Neither regional integration nor closer ties with the EU have led to increased trade, investment or overall prosperity in the Western Balkans, according to a new report from the Vienna Institute for Economic Studies international (wiiw) and Bertelsmann Stiftung.
Currently, per capita GDP in the Western Balkans is only 20-40% of the German level, well below most eastern EU members who joined from 2004, the report says. , “Pushing on a string? An assessment of regional economic cooperation in the Western Balkans ”, published ahead of the EU-Western Balkans summit in Ljubljana.
“Almost without exception, the countries of the Western Balkans have recorded the worst rates of economic convergence with Germany over the past 20 years in all of Central and Eastern Europe… And this despite the fact that in 2000, most of the Western Balkan countries were much poorer than even Bulgaria and Romania, and that, other things being equal, poor countries tend to grow faster than rich countries, ”the report says.
“The gap with the new EU members in Eastern Europe has widened, which is worrying. After all, poor countries are expected to grow faster than rich countries,” said Richard Grieveson, director assistant to wiiw and co-author of the study.
On top of that, there has been a “huge brain drain” from the region. Between 2000 and 2019, the populations of Serbia and Bosnia and Herzegovina decreased by more than 7% and those of Albania by more than 6%. The report cites a study that predicts that the working-age population of all Western Balkan countries will decline from 17% in Montenegro to around a third in Bosnia by 2050.
“These figures show the limited prospects and lack of hope for the future of a large part of the region’s population,” the report said.
Despite the signing of stabilization and association agreements with the EU, exports to the bloc have increased by less than a quarter over the past two decades, while foreign direct investment (FDI) from the ‘EU grew by around 46%.
According to the report, the increase in trade has had benefits. Bilateral trade agreements concluded between the countries of the Western Balkans in the 2000s increased exports to the region by around 14%. These were replaced by participation in the Central European Free Trade Agreement (CEFTA), which increased intra-regional exports by 38%. Moreover, if we exclude Serbia, which does most of its foreign trade with the EU, the increase was around 70% for both.
However, according to wiiw and Bertelsmann Stiftung, increasing regional integration has not had much impact on economic development.
“The region’s GDP is still very low – roughly the same as that of Slovakia as a whole. So the potential gains from increased regional trade barely materialized, ”Grieveson said.
Regional cooperation, a key element of the EU’s strategy towards the Western Balkans for more than two decades, was expected to be useful politically and economically. The strategy was based on the assumption that convergence would lead to a greater willingness to resolve political conflicts peacefully, as well as to economically prepare the region for EU membership.
However, this has been less successful in the Western Balkans over the past two decades than in Western Europe since 1945, the two think tanks said. There has been no economic catching up and conflicts, especially those between Serbia and Kosovo and within Bosnia, have not been resolved. Instead, the report argues that parts of the former Yugoslavia are still defined by the “geography of animosity,” a term coined by Vladimir Gligorov, senior research associate at Wiiw and national expert for the States. of the Western Balkans.
“The EU’s previous strategy of using regional economic integration to accelerate the process of economic catching up of the Western Balkan states and resolve political conflicts has not been successful,” said Stefani Weiss, expert at the EU at the Bertelsmann Stiftung in Brussels.
The report qualifies the successes in infrastructure as “modest”. While the Western Balkan states have been successfully connected to the trans-European transport and energy networks, the report states that there are “still big gaps, especially in the area of high-speed internet”.
Meanwhile, China has made major infrastructure investment pledges in the region, announcing infrastructure investments worth around € 7 billion. However, said Weiss, “very often [Chinese investments] create economic dependencies – see Montenegro – and weaken the influence of the EU. This should give food for thought. “
He argued that it is a matter of geopolitics. “At the end of the day, the EU has to make a very simple geopolitical choice: does it really want to integrate the Western Balkans or continue to have a contested area on its doorstep where Russia and China also exert their influence? said Weiss. “Precisely because full membership is becoming increasingly remote for most of them for political reasons, Brussels must offer them an alternative.”
Ahead of the EU-Western Balkans summit in Ljubljana, Grieveson argued that the EU’s € 9 billion economic and investment plan, which is supposed to attract billions of euros in private investment, “will not much to change the deplorable economic situation in Western countries. of the Balkans, but will bring ‘more of the same’ instead ”.
The report recommends the deepest possible economic integration for the Western Balkans with the EU, including the opening up of EU structural and cohesion funds and other financial instruments to Western Balkan states. Other options would be integration into the EU Customs Union and an expansion of existing Stabilization and Association Agreements.