Op-ed by the Regional Cooperation Council’s Secretary General, Majlinda Bregu & Deputy Secretary General, Tanja Misčević
It’s not a custom for an op-ed to be signed by two persons. Except in one crucial respect. We are not the same. Actually this is our biggest asset at RCC. We come from different countries, religions, backgrounds; we approach problems from different angles, but we all bring in certain identity perspective that enriches our daily pitching for regional cooperation. In a complex region cooperation is vital if breakthroughs are to be made. In other words, the flag we hoist is Togetherness.
It’s October 2020. We have all been living our lives in the slow lane for months now. Six months ago we all thought that the COVID 19-caused pandemic would have been contained by the end of the summer and that we would return to our usual modes of living. Today, as we write this, working from homes in Tirana and Belgrade, it’s crystal clear that usual modes of living have changed, changing us as well, drastically.
Wearing masks, physically distancing, avoiding friendly embraces after long no-sees, meeting, working and schooling online… it is all the new normal now and we cannot but feel nostalgic for all the things we took for granted earlier. And while waiting for scientific solution to this microscopic-size but fatal enemy, we are working and fighting our own wars to keep the faith and use the opportunity to make things better – now is the time, as we’ve come to realise how relative and uncertain everything is.
Consequences of this tiny, common enemy are raising their ugly heads. It is evident all around the world. In our region, Western Balkans, very much so, as both economically and socially we entered the pandemic with huge disadvantages compared to our EU neighbours.
Health for one, the frontline of the fight against the virus is a good illustration, as Western Balkans investment in this sector prior to pandemic was very modest – ranging from 2.9% to maximum 5.4% of GDP (compared to 7% of EU’s average, not forgetting that cumulatively we talk about much more money as GDP of the region doesn’t compare to that of the EU).
So this traditional neglect of the health sector, despite many attempts of reform, left us with just 2.3 doctors in charge of 1000 citizens (EU average: 3.7), 5 nurses (EU: 8.6) and not even 4 beds (EU: 6.1) – this made a shortcut to the ‘black lists’ in categories of numbers of infected citizens per 100.000. Combined with equally modest investments in research, the ultimate resource of finding the cure (around 1% of GDP is WB’s average), the social impact was guaranteed – anxiety across the board as to what would happen.
Economic impact is not falling short either. It’s enough to go to the nearest shopping mall, look around and count how many stores have already been closed. This is just one domino in the entire effect – bringing down jobs and unemployment in the region by 15% from March to July this year. Especially hard hit is the youth, whose unemployment rose by 27%, bringing the number of unemployed young people to almost 800,000, while women unemployment reached 53%.
Is the recession already here?
Some expert estimates say that the Western Balkans will experience their worst recession in the past two decades. And it seems as it has already started. Weak healthcare capacity, a heavy reliance on capital flows and, in some cases, a strong dependence on tourism will exacerbate the scale and duration of our economic downturns.
The regional growth is forecasted to fall to -5.1%. GDP drop in the second quarter of this year is striking, in some cases up to -20%, largely due to collapse in tourism (Table 1). As every cloud has a silver lining, there is some good news too – growth in the region is expected to recover to 3.4% in 2021.
But, the FDI decline for 2020 is already at 40%, and keeping companies liquid, incentivising investment in COVID-19 related industries, and keeping supply chains alive should be a priority. The region’s current account deficit stands at 6% of GDP, the highest level in the last 5 years, suggesting that external positions in many economies remain vulnerable.
COVID-19 Hit on Tourism
The six Western Balkan economies reported 75% decrease in international visitors in the first half of 2020 compared to 2019, and a return to pre-COVID 2019 growth levels is expected to take between 3 and 4 years.
The level of layoff is on the average of 15-20% for full-time employees and 30-40% for part-time employees. To put this into perspective here are some figures testifying to the magnitude of these losses: more than 12 million people visited the region last year, which brought us a profit of 7.2 billion euros!
Tourism makes 10.2% of the region’s GDP and it accounts for more than 25% of exports! On average, 11.4% of total employees in the Western Balkans come from this sector.
Start the recovery now
Having in mind the overwhelming weaknesses of our patch of Europe and scope of damages, it is clear that we’ll need a helping hand as well as to pull together our strengths to overcome this difficult challenge.
And once again, the European Union (EU), the region’s reliable partner, has stepped in, with 9 billion EUR envisaged in their Economic Investment Plan (EIP) the European Commission presented earlier this week, which comes at the right time. Together with the already announced 3.3 billion euro to combat pandemic outbreak, it is an impetus to move on faster with economic development, but also once again reaffirms the unequivocal support for the European perspective of the Western Balkans.
This EU investment, backed by the Western Balkans Guarantee Facility, has a potential to attract 20 billion EUR more from public and private investments. When you put it together, it makes up to 32.3 billion EUR to be pumped up in the region – a massive stimulus – almost 30% of the Western Balkans’ 100 billion EUR GDP.
The plan is very specific: investing in sustainable transport (roads and railway, connecting region’s capitals), clean energy, environment and climate, digital future, and human capital, but also boosting private sector and investments. Last but not least it calls for building a Common Regional Market, which will bridge the economic convergence gap between the Western Balkan economies and the EU.
Regional cooperation a vehicle to faster recovery
The way out of this is together – through joint actions on common goals. This is where Regional Cooperation Council (RCC) finds its comfort zone, in these ‘out of comfort zone’ circumstances: We have been developing this sustainable, tailor-made solution to complement region’s aspirations and abilities with the realities.
The Common Regional Market – agenda for period 2021-2024 that the RCC with partners and WB governments has been working tirelessly on for the past several months is based on the four freedoms approach, mirroring closely EU Single Market principles, rules and regulations.
According to a World Bank study, such an enhanced market integration of the Western Balkans could bring an additional 6.7% GDP growth to the region.
This ambitious agenda is made of targeted actions in four key areas. Firstly, free movement of goods, services, capital and people, including crosscutting measures, such as the Green Lanes, to align with EU-compliant rules and standards and provide opportunities for companies and citizens.
Additionally, there is the regional investment area to harmonise investment policies with the EU standards and best international practices and promote the region to foreign and intra-regional investors. Here we see a huge potential – more investments coming into the region which would become investor-friendly, simultaneously addressing the region’s weakest spots: unemployment and brain drain.
Thirdly, development of the regional digital area to integrate the Western Balkans into the pan-European digital market; and finally developing a regional industrial and innovation area to transform the industrial sectors, shape value chains they belong to, and prepare them for the realities of today and challenges of tomorrow.
Last, but not least Green Agenda; all activities will bear green-approach, mirroring the EU Green Deal and translating it into the Western Balkans Green Agenda.
Our destiny is in our hands
So, we are laying the groundwork – the EIP and Common Regional Market 2021-2024 that constitute an important element of a long-term recovery of the Western Balkans.
This provides an enormous potential for sustainable economic growth and complete socio-economic transformation of the region. Practically translated: better roads and railways, more and better jobs, healthy competition, cleaner air, rivers…. In such times anchored cooperation/ bashkepunim/saradnja/suradnja/саработка/сарадња takes on more importance.
But, as in everything else, it all boils down to human factor – willingness and readiness to make the change. We test ourselves on that each day. Our RCC club won’t be worth a dime if we don’t play together as a whole.
And the whole is other than the sum of the parts – somebody said.