A New Year’s resolutions are hard to follow, but the one governments of the Western Balkans states set by the end of 2019 could be essential for the future of the entire region. There is no place for failing in that one. A new intergovernmental deal shall allow free movement of goods, services, capital and persons within the Western Balkans states — or at least some of them. A new proposal which, in general, resembles the Central European Free Trade Agreement (CEFTA) and Schengen’s one could bring additional economic growth and development to the region that still struggles to overcome tensions and challenges from the past. The success of the deal could depend on the politicians who are openly coquetting with chauvinism.
In October 2019 the president of Republic of Serbia, Mr Aleksandar Vučić met the prime minister of the Republic of North Macedonia, Mr Zoran Zaev and the prime minister of the Republic of Albania, Mr Edi Rama to discuss better market integration and cooperation in the region. The initial proposal would cover Albania, Serbia and North Macedonia in the first phase of the implementation. At the same time, Montenegro, Bosnia and Herzegovina and Kosovo are expected to join in the later stage although first reactions from Montenegro and Kosovo do not bear optimism. The lack of confidence in the proposed idea might be hidden in the absence of political trust among leaders of the Western Balkans states and paranoia from the ghosts of the past. On the field of economics, all countries are desperate for new ideas that could reduce unemployment, improve the standard of living and make the region more appealing to young and educated people.
According to the Western Balkans regular economic report conducted by the World Bank (WB), it is estimated that on average the real gross domestic product (GDP) growth for all six countries would be 3.6% in 2020, and 3.8% in 2021. Yet, much of that growth depends on the activities that will occur in the global market. To avoid being constrained by the global economic actors, the Western Balkans leaders will need to start cooperating and easing trade conditions within the region. According to Linda Van Gelder, World Bank Regional Director for the Western Balkans, “trucks spend some 26 million hours at crossings in the region each year — that’s nearly 3,000 years.” By contrast, delays in many European Union countries are five-time shorter. It is odd as intra-CEFTA trading plays a significant role for most of the Western Balkans state. The total value of goods export among members was worth €6bn in 2018. Montenegro and Kosovo reap most of the benefits from intra-CEFTA trading although they express most of the scepticism toward future regional cooperation. In 2018, the Statistical Office of Montenegro (MONSTAT) reported that 40% of exports and 29% of imports were shares of CEFTA members in Montenegro’s trade of goods. Similar data were published for Kosovo by Kosovo Agency for Statistics (KAS). In the same year, 47.2% of the total exports and 25.5% of the total imports of Kosovo were to and from CEFTA members. Therefore, lowering trade barriers and resolving trade disputes could improve trade conditions and stimulate new investments from the private sector. Thus, it could lead to new job opportunities and better regional integration, which is crucial for successful EU integration.
Such an outcome is essential for encouraging young people to stay. Even though economic growth was strong in 2018, which led the unemployment rate to fall to historic lows in the first half of 2019, the youth unemployment rate remained high (see chart below).
Many young people then emigrate from the region, and it has a vastly negative impact on the Western Balkans economies. Westminster Foundation for Democracy (WFD) estimated that on average €17,437 per person is lost for every work-capable person who leaves North Macedonia, Montenegro or Albania. It means that billions of euros are lost due to the inability of the governments to prevent high rates of annual emigrations. Ageing of the population causes several problems which are related to the economic growth, workforce and productivity too. With contemporary economic and political paradigms, it is challenging to expect to have sustainable models which would empower the Western Balkans economies. It is particularly cased with governments that still maintain a large scale of the funds in pension and health care.
In Montenegro, according to MONSTAT, the number of people over the age of 65 is 91,965 or 14% of the population. Contributions for pension and disability insurance for 2017 were close to €294m, around 6.8% of GDP, and it will increase over time, as the population continue ageing. In contrast, natality is decreasing, and life expectancy is rising while the rate of natural increase was 1.4 — the lowest in the last decade.
The better future of the region lays upon politicians who are better in clashes than in collaboration. It shall require much more than plain words for the region to become more competitive on the global scale. It means that compromises have to become an integral part of the communication between leaders. There are a lot of disputes and tensions that must be resolved if there is a genuine interest in regional integration and better economic cooperation. For some politicians, it will be a painful process to cut its ties with nationalism and populism, but for the sake of the future, it has to be done. Otherwise, as Professor Robert Skidelsky noted: “Bad economics leads to bad politics.” — and our region, unfortunately, still remembers what bad politics could do to generations of people.