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Transforming the Western Balkans: Trade, Energy, and Mobility as Catalysts for Growth

Photo: Pixabay

By: Kristina Milošević, Migena Kalthi, Mona Xhexhaj, and Nikola Nešić

The Western Balkans do not enjoy a good image in the EU, especially in the Member States which have had little contact with the Western Balkans countries. The Western Balkans also face an image problem in the EU, often seen through a lens of conflict, political instability, and corruption. Moreover, the region is often perceived as being at the frontier of the European Union.

The fact that the Western Balkans are geographically surrounded by EU countries, they should be viewed as integral to the European framework.  Our disputes and polarization often contribute to this negative image, but it is imperative to change it.

The Western Balkans have the potential and can be transformed from a region seen as problematic to one of significant opportunities.

By harnessing cooperation in trade, energy, and mobility, the Western Balkan countries can drive economic growth and stability, paving the way for a more prosperous future. Each area presents unique opportunities and challenges that require strategic planning and collaboration.

Energy cooperation is a cornerstone for the Western Balkans, offering a path to greater economic integration with the European Union. The countries in the region, as signatories to the Sofia Declaration on the Green Agenda, have committed to achieving climate neutrality by 2050 and aligning with the EU Emission Trading System (EU ETS).

However, achieving these goals is complex. The EU’s Carbon Border Adjustment Mechanism (CBAM), set to take effect in 2026, will impose significant costs on Western Balkan exporters unless they integrate into the EU system. For instance, ETS costs in Serbia could be twenty times higher than CBAM costs, making it economically challenging for buyers.

To navigate this, the Western Balkans must fully utilize their renewable energy potential, particularly in solar and wind sectors, which remain largely untapped.

Continuous financial support from the EU is essential and expanding the EU cohesion policy in energy to include the Energy Community of the Western Balkans (EnZ) can ensure a just transition away from coal. By addressing these challenges and aligning with EU energy standards, the Western Balkans can drive economic growth and regional stability.

Cooperation and mobility crucial for economic growth

Enhanced mobility within the Western Balkans is crucial for fostering economic and social integration in the region. Recent advancements highlight this importance, particularly with the signing of three pivotal mobility agreements in 2022 in Berlin by Western Balkan leaders, as part of the Common Regional Market initiative. The three mobility agreements focus on facilitating ID travel within the region, recognizing academic qualifications, and acknowledging professional qualifications for doctors, dentists, architects, nurses, veterinarians, pharmacists, and midwives across WB6.

These measures, if implemented effectively, can increase cross-border economic activities. By simplifying travel and professional recognition, these agreements can drive economic growth and facilitate the European integration process.

However, political issues, including lack of normalization of relations between Kosovo and Serbia has hampered the implementation of the agreements. Furthermore, Bosnia and Herzegovina and Kosovo maintain visa regimes, complicating regional mobility.  Montenegro is currently the only country that has ratified all mobility agreements signed in Berlin in 2022.

With summer upon us and our focus on tourism, it’s a great time to discuss how enhanced Mobility can play a significant role in this sector. By facilitating travel across multiple countries, increased mobility in the region allows operators to design diverse and exciting travel packages, which promises to boost tourism and economies even further. For instance, in 2022, Albania witnessed a significant increase in tourists from Serbia. We need to, and should, further increase regional tourism.

The EU’s Growth Plan for the Western Balkans (2024-2027), with a €6 billion financial instrument, aims to support these mobility objectives. Improved mobility will transform the region towards a knowledge-based economy, enhancing human capital development, cross-border service provision, and education quality. Businesses will benefit from expanded markets, boosting regional trade and attracting investment. Enhanced mobility also promises to boost tourism, allowing operators to design diverse travel packages covering multiple countries.

Gender equality in business is crucial for driving economic growth and innovation in the Western Balkans. Women’s labor force participation rates are significantly lower than men’s, and substantial gender wage gaps persist. Only 15% of business leaders in the region are women, and 27.5% are female entrepreneurs. Supporting women’s participation in business aligns with the EU Strategy for Gender Equality 2020-2025.

Policies that promote flexible working hours and support for women balancing multiple roles are essential. Educating women on regulations and taxes adapted for their businesses can empower more women to engage in business. Regional networking initiatives between female politicians and business leaders can further foster cooperation.

Chambers of Commerce can improve the image of the Western Balkans in the EU

Chambers of Commerce should promote female regional cooperation in business, addressing the gender equality gap in the economy. Successful women in business not only drive growth and innovation but also play a crucial role in societal advancement.

The Chambers of Commerce in the Western Balkans can play a crucial role by coming together to create a joint office to improve perceptions about our region in the EU.

In 2016, in front of Albanian Prime Minister Edi Rama and Serbian President Aleksandar Vučić, the joint Serbia-Albania Chamber of Commerce was launched, marking a significant step forward in regional economic cooperation.  Since 2017, the Chambers of Commerce and Industry from the six Western Balkan countries have established the Chambers Investment Forum, promoting regional economic cooperation.

A joint program by economic chambers can improve the region’s image by conveying a unified message to the EU. This program should highlight economic opportunities and tackle the image problem head-on.

We already have some important positive stories in the economic cooperation front in the Western Balkans. In 2023, a landmark agreement among Albania, North Macedonia and Serbia was signed on the mutual recognition of phytosanitary certificates, eliminating the need for separate sets of identical laboratory documents for food products, and allowing agricultural and food products to cross borders without unnecessary delays or stops.

This streamlining of processes not only speeds up trade but also reduces costs and fosters economic integration among the three countries. This example underscores the potential for cooperative regulatory measures to facilitate smoother trade and drive economic growth in the Western Balkans.

We need to show that our region can always move in the right direction when there is political will, and the business sector seems ready in the Western Balkans to do the rest if political barriers are resolved.

At the same time, in addition to our regional political issues, we need to also recognize that we have a common problem as a region in the EU, and that is an image problem.  Addressing the image problem is imperative for moving forward also in the European integration process, as more than often for an average European citizen, Western Balkans is not perceived as an area surrounded by the EU, but rather as a frontier.

This effort of addressing the image problem does not mean overlooking real issues in the areas of rule of law and democratic performance of public institutions in WB6, and that is why we suggest that Chambers of Commerce in the region are best placed to work on this, rather than governments.

We propose that the chambers of commerce in the Western Balkans cooperate on a joint initiative to improve the region’s image in EU capitals. This initiative should include a comprehensive multi-media campaign and the establishment of “Western Balkans House” offices in key EU capitals, managed by the chambers of commerce from the WB6 countries.

These establishments would serve as cultural and economic information hubs, providing accurate and positive representations of the Western Balkans, and curated by talented individuals from all WB6. Additionally, they would organize regular events to facilitate deeper dialogue and understanding between EU member states and the Western Balkans.

Our policy recommendation underscores the need for a unified approach to address the Western Balkans’ image problem in EU capitals. By leveraging the collective strength of the chambers of commerce and creating dedicated cultural and economic information centers, the region can change the narrative in the EU about the Western Balkans and in the Western Balkans about the EU.

This article was written by members of the Balkans Dialogues Academy, led by the Foundation BFPE for a Responsible Society and funded by the Open Society Foundations-Western Balkans (OSF-WB). The opinions expressed in this article are those of the authors and do not necessarily reflect the positions of BFPE or OSF-WB.

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