South East Europe 2020 Towards a Regional Growth Strategy May 2013

How it all begun… Emergence of multiple regional cooperation frameworks requiring coherence & coordination Need to anchor reform efforts into an overarching growth and development agenda Provide RCC with a mandate to perform its role to its fullest potential

…with kick-start by Europe 2020 ? Preparations for future membership suggest that the Europe 2020 policy goals and implementation methods are pertinent to enlargement countries However, a strong need to adjust the strategy to region’s needs, making it more realistic and credible Main objectives include boosting competitiveness, productivity, growth potential, social cohesion and economic convergence. Materialized as a response to Europe 2020, as the region was left out of the main European growth framework:

Getting the mandate SEE 2020 RCC to provide a “link between the national and regional level and … for the efforts going into Europe 2020 implementation in the region to demonstrate a considerable level of complementarity with the work being done at the national level.” Montenegrin C-i-O SEECP “The [European] Commission will propose to the Regional Cooperation Council that it sets up platforms for dialogue and peer review in other areas in line with Europe 2020 priorities” Enlargement Strategy Actively pursue “a regional recovery and development strategy which should follow the main parameters of EU 2020, based on knowledge and innovation.” June 2010 Sarajevo High Level Mtg

SEE Investment Committee – SEE2020 Catalyst Transfer of SEEIC provided an opportunity to: 1.Get a clear mandate for SEE2020 Development 2.Engage national administrations 3.Secure resources

Integrated growth deeper regional trade and investment linkages and policies enhancing the flow of goods, investment, services and persons Integrated growth deeper regional trade and investment linkages and policies enhancing the flow of goods, investment, services and persons Smart growth commitment to compete on value added, promoting knowledge and innovation across the board Smart growth commitment to compete on value added, promoting knowledge and innovation across the board Sustainable growth enhancing competitiveness, entrepre- neurship and a commitment to greener and more energy-efficient development Sustainable growth enhancing competitiveness, entrepre- neurship and a commitment to greener and more energy-efficient development Inclusive growth skills development, employment creation and labour market participation by all, including vulnerable groups and minorities Inclusive growth skills development, employment creation and labour market participation by all, including vulnerable groups and minorities Governance for growth improving the capacity of public administrations to strengthen the rule of law and reduce corruption so as to create a business-friendly environment Governance for growth improving the capacity of public administrations to strengthen the rule of law and reduce corruption so as to create a business-friendly environment

Key principles of SEE Added value to national efforts – regional relevance 2.Decentralized development and implementation 3.Quantifiable indicators and measurable progress 4.Clear governance structure and political support Strong link with IPA 2

Formulating SEE I DENTIFY PRIORITIES integrated, smart, sustainable, inclusive growth within good governance framework 2.D ETERMINE APPROPRIATE POLICY AREAS FOR SETTING OBJECTIVES AND TARGETS e.g. trade as an area that best captures integrated growth 3.F ORMULATE APPROPRIATE OBJECTIVES e.g. increase intra-regional trade as an objective of integrated growth 4.D ETERMINE BASELINE DATA FOR OBJECTIVES e.g. currently intra-regional trade (goods) amounts to EUR 12.5 billion 5.E STABLISH STRATEGIC INTENT ( TARGET ) e.g. increase intra-regional trade by 240% by P UT FORWARD INDICATION OF MEASURES / ACTIONS AND INDICATORS e.g. removal of NTBs and greater facilitation of trade; fostering of regional value chains to boost movement of goods/services accross borders etc.

Milestones: Targets set Description Overall strategic goals 1. Increase of GDP PPP per cap relative to the EU (% of EU 27 GDP PPP p/c avg) Growth of Total Trade in Goods and Services (in EUR million)89,884212, Reduction of Trade Deficit /Improvement of Trade Balance Integrated growth 4. Growth of intra-regional trade in goods (in million EUR)12,50742, Growth of Overall FDI Inflows (in current EUR million)3,3347,527 Smart Growth 6. Growth of GDP per Person Employed (in EUR)18,37124,462 Sustainable Growth 7. Growth of enterprise creation30,10736, Growth of Exports of Goods and Services per capita (in EUR)1,8444,221 Inclusive Growth 9. Growth of Overall Employment Rate (per cent of 15+) Increase Population With Tertiary Education Within the Regional Workforce1.7 mil.2 million Governance for Growth 11. Increase Government Effectiveness (as measured by WBI indicator)

Milestones April 2012: SEEIC sets-up a Task Force to look into targets July - Sep 2012: SEE Task Force meets to develop targets October 2012: SEEIC approves targets November2012: SEE Ministers endorse targets November 2011: SEE Vision adopted by the Ministers Dec 12 – Nov 13: Strategy & Action plan development & governance proposal November 2013: SEE Ministers endorse strategy and governance mechanism

SEE 2020 Development Process A distributed approach: 1.Divest development of SEE 2020 to regional structures that: – Are able to play a leading role within each pillar – Are functionally aligned with SEE 2020 – Have capacity to work on development and can build capacity for implementation – Have, or are willing to put in place adequate governance mechanisms 2.Coordinate development of joint objectives, actions and indicators at the regional level 3.Verify through national administrations (shaping governance) 4.Coordinate at RCC level

De-centralized dev’t & implementation pillar: integrated growth pillar: smart growth pillar: sustainabl e growth pillar: inclusive growth pillar: governanc e SEE 2020 RCC SEECP SEEICCEFTA JHA Strat EDIF R&D Strat RENA ECS Social Agenda ERI SEE Parliam ent e-SEE SEETO

Integrated growth: Targets and priority actions a.Removing trade distortive non-tariff barriers and facilitating cross-border movement of goods in a timely fashion; b.Undertaking concerted efforts for the liberalisation of trade in services, under the auspices of CEFTA; c.Creating a regional strategy for investment promotion that builds on the work that has already been conducted by the regional working groups under the auspices of the Investment Compact and the SEEIC; d.Enforcing laws and regulations to protect intellectual property; e.Supporting the work of all CEFTA bodies and structures to fulfill their respective mandates; and f.Developing a single regional capital market. 1. I NCREASE INTRA - REGIONAL TRADE IN GOODS BY MORE THAN 230% 2. I NCREASE OVERALL FDI INFLOWS TO THE REGION BY AT LEAST 120% 1. I NCREASE INTRA - REGIONAL TRADE IN GOODS BY MORE THAN 230% 2. I NCREASE OVERALL FDI INFLOWS TO THE REGION BY AT LEAST 120%

Main regional platforms: RCC/SEE Investment Committee CEFTA Main partners: OECD IFC Regional expert networks National counterparts: Ministries and Agencies in charge of trade and investment Integrated growth: Main stakeholders

Investment Promotion – Re-branding the image of SEE so as to leverage the region globally and build a perception of an ideal business location. Investment Policy For reforms/ initiatives in institutional, legal and regulatory frameworks that create and improve an enabling environment for investment Integrated growth: Investment Dimension

Common Regional Investment Promotion Tools What national IPAs promote: Competitive location Competitive workforce Industrial heritage Friendly business environment Fiscal incentives Labor incentives Financial incentives Investment facilitation assistance National treatment FTAs, double taxation agreements, bilateral investment protection agreements Similarities: Industrial compatibilities Infrastructure, physical and other linkages Similar challenges and issues

Investment Promotion Tools What investors need to see in the Region: – Openness to foreign investment – Right to private ownership and establishment – Full protection of property rights – Liberalized foreign exchange markets – Conducive earnings repatriation conditions – Stable, transparent and predictable regulatory framework – Simplification of investment establishment procedures – National treatment status – Right to national and international impartial arbitration in the event of a dispute with government

The Roadmap to Regional Investment Promotion

Key Success Factors Strategic view – importance of trade and investments in strengthening regional cooperation/partnerships Parties in the context of their economic development, regional cooperation and accession to the EU Donors in the context of the impact of trade on promoting economic development in the Region Coordination – efficient coordination required: among and within respective Parties administrations between the Parties and the Secretariat to execute action between the Parties, the Secretariat and international partners to seek for synergies and prevent overlapping of efforts Sustainability – ensuring sustainability of the process as one of the prerequisites to success

Challenges Agreement to interlink and improve national policies with regional goals and achieving regional goals in line with national priorities Putting together and rolling out a programme for regional investment promotion strategy, policies, and identifying priority cooperation sectors for joint promotion Financial resources: investment promotion is an expensive exercise Human capital resources Competition

Overcoming the Challenges: Need for Regional Cooperation Competition “COOPETITION” Cooperation Core partners: RCC/SEEIC, IPAs, Business and Donor Community, Int’l organizations, Sub- regional initiatives, Economic Diplomacy Network Focused and intensive investment promotion campaigns for SEE Partners at national and supranational/regional levels

Assets Legal base – CEFTA Agreement Commitment – SEE 2020 Platform – RCC Secretariat / SEEIC Agreement and expertise – Western Balkans administrations and regional partners

Dragana Djurica South East Europe Investment Committee e: