the Special Co-ordinator led the preparation of the TWG’s Strategy and Action Plan for 2005 and the first draft was discussed at the Belgrade meeting. The Plan focuses on full implementation of the FTAs, eliminating selected NTBs, promoting trade in services and further harmonisation of the regulatory aspects of the FTAs.

In accordance with the Ministerial Statement of November 2003, work has also commenced on developing options for future direction and management of the trade liberalisation process in the region including a move to a multilateral free trade agreement. The selected option will be presented for review and agreement at a Ministerial meeting in 2005. Throughout the year, the Special Co-ordinator as well as the Chair and Director of WT II raised the issues of delays in ratification and implementation with several SEE governments and promoted the benefits of the FTA process to the domestic and international business community.

(ii) Investment Facilitation

In the field of investment facilitation, an independent evaluation of the Stability Pact’s Investment Compact (IC) was carried out by AT Kearney and the final report, published in July, confirmed that the Investment Compact is “good value for money“ and “has clearly contributed to improving the investment environment and increasing private investment and employment in the region” . A key concern of the IC is to ensure that the countries implement the agreed reforms designed to improve the investment climate. Under the leadership of the OECD, the Investment Compact continued to undertake a range of activities including technical assistance, promotional events and development of institutional structures.

The key political event under this initiative was the ministerial conference in Vienna in July, during which SEE governments endorsed a political declaration to improve governance. Among others, the region’s governments promised to reduce administrative burdens for company registration and licensing, and undertook to facilitate appeals procedures and information exchange, as well as to strengthen institutional capacity at central and local government level. The Vienna conference also featured a business forum, and a ceremony to present the “South East Europe International Investors of the Year” awards. As part of its efforts to enhance regional ownership of the process, the Compact’s regional chairmanship was handed over from Romania to Bulgaria.

Private sector involvement in the IC has been strengthened through the activities of the regional network Foreign Investors Councils (FICs) that has been established throughout the various countries. Several of the FICs have produced “White Books” on the investment climate in their respective countries and have presented these to governments as their input into policy development. Together with Friedrich Ebert Foundation, the Investment Compact also organised, in September, a conference to highlight the role of parliamentarians in implementing economic reforms. The need to ensure that parliamentarians and representatives of local government are better informed regarding economic development issues is emerging as an important topic across several Stability Pact initiatives and will be followed up.

The Special Co-ordinator and senior Stability Pact staff participated in several high profile events designed to promote business in the region, including the 4th SouthEast Europe Finance & Investment Conference in Dubrovnik in October, the Congress on Financing Infrastructure in SEE and the German World Bank Forum in Munich.

(iii) Other Private Sector Development Activities

The Trade Working Group, the Investment Compact and the Office of the Special Co-ordinator also worked with the Business Advisory Council for SEE. The Business Advisory Council held four meetings in 2004 – in Sofia, Bled, Istanbul and Zagreb. It also organized two limited business missions to Chisinau (21–22 October) and Tirana (14–15 November) to enhance a direct exchange of views between the public and private sector on the investment climate in the individual countries. In 2004, the BAC institutionalised its partnership with the IC’s network of Foreign Investors Councils and SECIPRO committees (trade and transport facilitation bodies) in the region.

The EBRD-led private sector development programme continues to operate under the auspices of the Stability Pact and provides much needed stimulus for private sector development in SEE, particularly to the SME sector through a combination of financial instruments and technical assistance. The ten initiatives focus on trade facilitation (e.g. back up guarantees for letters of credit), SME financing (micro credit, SME credit lines and equity funds) and SME support (business advisory services and management advice).

The volume and value of transactions continues to rise throughout the region, for example, the current annual turnover for the trade facility for 2004 is approximately € 43 million (350 transactions). The share of intra-regional deals is increasing. Micro-finance institutions are active in all SEE countries except Croatia and again the volume of transactions is rising with excellent repayment rates (arrears over 30 days currently running at 0.53%). The EBRD/EU SME Facility for Romania and Bulgaria has resulted in a total of 8,550 loans with a value of € 238 million and the EBRD would like to replicate this scheme in the Western Balkans. The EBRD’s Business Advisory Scheme is active in Bosnia and Herzegovina, Bulgaria, Croatia Macedonia and Montenegro and hopes to access additional funding to expand to Serbia and Romania. The Turnaround Management Programme (TAM) is active in all SEE countries.

The SP’s Electronic South East Europe (eSEE) initiative is making further progress in promoting the Information Society in SEE. Further to the European Ministerial Conference on the Information Society in Budapest on 26 and 27 February 2004, which included the participation of the SEE ministers responsible for information technology, three meetings of the eSEE Working Group have taken place to review and to stimulate progress. While some countries have met the ambitious deadlines for action in the agenda, others are encountering difficulties with the schedule. A revised schedule is being prepared. The participation of a representative of the European Commission in the meetings is helping the Group to focus particularly on the priorities in terms of adoption of the acquis communautaire as concerns the ICT sector. An important development has been the publication in October 2004 of “eSEE Regional ICT Sector Status and Usage Report: Building an Information Society for All”, showing the current status and highlighting best practice in the eSEE countries. It was prepared, under the auspices of the Stability Pact, with the support of the UNDP and of UN Volunteers and contributions from INA (Greece).

3.2.3 Future Challenges and Aims for 2005

Facilitating and monitoring implementation of agreed policy reforms, promoting further liberalisation and improvements in the business environment and improving further government /private sector dialogue are the main challenges for WT II’s trade and investment oriented initiatives.

The Trade Working Group will intensify activities to implement the FTAs fully and effectively and will pay particular attention to the reduction and elimination of non tariff barriers, meeting standards, promoting trade in services and promotion of the overall trade process both within the region and internationally. The Group will also prepare the Ministerial Meeting on Trade in 2005 that will endorse the most appropriate option to ensure the evolution of a regional free trade area in SEE from both a trade policy and management perspective.

The Investment Compact will focus its efforts on two main areas (i) FDI policy and promotion and (ii) Enterprise (SME) development. Activities will include monitoring progress in the various areas in accordance with the agreed reform priorities and other agreements (e.g. EU SME Charter) and supporting implementation of the reforms (much concern expressed over administrative capacity in the region). The IC will seek to further develop regional co-operation and ownership. Co-operation with the private sector and other actors (e.g. parliamentarians) will be intensified, particularly through the network of Foreign Investor Councils and supporting the BAC, as requested. More active involvement of the IFIs will be sought. The monitoring process will be more systematic and more frequent and more resources will be put into developing and implementing a communications strategy for the IC, including better co-operation with other SP initiatives and other partners e.g. FIAS.

3.3 SOCIAL COHESION

3.3.1 Overall Objective

The overall objective of the Initiative for Social Cohesion (ISC) is to address social issues that affect the daily lives of citizens in the countries of South Eastern Europe (SEE). Attention is paid to the most vulnerable populations. The method is based on regional networking, prioritising capacity building and the strengthening of institutions. The Initiative breaks down into five main sectors: Social Dialogue, Employment, Social Protection, Health and Housing Policy.

The ISC brings together decision makers and experts in SEE countries with experts from the international community, including the Council of Europe, the Council of Europe Development Bank (CEB), the WHO and the ILO.

3.3.2 Activities and Achievements 2004

The Stability Pact's strategy and approach for its Initiative for Social Cohesion (ISC) has been revised substantially during 2004. The initiative sharpened its focus and redefined its overall mission statement, establishing concrete objectives for its five areas of activity. A newly created Advisory Group consisting of the Co-chairs, representatives of the leaders of each sector and the Office of the Special Co-ordinator now guides the overall strategy and approach for the initiative.

The ISC has made progress in each of the sectors under its responsibility. Work in reviewing national employment policies as agreed during the Bucharest Ministerial Meeting on Employment in 2003 continues under the leadership of the Council of Europe and the ILO. Several countries have submitted reports and Albania and Croatia are being subjected to an in-depth peer review. In the Health sector, national plans for food quality and safety have been agreed and in many cases endorsed, while new projects in areas such as blood safety have secured funding.

While social dialogue is still weak in SEE, the ISC’s activities in this area are achieving results as evidenced by the results of the third joint meeting of the European Trade Union Confederation (ETUC) Balkan Forum and the South East European Employers’ Forum that took place in Sofia in October. A series of consultative meetings cumulating in a joint forum brought together unions and employers to discuss how to further strengthen social dialogue in the region and in particular settle labour disputes including the use of labour courts. In the field of social protection, the ISC supported the establishment of the EC funded Regional Coordination Centre for Social Policy Issues, which will soon become operational in Skopje.

3.3.3 Future Challenges and Aims for 2005

The peer-reviews of the national employment policies and in-depth analysis and assessment by the ILO and the Council of Europe of another two countries will continue in the first half of 2005. Additionally, the ILO plans to organise national tripartite conferences in Albania and Croatia to discuss the reviews of their employment policies and the recommendations for improvement. The second Ministerial Conference on employment is planned to take place in Bulgaria, funded by the Belgian Government, to take stock of the progress made in the reviews of the employment policies, as well as to plan future regional co-operation in this field.

The ISC health sector network is already working on the preparation of the second Health Ministers Forum, scheduled for November 2005. Special attention will be given to the impact of Health on macro-economic performance and an evaluation report on progress since the Dubrovnik pledge will be presented. Further objectives include the inauguration of several community centres for mental health in the first quarter of 2005, finalisation of food safety strategies and preparation of legislation for Food and Nutrition Services and Surveillance and Control of Communicable Diseases.

The networks of SEE employers’ associations and trade unions will continue to work in 2005 on the achievement of several objectives they set at their recent joint meeting: continuing the work on labour dispute resolution, in particular the establishment of labour courts; organisation of a major regional conference on “the rule of law in labour relations”. Special emphasis will be put on the role of social partners and on the instruments available to them in the fight against corruption and the black economy.

In addition to its support for the newly established Regional Centre for Co-ordination of Social Policy in Skopje, the ISC will continue to ensure the smooth functioning of its Social Security Experts’ Network, with particular emphasis on pension reform.

3.4 HOUSING AND URBAN MANAGEMENT

3.4.1 Overall Objective

The overall objective of WTII’s Housing and Urban Management Initiative (HUMI) is to keep the housing issue on the national, regional and international agenda and to facilitate the long-term development and reconstruction assistance that is needed for everybody to find an affordable and sustainable housing solution.

This initiative initially worked as part of the Stability Pact’s Migration, Asylum and Refugee Return Initiative but has since been transferred to WT II in recognition of the need to address housing policy in a more comprehensive manner.

3.4.2 Activities and Achievements 2004

HUMI is assisting the countries in SEE to overcome obstacles in the development of housing policy instruments; to promote the regional cooperation in the area of housing policies and to further the process of exchange of information on these policies and related matters throughout South-East Europe.

Much of the progress made under this initiative was highlighted at a high level conference on the issue of Informal Settlements in SEE in Vienna in late September. Ministry representatives from Albania, the former Yugoslav Republic of Macedonia, Serbia and Montenegro signed a declaration, reaffirming their commitment to formalising existing informal settlements, including among other things facilitating more secure tenure and access to education, health care and infrastructure services.

HUMI is also facilitating the elaboration of housing policies in Montenegro – and this process will be extended to other SEE countries on request to encourage a consistent approach and sharing of best practice.

3.4.3 Future Challenges and Aims for 2005

HUMI will continue to act as an effective lobby for the development of housing policy in SEE. In particular it will monitor progress on the implementation of the Vienna Declaration on Informal Settlements as well as developing a regional concept for housing and urban management/planning capacity building and training of national as well as municipal officials.

HUMI will also continue to work closely with the housing expert network established in the framework of the ISC, which is preparing the second SEE Ministerial Conference on Housing, to be organised by the Council of Europe and the Council of Europe Development Bank in the second half of 2005. This conference will build on the work of the SEE Housing Expert Network, more specifically on the SEE country profiles on the housing sector, prepared under the guidance of UNECE and the regional report “Trends and progress in Housing in SEE”, which will be published early in 2005 and which will highlight best practices in devising and implementing national housing policies.

3.5 ENTERPRISE DEVELOPMENT AND EMPLOYMENT GENERATION

At the WT II meeting in Tirana in December 2003, WT II was requested to seek convergence between its economic activities and those under the auspices of the ISC. One of the first examples of improved co-operation and co-ordination was the organisation of a conference on Entrepreneurship and Employment in Bucharest on 26 and 27 May. It is important to note that this is not a separate activity or initiative but rather is designed to enhance existing WT II initiatives in these areas such as the Investment Compact, the European Charter for Small Business and the Bucharest Employment Process.

The conclusions of this conference were endorsed at the Portoroz meeting, in particular the need for enhanced political commitment to support existing SP initiatives (e.g. the Investment Compact, the Charter for Small Enterprises, the EBRD-led Private sector development activities, and the Review of Employment Policies further to the Bucharest Ministerial Conference of 30-31 October 2003).

The WT meeting again stressed the need for more communication, convergence and cross-fertilisation among the initiatives, in particular among officials involved in investment promotion and those involved in employment policies. Working Table II was encouraged to follow-up on the conference through similar joint events on topics such as training for employability and entrepreneurship, optimal financial/technical assistance packages for SMEs and successful experiences in regional development.

The first of these events was a seminar that took place in Skopje on November 9 and focused on sharing best practice in regional or local aspects of economic development. The seminar brought together officials and experts involved in several WT II initiatives namely the Investment Compact’s FDI and SME development activities and the employment and social dialogue sectors of the Initiative for Social Cohesion.

The workshops that formed part of the seminar found that while many countries have strategies for SME/enterprise development, little progress has been made in ensuring that these trickle down to the local level. While several successful examples of enhancing local economic development were shared, in general it was felt that regional/local economic development strategies, if they exist, are in the very early stages of implementation. The usual challenges of intra –ministerial, agency and private sector co-operation as well as lack of capacity among officials at national and local level diminish the expected impact of the strategies. The value of community-based measures to expedite economic development were noted and the seminar discussed a number of practical ways to improve communication at regional, national and local level. A template of community-based measures based on the discussions will now be formulated and circulated to all.

In line with the conclusions of Portoroz, two further seminars – one on training for employability and one on SME access to finance and technical assistance will be held in the first half of 2005.

4. CONCLUSIONS

As requested at the WT II meeting in Tirana and subsequently stressed at the Portoroz meeting, all initiatives have focused on the implementation of the various political agreements secured under their auspices and tangible progress has been made in each area. This emphasis on translating statements of political willingness into concrete actions will be intensified in 2005.

The monitoring and reviewing element of each WT II initiative provides an additional impetus to governments to make progress in accordance with their commitments. Hence the monitoring process remains a fundamental component of each initiative and should be further strengthened during 2005. The ability to publicly demonstrate solid progress through these review mechanisms contributes to the development of an improved image of the political stability and economic prospects of the region and hence its attractiveness for investment – public and private, foreign or domestic.

The regional co-operation aspect of all WT II activities (like all SP activities) allows both the countries of SEE and the international community to develop and implement strategies that reflect best practice but that are tailored to the specific circumstances of the region, allowing for more efficient use of scarce resources. This unique combination of political, technical and financial assistance from all Stability Pact partners in the region and internationally is crucial to the success of these initiatives.

In addition and as amply demonstrated by the forthcoming energy agreement, regional strategies can expedite integration into European and/or international structures for all countries and all WT II initiatives ensure that the responsibilities and commitments of the SEE countries vis à vis the EU and other bodies are respected.

Successful implementation of reforms requires enhanced communication and co-operation between all parties, e.g. government and private sector, between ministries and government agencies, governments and donors and all initiatives will seek to provide suitable frameworks and opportunities for dialogue and co-operation.

Efforts to ensure that social policies in the region are closely intertwined with economic policies will continue and WT II will maintain its policy of highlighting the importance of social cohesion in all aspects of its work.

WT II will also continue to ensure that the recommendations made at the Entrepreneurship and Employment Conference in Bucharest are translated, via the relevant WT II initiatives, into pragmatic activities “on-the-ground” designed to stimulate, at local level, further SME development, entrepreneurship, investment generation and job creation.