European Western Balkans
European Integration

Remarks by Commissioner Hahn at the Western Balkans Business Forum

Ministers, distinguished guests, Ladies and Gentlemen,

Thank you for giving me the opportunity to address you at this business forum.

The EU has just entered a difficult phase, I need not say more. At the same time, the prospect of EU membership continues to drive transformation and anchor stability in the countries of Southeast Europe.

One of our biggest challenges for preparing the Western Balkans countries for the EU is restructuring the economic model to ensure that all countries are functioning market economies, and driven by export and investments rather than import and consumption. The progress on connectivity measures are an important element in this respect.

The accession process is not only about aligning national legislation with the EU acquis. It increasingly focuses on economic issues underpinned by the rule of law. We put a strong emphasis on promoting economic development and strengthening competitiveness.

The rule of law and economic development are two sides of the same coin. Rule of law, in particular legal certainty and a functioning judicial system, foster investments and economic growth. The Western Balkans currently face considerable problems, not only with access to finance for SMEs, but also with excessive regulatory burdens a high share of the informal economy. Significant skills gaps are also hindering SME growth, highlighting the importance of improving the quality of education as a means of boosting employment. I am therefore very happy that we will hear about the experience of French investors later this morning.

The Commission has developed the annual Economic Reform Programme exercise. Jointly with the countries concerned, the economy and finance ministers formulate country specific recommendations, as published in May. Our approach is to strengthen economic governance. This is the only way the region can experience long-term economic growth and improved productivity and competitiveness.

Most countries have shown strong commitment to the Economic Reform Programme process and have made it a central element of their strategic economic planning. So far implementation has been mixed, in particular regarding the key structural reform recommendations. Each government now has to take concrete steps in the coming year to address all of them.

Let me say a few words about our connectivity agenda. Building and connecting transport and energy infrastructure is at the very heart of the Commission’s efforts to reinforce integration between the individual countries of the Western Balkans and with the EU, thus driving forward their European perspective through concrete projects. It means focusing investments on establishing and improving transport and energy infrastructure and networks, to strengthen the countries’ backbone of competitiveness. That creates opportunities for businesses and people, and also contributes to building bridges in the region developing good neighbourly relations and promoting peace and reconciliation.

The countries of the region need to deliver on the commitments made notably on the reform measures on transport and energy. We were very clear that these were necessary to add value to the investments, and that connectivity is not (only) about building new infrastructure but getting the best use of infrastructure. Investments without reforms make little sense, and the soft measures have been identified because they provide added value to the investment priorities.

In the energy sector, it clearly does not make sense to invest in expensive inter-connectors of the transmission grids, if the countries are not willing to trade energy in the region. Trading would increase security of supply and reduce the need for additional expensive generation capacity. It would also ‘green’ the region because the renewables such as hydro-power in Montenegro and Albania would be easily exported to the neighbouring countries during peak production periods. In this context, our experts have already had a first meeting on developing a hydro master-plan for the Western Balkans.

In the transport sector, rail market opening would more easily attract investors including from abroad if they would have access to the entire corridor rather than merely national segments. And why should anybody invest in new roads if the existing network is not properly maintained?

Despite the obvious benefits, however, progress on the ‘soft measures’ on transport and energy agreed by Prime Ministers in Vienna leaves much room for improvement. As announced, we have reflected this in our investment package which we present today. We have decided to provide € 96 million for 3 railway infrastructure projects in Serbia, Albania and in Kosovo. We will also provide € 50 million for greening measures such as energy efficiency in residential buildings and small scale Hydro projects. This demonstrates that we are serious about our commitment to making up to 1 billion in EU by 2020 grant co-financing available for the connectivity agenda.

To conclude, the connectivity agenda has the potential to improve the competitiveness of the region by reducing the costs for businesses when goods are moved through the region. That potential will only be fully met if all the identified reforms are implemented in full whilst countries focus their limited fiscal space on the most important investment priorities. To further facilitate this, we might need regular meetings at political level including with the advisors of the Prime Ministers. All these measures should lead to a Western Balkans single market, well ahead before joining the Union.

Thank you.

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