Trade for a Better Image

The head of the Stability Pact promotes a free-trade area for the Western Balkans and rejects Croatian and Serbian criticism. by Mirna Skrbic 16 February 2006 SARAJEVO, Bosnia and Herzegovina | Erhard Busek, the special coordinator of the Stability Pact for South Eastern Europe, met with Bosnian officials during a two-day visit to Sarajevo last week. Busek stressed that Bosnia’s talks on a Stabilization and Association Agreement (SAA) with the European Union had started off well and promised that the Brussels-based Stability Pact with its more than 40 member nations and organizations would continue assisting the country on its path towards European integration.

Busek also discussed the EU’s latest proposal to form a regional free-trade area in the Western Balkans, which was endorsed by Bosnian Prime Minister Adnan Terzic as well as Foreign Minister Mladen Ivanic. The initiative for such a proposal came from the Stability Pact, which was also behind the current network of bilateral free-trade agreements in the Balkans.

The initiative met with criticism in Serbia and Croatia. The Serbian government is concerned that the plan fails to pay enough attention to the critical need for foreign investment, while many Croats are suspicious that the proposal comes close to a resurrection of the old Yugoslavia.

TOL talked to Erhard Busek about the beginning of SAA talks and the future of Bosnia as well as the newest proposals for a regional free trade zone.

TOL: How do you assess the start of SAA talks between Bosnia and the EU? Will Bosnia be able to complete the talks by the end of this year, as planned?

Erhard Busek: As far as I can see, it has started quite well. Brussels is impressed that Bosnia is quite well prepared. It very much depends if they are able to do it quickly because there is an election date in between [in October 2006]. I think if they [the Bosnians] want to finish the SAA by the end of the year that will very much depend [on whether] the new government is quite quickly in charge after the election.

TOL: Do you believe that Christian Schwarz-Schilling, the new high representative of the international community, will also be the last high representative in Bosnia?

Busek: As far as he told me, yes. I think there must be a change, with the high representative becoming the EU Special Representative, maybe with special capacities, but I think that [peace implementation] will move in the direction of [being] the responsibility of the Europeans.

TOL: What do you believe are the main obstacles that Bosnia will have to face in European integration? You mentioned during your visit to Sarajevo that the country needed to work on its image.

Busek: I think what Bosnia needs is more investment and sound economic development. For sure, it is very much connected with the image of Bosnia. I think you need reports about success stories, success stories that exist [already]. There needs to be more of an interest, because for the moment, I think besides agricultural products it is not an area where a lot of investment is happening. Another problem is … the question of human capital. Human capital needs to be used in the right way for the future of the country, because for the moment, there is a lot of emigration.

TOL: Why do you think that foreign direct investment is scarce, especially in Bosnia, Macedonia, and Kosovo?

Busek: The problem concerns different kinds of instability. I think this is partly coming from the past, for example in the case of Macedonia. But there is also [the necessity to] change the framework for investment, quick change of legislation. For Bosnia, it is the internal situation. Because there are two different market systems and different regulations for the cantons and the entities.

TOL: A change of Bosnia’s constitution is not a requirement for the conclusion of an SAA, yet will have to be carried out if the country is ever to join the EU. Do you believe that Bosnian leaders can carry out constitutional change alone?

Busek: I am not quite sure, but I hope so. It will be better if it is done without any pressure from outside.

EVERYONE A WINNER

TOL: The European Commission suggested that bilateral free-trade agreements which were signed with the assistance of the Stability Pact be transformed into a regional free-trade zone. What would this mean for the countries in the region? Who would be the likely losers and winners initially?

Busek: First of all, in free trade everybody is a winner, not a loser. Because regional trade, I think, at the beginning [made up] three to five percent [of trade in these countries] and the free-trade agreements that we did doubled that share to six to 10 percent, which is not so much. … I think there is now a jungle of 31 free-trade agreements existing all over the region and that’s not the right frame for the business community. Therefore, we are now announcing free-trade agreements for the whole region.

TOL: What do you think of Croatian Prime Minister Sanader’s suggestion to extend the existing Central European Free Trade Agreement (CEFTA) to the Western Balkans instead of forming a new free-trade area?

Busek: I don’t think it is an alternative. We will use the umbrella of CEFTA. We agreed already to move in this direction. CEFTA was also used by the EU or new member states. It was used for example by Austria, Sweden, and Finland, why not use it in the same direction here in the region?

TOL: What do you make of the apprehension coming from Croatia that this new free-trade zone may be a new way to recreate the former Yugoslavia?

Busek: It is total nonsense.

TOL: What feedback did you receive in Croatia last week on this topic?

Busek: In my meetings with the prime minister, I gave an explanation about how it is really. Because all this criticism concerning the recreation of Yugoslavia was done by the media, and no serious man or woman is intending to do it.

TOL: On the other hand, Serbia’s criticism is that the proposal does too little to address the key question of investment.

Busek: Free trade is not investment. I think they are mixing up two different subjects.

TOL: The Stability Pact devotes much of its attention to the common energy market. What are the benefits of this project and what are the major challenges that the market faces?

Busek: The benefit for the countries in the region is that they are connected with the EU even before entering it. This creates improvement for everybody. Also I think it provides energy security. We are trying to move forward also concerning gas, which since the last moves by the Russians is a priority project. I think we have to create alternatives.