EC Communication on A credible enlargement perspective for and enhanced EU engagement with the Western Balkans COM (2018) 65

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Position Paper May 2018 EC Communication on A credible enlargement perspective for and enhanced EU engagement with the Western Balkans COM (2018) 65 EUROCHAMBRES and the Western Balkans Six Chambers Investment Forum: Emphasise, that EU enlargement is about fostering peace, prosperity and reconciliation strongly support EU enlargement to the Western Balkans, convinced in its mutual economic benefits underline importance of strengthened credibility of the accession of the Western Balkans to the EU as it improves business environment by making it more predictable and investment friendly remind of important and relevant capacities and track records Chambers of commerce and industry have in supporting business community to prepare for enlargement in different areas: SME competitiveness, fight against corruption, regional cooperation, application of EU rules and standards, vocational education and training, access to finance, etc call upon the European Commission to enhance the dialogue with the business community with a view of maximizing economic impact of the enlargement call upon the Commission, as well as current and future EU member states, to work more on leveraging results of enlargement process to promote cross-border trade and investment suggest practical measures to facilitate cross-border business operations Introduction EUROCHAMBRES The Association of European Chambers of Commerce and Industry represents over 20 million enterprises in Europe 98% of which are SMEs through members in 44 countries and a European network of 1700 regional and local Chambers. All the Chambers in the Western Balkans are members of EUROCHAMBRES and EUROCHAMBRES has been actively engaged in the Western Balkans, Turkey and the EU neighbourhood for more than 15 years, mainly through concrete initiatives to enhance competitiveness in the region and strengthen the dialogue and mutual understanding between Western Balkans and EU businesses. As leading business representatives, Chambers have a legitimate and significant responsibility to assist enterprises in the economic integration process. WESTERN BALKANS 6 CHAMBER INVESTMENT FORUM (WB6 CIF 1 ) was created in the framework of the Berlin Process as a joint initiative of the chambers of commerce and industry of Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro and Serbia. The WB6 CIF represents and supports 1 WB6 CIF is a part of the wider chamber initiave for promotion of regional cooperation that also includes Croatia and Slovenia. However, driven by the regional economic integration and joined challenges stemming from the EU accession process, the 6 WB chambers have taken the step forward and set up an organisation with permanent secretariat. Position Paper May 2018

around 200,000 businesses, mostly small and medium-sized enterprises in its mission to contribute to 1) removing obstacles to economic regional cooperation, 2) ensuring sustainable economic development in the context of EU accession and 3) improving business and investment climate. EUROCHAMBRES and the WB6 CIF welcome the new EC strategy. In the following paragraphs we stress important elements of the Strategy and provide inputs and suggestions for its implementation: EU Enlargement, a priority for the Chambers of Commerce and Industry (CCI) in the EU and the Western Balkans: A credible enlargement perspective means predictability, growth and jobs Almost 15 years have passed since the Thessaloniki Summit where Heads of States and Governments of the European Union and of the Western Balkans declared that the future of the Western Balkans lies within the EU. Apart from Croatia, who joined the EU in 2013, the accession of the rest of the region has not progressed as expected. EUROCHAMBRES and the Western Balkans 6 Chambers Investment Forum have wholeheartedly welcomed the new positive momentum for EU accession of the Western Balkans as laid down in the new EC strategy from February 2018. A credible enlargement perspective for all Western Balkan countries is the right approach for ensuring peace and reconciliation. Moreover it gives renewed hope to the societies, which is needed to carry the requested ambitious reforms and may keep especially young people engaged in their countries. Bringing closer the Western Balkans to the EU is one of EUROCHAMBRES priorities and is at the core of the WB6 CIF activities. We believe that the EU enlargement to the Western Balkans will enhance economic and trade relations and strengthen stability in the region to the mutual benefit of the EU and the aspiring Member States. The uncertainty of accession reduces predictability of the business environment, making it harder for businesses to invest and manage their future activities. Strengthened credibility of the EU enlargement to the Western Balkans brings back a more stable and predictable business environment. The EC Strategy brought desired political impetus and advanced toolbox for its implementation. To benefit from the implementation of the Strategy, we believe that the importance of clear perspective, instruments and institutions is essential. Otherwise, the Strategy may be reduced to a mere declaration of support. With full understanding that EU accession is a process based on merits of the candidates, we don t see the 2025 perspective as a promise or a date set in stone, but a political ambition and a necessary input to businesses on how to respond effectively to anticipated changes. This target provides certainty of upcoming changes in the legal and policy environment as well as prospects of enhanced trade and investments. It also provides a benchmark to hold all decision makers accountable for their responsibilities. In terms of the economic integration of the Western Balkans, a certain progress was made when leaders of the region vowed to deepen ties and work together towards joining the European Union. However, it is important to involve intermediary organisations, such as Chambers, in drawing up economic reform programs, as well as joint conclusions with specific recommendations for each country in the region. The candidate countries need stronger reform incentives. It is necessary to promote closer regional cooperation in order to facilitate the fulfilment of the criteria for EU membership and WB6 CIF represents a great base. Economic development and enhanced competitiveness are key in the enlargement process Position Paper May 2018 Page 2 of 6

EUROCHAMBRES and WB6 CIF welcome the priority given to economic development and enhanced competitiveness in the EC Strategy. While benefits of EU economic integration are significant, the global economic crisis has downplayed its effect. The crisis has significantly decreased investment capacities and internal demand in the EU and slowed down reforms and harmonization efforts of the EU candidate countries. As a consequence, support for EU enlargement has dropped and process has underperformed. We strongly support the proposed six priority areas. We believe that economic potential of the enlargement can be boosted, provided the Strategy s six initiatives are implemented comprehensively and with good will from all sides. All Western Balkan economies are struggling with gray economy and corruption and they need strong rule of law agenda. The CCIs play a significant role in the fight against corruption in particular in raising awareness on the impact of corruption and equipping businesses with preventive tool 2. Stronger cooperation in security and migration matters will yield in lower systematic risk of the region. CCIs can play an active role in the integration of the refugees in the labour market, as both business representatives and, in some countries, providers of vocational education and training 3. Constructive approach in addressing bilateral disputes should open more opportunities for regional economic cooperation. In this context, the Chambers contributed to good neighborly relations in the region, in facilitating the on-going dialogue between the Chamber of Commerce and Industry of Serbia and the Chamber of Commerce of Kosovo, facilitated and supported by EUROCHAMBRES4. Stronger Connectivity Agenda will essentially decrease transactional costs and further strengthen the regions competitiveness. The key opportunities, as seen by business community, lie in the socio-economic and digital initiatives. Extending the scope and boosting Western Balkans Investment Framework, and in particular its measures for private sector development, will provide so much needed fuel for growth. Access to finance mechanisms should be further developed to mirror the ones available in the Member States, both on demand and supply side. Support measures should go beyond targeting the business niches with high growth potential, to include average SMEs. This should include support for innovation, digitalization and compliance to EU rules and standards. Activities targeting vocational training should provide support to development of the work-based learning and dual systems based on the EU best practices. Economic benefits from EU enlargement should be enhanced and made more visible EUROCHAMBRES and the WB6 CIF welcome that the new EC strategy highlights the importance of the role of the civil society in the enlargement process. The accession negotiations are in the hands of the policy-makers, however the relationship between the EU and the candidate/potential countries is a matter for each and every citizen, including businesspeople. The role of the CCIs, as key business representatives and business support organizations, is to bring the voice of the business to decision makers and provide services to SMEs to maximize benefits of the enlargement process. Inclusive enlargement 2 A project led by the CCI Italy in which EUROCHAMBRES and the CCI Serbia participated, the ACTS project (Anti-Corruption Toolkit for SMEs) co-funded by the Internal Security Fund of the European Commission developed a tool to help SMEs to evaluate the areas where there is a risk of corruption and to support SMEs in mitigating that risk. 3 EUROCHAMBRES has been promoting a comprehensive multi-stakeholder approach to integrate the refugees in the labour market, the so-called ERIAS initiative - European Refugees Integration Action Scheme 4 This initiative has brought upon number of benefits for businesses, facilitating trade and investments between the two economies. WB6 CIF has been created, based on the initiative of the CCI Serbia and CCI Kosovo, so as to leverage this success at the level of the entire region. Position Paper May 2018 Page 3 of 6

Enlargement process entails regulatory, policy and institutional convergence which will facilitate trade and investment between EU and the Western Balkans. It should also help fostering the regional integration in the Western Balkans. Regulatory convergence offers opportunities for minimizing or removing barriers to cross-border economic activities. Policy approach based on taking up these opportunities and turning them in concrete benefits for businesses and their employees is dubbed inclusive enlargement. The objective is to the prospect of Western Balkan economies as future fully-fledged participants in the Internal market instead of being mere trading partners. Furthermore, it also suggests strong cooperation with the business community in identifying where and how it can be applied to produce the best economic and social results. Given that the key principle of the accession negotiations is nothing is done, until everything is done, many barriers and costs related to cross border business activities persist until the day of accession, although the conditions for their removal could have been met before. The parties should be able, if deemed in mutual interest, to use these achievements and transform them in concrete benefits for businesses and citizens. The Commission s proposal to use Mutual Recognition Agreements is a good example of this approach in practice. However, other, more innovative mechanisms could be explored, on case by case basis. A vigorous implementation of the think small first principle should help improving the overall economic governance in the Western Balkan region and bring concrete benefits to small and medium sized enterprises in the EU and its future member States. Inclusive enlargement would also suggest strengthening support mechanism targeting economic operators, in line with practices in the Member States. This entails more ambitious evolution of the pre-accession funds towards volumes and mechanisms envisaged in the framework of the European Structural and Investment Funds and the European Fund for Strategic Investments. In order to boost the benefits from participation in the EU programmes and policies more technical and peer-to-peer support should be provided. The focus ought to be put on horizontal measures supporting competitiveness (e.g. digitalization, innovation, etc) and EU rules compliance (e.g. environmental and consumer protection, sector based requirements). This will strengthen competitiveness and facilitate the region s sustainable EU accession. The EU CCIs have developed instruments to help SMEs to comply with relevant EU rules, which could be transferred to the Western Balkan CCIs. EUROCHAMBERS and the WB 6 CIF support the European Commission proposal to include Western Balkans partners in different EU technical committees and Commission working groups, in particular dealing with economic, financial and standardization matters, as an efficient ways to bring inclusiveness in the region. Final goal of inclusive enlargement is minimizing impact of trade and investment diversion caused by currently different levels of economic integration within the EU and between the EU and the Western Balkans. It can be a powerful tool to facilitate and promote the inclusion of Western Balkan economies by further enhancing economic integration with the EU. The same logic should be applied in the context of Regional Economic Area to promote regional economic integration. Ultimately, the more economic integration provides clear economic benefits, the bigger support will be for it. We support ideas of gradual increasing of IPA and other structural funds with regard to the Western Balkans, including as well, the inclusion of the enlargement perspectives for West Balkan countries in the next EU Multi Financial Framework. Platform for permanent business dialogue We suggest the establishment of a platform for continuous dialogue between the decision makers, both in the EU and the Western Balkans, and business community. The platform should aim at identifying problems businesses face either in cross-border activity or in application of EU regulation and policies and suggest concrete solutions. The platform would also generate recommendations and provide valuable input to different EU policies and foster integration of the Western Balkans in EU policy-making. Position Paper May 2018 Page 4 of 6

This bottom-up approach will contribute to increased transparency of the enlargement process and make the businesses more informed of its real impact. Direct engagement of the business community from the Western Balkans in the dialogue on topics related to different EU policies will also contribute to improve its capacity not only to adapt to the EU policy framework, but also to meaningfully contribute to it. Suggestions for application of inclusive enlargement on already identified issues The business community has already identified number of issues to be taken into consideration. These can be barriers, costs or opportunities related to either cross-border activities or new market access. Application of the inclusive enlargement principle provides a tool for both removing barriers and tapping into opportunities. In doing business across borders, there are number of barriers and costs which are inherent to differences in the regulatory and policy frameworks. In the context of the EU enlargement process, they should be reduced or avoided. The EU and its candidates should not wait for full membership in the Single Market to remove market related barriers, if the regulatory requirements are met. The following paragraphs offer a few examples: Sustainable limitation of roaming charges can provide boost to cross-border communication. This is particularly important for SMEs who are part of the European value chains, as it allows easier and cheaper communication. Roaming free system within the Western Balkans and between the Western Balkans and the EU should be introduced at such pace to enable sustainable functioning of the telecom market. In line with EU experience it should be based on principle of gradual adaption, shared responsibility of all players in roaming market and respectful of the annual life cycles of the market. Application of electronic identity in cross-border transactions can lower their costs. The recognition of electronic identity should be applied as soon as the regulatory requirements are met by the EU candidates. This will enable effective use of e-invoices and other electronic formats of transaction documents,which will reduce the costs of doing trade and investments. Customs formalities should be further facilitated based on customs regulation convergence. Handling customs requirements requires time, financial and human resources. They can disturb the flow in crossborder value chains. This is why it is of great importance to step up administrative cooperation at the level of customs authorities in order to provide smooth border crossing. The example of good practice would be application of the New Computerized Transit System in the Western Balkans. On the other hand companies report disturbances in the executing customs formalities, for all kinds of different reasons, such as different interpretation of the harmonized customs rule, e.g. Combined Nomenclature. The same principle should be valid also for institutions and rules facilitating and simplifying application of customs rules, such as mutual recognition of Authorized Economic Operators and integration of IT systems and electronic exchange of documents. Transport conditions play a significant role for trade integration and the development of business. The improvement of the business relations and the free flow of goods should be instead supported as a general instrument of closer economic relations based on equal footing. As it stands now, trade and investment between the EU and the Western Balkan countries face substantial limitations. This is why recent developments that resulted in the EU s Connectivity agenda and Transport Community are an important step forward. However, substantial differences in treating Western Balkans and EU transporters remain. The drivers face limitations related to visa-free stay in the EU (Schengen). This creates a significant financial burden for SMEs who have frequent shipments to/from their EU partners. Existing market access arrangements can be obstructed and delayed by inefficient implementation mechanisms. Businesses report problems in exercising these market access rights in the EU, due to lengthy and burdensome procedures In order to facilitate the delivery of services from candidate countries service providers it is necessary to foster the gradual alignment of the education systems and the quality of professional training in the Western Balkans through knowhow transfer and capacity building measures. In addition, once the requirements are met administrative procedures should be facilitated. The question of extended market access itself is strongly connected to harmonization of relevant legislation and institutional set-up for its implementation. Chambers suggest a mechanism in which the Position Paper May 2018 Page 5 of 6

market access could be granted upon the agreement of the both sides, EU and its Balkan partner, when the necessary requirements on legislation, policy and/or institutions are met. This system should not involve a special procedure, as envisaged for regular trading partners from third countries, but should be fast-tracked taking into consideration the achievements made in the accession process, regularly monitored by the EU in the context of the accession negotiations or the implementation of the Stabilization and Association Agreements. This is of particular importance for sectoral regulation for industrial products. Finally, in order to address unemployment and skills mismatch, the Chambers support a better skills forecasting to ensure that the skills of the students and workforce correspond to the skills needed in the labour market as well as the strengthening of Vocational Education and Training (VET) and, in particular of work-based learning which has helped in addressing successfully youth unemployment in some EU Member States. Chambers in the EU play a key role in VET. As business representatives, they can facilitate the participation of SMEs in apprenticeships schemes through the different services they propose to their members. In many countries they are also involved in the shaping and delivery of VET. Based on this experience in the EU, we proposed to increase the capacity of the Chambers in the Western Balkans so that they can effectively contribute to develop and upgrade the skills needed in the labour market, thus reducing unemployment in the region. Further information: Ms. Juliette Loppé, Tel +32 2 282 08 87, loppe@eurochambres.eu; Mr. Zdravko Ilic, tel +32 488 033 456, brussels@pks.rs All EUROCHAMBRES position papers are available via the Publications tab on www.eurochambres.eu WESTERN BALKANS SIX CHAMBER INVESTMENT FORUM Piazza della Borsa 14, 34121 Trieste, Italy Tel +39 040 6701216 info@wb6cif.eu www.wb6cif.eu - ASSOCIATION OF EUROPEAN CHAMBERS OF COMMERCE AND INDUSTRY Chamber House, Avenue des Arts, 19 A/D B - 1000 Brussels Belgium Tel +32 2 282 08 50 Fax +32 2 230 00 38 eurochambres@eurochambres.eu www.eurochambres.eu Position Paper May 2018 Page 6 of 6