Business defines role in Balkan reconstruction
Brussels, 6 October 2000 - Direct investment, joint-ventures, support for local firms and partnerships with international financial institutions are all ways the world business community can help promote stability and economic growth in the shattered region of the Balkans.
This was among main conclusions from a conference on What can business bring to Balkan reconstruction? in Brussels on October 3. The conference took place just two days before street protests in Belgrade heralded the collapse of the Milosevic regime after its attempt to disregard electoral defeat.
Organised by the Business-Humanitarian Forum, an international association of leading multinational corporations and relief agencies, in cooperation with the Humanitarian Affairs Review, the conference drew more than 200 specialists from the public and private sector from around the world.
A second conclusion from the conference was that, even if it wanted to, the international business community cannot act in isolation. Its efforts need to be part of a concerted programme involving all stakeholders - international as well as local.
In his opening address, John J. Maresca, president of the Business-Humanitarian Forum Association, said the aim of the conference was to act as a catalyst to bring stakeholders together. It did not intend to duplicate what others are doing. Business has a key role to play in post-conflict situations, even if they were fraught with uncertainties which make investment decisions difficult. One task would be to identify the obstacles to investment and, with the help of participants with direct experience of the region, find out how they could be overcome.
Daniel Janssen, chairman of Belgian chemical group Solvay SA said his company was continuing its investment programme in Bulgaria, where it had acquired a controlling interest in the biggest synthetic soda plant in the world, producing 1.2 million tonnes a year, despite major difficulties. These included the need to end discrimination among investors on the part of local authorities, who clearly favoured some over others.
Mr Janssen also highlighted problems posed by the absence of a proper legal framework for foreign companies, opaque and complex laws on corporate taxation, VAT and import duties, and the lack of business ethics. Several other speakers warned of corruption, saying that, if it existed everywhere, it was particularly prevalent in the Balkans. They also spoke of the negative effects of currency instability, the absence of international accounting standards and the difficulties of regional cross-border cooperation and trade.
Fabrizio Barbaso, director at the European Commission responsible for the western Balkans, said the EU has supported the expansion of trade by removing import duties on 80% of products from the region. The EU was also providing technical and financial support for the creation of efficient and honest customs services in several countries.
Two of the states in the region, Bulgaria and Romania, are already cand
idates for EU membership, while the others were being offered so-called stability and association agreements. The EU had spent 4.5 billion euros to support the region since 1991 with a further 576 million budgeted for this year and 800 million proposed for 2001.
Rory O'Sullivan of the joint EC-World Bank Office for south-east Europe said growth in the Balkans this year had resumed after the negative impact throughout the region of the war in Kosovo in 1999. He said that foreign direct investment by the private sector was the driver of economic growth throughout eastern Europe.
Mr Sullivan quoted the case of Poland where it has risen from $100 million to $5 billion in ten years. International financing institutions, like the World Bank and others, now played a subordinate role to the private sector in investing in developing countries, O'Sullivan said. This change was part of the process of globalization, moving to a market economy and the creation in many countries of a more friendly investment environment.
The private sector also had a major role to play in partnering the international community in infrastructure projects which are necessary to modernise and revitalise economies in the region, particularly in sectors like transport, energy, water and communications.
John Whitehead, chairman of the International Rescue Committee, said that companies that got involved in emergency relief work, often on a pro bono basis, found themselves well placed to profit from business opportunities which presented themselves later. Early service is not forgotten.
Patrick Bourrier, director of international affairs at French telecoms group Alcatel, took a more prudent line. He warned that the pace of liberalization in his sector was too slow in the Balkans, that there was a lack of robust regulatory agencies and that local firms risked being wiped out by outside competitors. On the positive side, the level of human skills in the region means it can use the latest technologies and therefore offer the most modern services, he said. Markets, particularly those for mobile services, were growing fast.
But local initiatives needed support (especially financial) from outside partners because existing instruments cannot support business start-ups. Bourrier also said the spirit of entrepreneurship needs to be rekindled and local jobs created. All suppliers of telecoms equipment in the region and all service providers are potential investors.
A number of participants from the region itself criticised the international community and the European Union of being risk-averse. Aleksandar Dimitrov, Macedonian foreign minister, said delays by the EU and others in implementing projects had sent the wrong signals to all the countries in the region.
While warning that expectations about what the international community should not be pushed too high, Emma Bonino, former EU commissioner for Humanitarian Assistance, criticised the business community for unwillingness to take risks in the Balkans. She also said the absence of local structures and regulations made it necessary for donor organizations to take care that at least on their side necessary procedures for public funding were adhered to.
Michael Carbine, chairman of the central and east European working group at UNICE, the European employers' federation, said the west had not kept its promises to help bring stability to the region in the wake of the Bosnian and Kosovo crises. He said that donor countries often made sure the aid they were paying for
was provided by their own companies and channelled through their own consultants.
Several speakers argued that long-term stability was needed to stimulate investment and this could be achieved in Bosnia and in Kosovo by keeping international troops there for a long time, much as allied troops had been stationed in Germany for 45 years after World War Two. But others argued that the presence of troops and international administrators created a "protectorate" mentality which stifled local initiative and endeavour. Even in other countries in the region, the fact that the international community made a significant contribution to their GDP created a kind of donor dependence which needed to be brought to an end.
Ivan Stancioff, chief executive officer of Cresta Marketing of Sofia, said that the biggest asset of the Balkan countries was their human talents and skills. He warned that the region was losing skilled young people at the rate of 10,000 a year through emigration. He suggested international firms seeking to invest in Bulgaria should recruit among the Bulgarian diaspora in the west when seeking to fill key local posts.
Summing up, Jean Freymond, executive director of the Business-Humanitarian Forum Association, said that the key to creating a "business-as-usual" environment in the Balkans was through local empowerment, particularly of entrepreneurs. On the one hand, they need to end donor-dependence, while at the same time being able to operate in a rules-based environment. Local companies, particularly SMEs, are going to be the main source of jobs, growth and prosperity in the region, he said. Yet they have limited access to bank credits or to markets.
The international business community needs to support local business as clients and suppliers and later as business partners. In this way, normal business relationships will be established and a sound basis laid for subsequent joint ventures and foreign investments.