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Escaping Western Balkans INC.

Capturing the imaginations of observers, the region of Balkans was often described with a metaphor. From a powder keg – in the wake of the First World War – to the collective unconscious of Europe at the beginning of the wars of the 1990s these metaphors, together with that apocryphal statement of Churchill about the Balkans producing more history than it can consume have served a purpose of capturing the strong impressions that the Balkans politics and conflicts make. At the beginning of the 21st century it was suggested that the Balkans itself is a metaphor describing an area oscillating between fragmentation and globalization.

Why then, should we add another metaphor to the existing array of terms, sayings and descriptions? The first reason is that many recent, modern metaphors have, while having been effective and useful, become obsolete. Take, for example the term Yugosphere, coined by Tim Judah. While useful in describing the former Yugoslav cultural and economic space the fragmentation of this space between the EU and non-EU countries has made political and economic dynamics very different. Likewise, the concept of stabilitocracy, widely used by different observers of the region was useful to denote the EU’s attempt to keep the region stable in the wake of the enlargement fatigue. More recently – and as a direct inspiration to this piece – what was called “a mini Schengen” was rebranded and called Open Balkan.

Western Balkans Inc. and who owns it?

Judging by the statements of its founders it is almost as if the Open Balkan aims to be a new founding myth for this area; an area united in collaboration after relegated to being a forever delayed EU candidate zone. almost a kind of equivalent to the economic coordination area called the “European Coal and Steel Community” that gave birth to the European economic project itself.

But, what is this Open Balkan open to? Namely, the openness to which the name Open Balkan alludes has been an openness towards the trading of influence between foreign and domestic political and economic actors. It is this openness that strengthens the existing corrupt schemes with the possibility to create what is now fashionable to be called a new geopolitical reality.

These new geopolitical realities are not strong alliances between any of the Western Balkans countries and a major outside force. Instead, they appear as if the countries or the whole region in question is comprised of stock of capital in which, through investment and shares the increase of one’s participation may be obtained. Thus, the current economic and political practices of the six countries give more justification to the usage of the term Western Balkans, Inc.

Take for example the much discussed environmental issues and the construction of new infrastructure in the Balkans. Chinese company which was to renew the Tuzla thermal power plant hired a US subcontractor for delivery of the specified equipment. Once the subcontractor withdrew from the contract as the participation in coal-related projects became impossible due to US regulations the project got stuck in a bureaucratic quagmire.

The pressure from the Secretariat of the Energy Community that treats the power plant as a case of illegal state aid leads some in BiH to consider the abandoning of the project. Should such a decision materialize it would not only create a huge problem for production of electric power in BiH but it will also have repercussions for neighbouring Serbia where similar Chinese investments are supporting the refurbishment of Kostolac power plant.

Sometimes, the resolutions of these overlaps of influence are beneficial as in the case of the EU financial institutions stepping in to preserve the Montenegrin fiscal sovereignty in the wake of the debt crisis fuelled by the borrowing conditions and high construction costs of the Bar-Boljare highway.

Sometimes, they appear irrational as when the European Commission steps in to fund the parts of the Budapest Piraeus railway despite this project actually strengthening Chinese influence while having a modest benefit for Serbia, Hungary or the EU itself.

These overlaps, however, reveal an important insight. The willingness of Chinese and Russian funders to participate in the investment projects in Western Balkans would, by itself, never be enough to secure actual engagement. Rather, it is the restrictive approach of the European financial institutions to investments that creates room for such manoeuvres. Coupled with the delayed accession to the EU which denies the access to the structural and cohesion funds that the Union’s members which acceded in the previous waves of enlargement have access to further enables such practice.

It is this withdrawal of Europe occurring during the mandate of the so-called “geopolitical Commission” that creates a demand for the participation in others in projects that, while including what may be called corrosive capital, is actually a response to the growing need for infrastructural modernization.

This European unwillingness or inability to integrate the Balkans has created similar problems in the political sphere. To name a few examples, in BiH, major political leaders keep looking for all sources of foreign support in order to achieve their goals while the current Serbian leadership proved itself remarkably able in “sitting on two chairs” defying predictions it will have to abandon this practice. Should VMRO return to power in North Macedonia, and should Montenegro go to early elections, it would not be unreasonable to expect similar balancing to occur there.

Establishing local ownership

It is beyond the scope of this essay to try to make an estimate for how long the current WB governments may sustain the current economic and political balancing that allows the region to function as Western Balkans Inc. In the meantime, what the civil society and the actors willing to defend and promote democracy can do are mitigating measures that could both limit the growth of foreign influence and create a better economic surrounding.

First, instead of limiting themselves to protests that have a mobilization potential, the CSOs should focus on preventing further deterioration. This could be done by highlighting demands for a strengthening of investment screening framework that could borrow from the investment oversight models developed in the US and the EU in the previous period.

The Committee on Foreign Investment in the United States reviews foreign investments coming from different sources with almost 40% of its work is dedicated to Chinese investments.

The EU has similar investment review practices. Currently, the investment screening frameworks in the Western Balkans are weak and regulated by rather loose investment treaties. Instead of relying only on border movement of goods, services and people, Open Balkan member states could create a joint investment screening legal mechanism.

The screening mechanisms could be improved by more than a domestic or regional action. The EU should consider allowing access to the structural and cohesion funds or should begin with a creation of the single economic zone that would include all Western Balkans. In line with was (unsuccessfully) proposed by the European Stability Initiative, such a zone, would have two major advantages over the existing situation. First, it would allow a better screening of the investments and second, it would most likely facilitate more European investments. By itself, this will not solve the problem of investment needs but would give an additional boost to economic growth providing the countries with greater flexibility in investment policy.

Additionally, the establishment of an investment bank managed by the Open Balkan members that would be able to attract foreign capital would help in promoting transparency and competition in international investments. While bold, such a move would encourage international engagement that is less prone to corrosive capital. Modelled after similar regional investment banks, this bank could answer part of the needs for investment but also for competition with the sometimes rather inadequate EBRD.

Although not directly connected to the questions of foreign investment in the region, the US sanctions based on the Global Magnitsky Human Rights Accountability Act could be an important part of the puzzle. The tremendous impact they made in Bulgaria by mobilizing the banking sector to limit the possibility of the sanctioned individuals to enter into business transactions have, together with domestic efforts to fight corruption given the country a chance of breaking with its corrupt past.

Together, these actions may not be enough to chart the Western Balkans countries off the murky waters of corrosive capital but may represent a move from empty pronunciations of unwanted foreign influence to concrete actions which would limit it.

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