Brussels, 22 Oct 2002

Improved Situation in South Eastern Europe as Free Trade Dawns, Refugees Return in Record Numbers - Activity Report of the Stability Pact 2002 to EU Ministers

A free trade area with 55 million consumers as of next year, over 125'000 returned refugees in 2002 and a mechanism in place to collect small arms in illicit private possession are the major achievements of the Stability Pact this year. This progress report was presented in writing to the EU Foreign Ministers Council in Luxembourg, by Stability Pact Special Co-ordinator Erhard Busek on 21 October. On a general note, Busek also informed Ministers that regional ownership within the Pact had increased, especially by the revived SEECP process becoming the co-ordinated voice of the region.

At a public presentation of the report at the Brussels based think-tank Centre for European Policy Studies (CEPS) today, Erhard Busek outlined the Pact's achievements in six priority areas. The creation of a free trade zone by means of 21 bilateral free trade agreements, of which 11 are signed and the rest is under final negotiation, helps attract investments to Southeast Europe and turns the region into one market, which is how it is perceived from the outside. The improved situation for refugees and internally displaced persons in Bosnia-Herzegovina, Croatia and Yugoslavia has led to record numbers of returns in 2001 and 2002. The figure of over 125'000 returns in the year 2002 so far is indicative of this success in finally closing one of the remaining open chapters of the Croatian and Bosnian Wars. The Pact's return activities are conducted in close co-operation with UNHCR and the governments of the countries concerned. They will come to an end in late 2003, when refugee matters will not need a special mechanism any longer and can be dealt with in the regular assistance to South Eastern Europe in the Stability Pact framework. The uncontrolled flow and illicit possession of small arms and light weapons in Southeast Europe can be tackled much more effectively in the future with the help of the Belgrade based Clearinghouse (opened 8 May), which is run by UNDP. Its main activity is to help develop and implement arms collection projects and related activities in all countries of SEE.

Busek also reported about the launching of sub regional co-operation by SRSG Steiner in Kosovo, HR Ashdown in Bosnia-Herzegovina and EUSR Le Roy in FYR Macedonia to address such practical issues as fostering regional trade and fighting organized crime. To this end, the Regional Crime Fighting Centre in Bucharest will be reinforced by the secretariat of the Pact's Organised Crime initiative SPOC in November. On infrastructure, a field with high public expectations, progress has been considerable and becomes more and more visible. The two lines of infrastructure projects stemming from the two regional conferences in Brussels (March 2000) and Bucharest (October 2001) were merged into one consolidated list, comprising 46 projects with a volume of € 3.46 bn. On 23 of these, physical work on the ground has started, with 5 more to begin before the end of 2002. With reference to electricity, a memorandum of understanding in view of the creation of an integrated electricity market along EU lines is expected to be signed on 15 November in Athens. A regional electricity market compatible with the respective EU legislative framework is planned to be realized by 2005.

PR2002/055

SCSP - Rue Wiertz 50 - 1050 Brussels - Belgium
Tel +32-2-401 87 25 Mobile: +32-478-974 655 Fax: +32-2-401 87 12
Spokesperson: Roland Bless
www.stabilitypact.org

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Having thoroughly reviewed the activities and working methods of the Stability Pact operation in concurrence with the General Affairs Council of 19 November 2001, the Special Co-ordinator of the Stability Pact, Erhard Busek, suggested to the 11 March 2002 GAC to undertake the following reforms and achieve the following by the end of 2002:

ACHIEVABLES 2002

In the light of the priorities defined by the Regional Table in June 2001, the following objectives have received priority attention with the aim of producing concrete achievable results.

Trade and Investment

Commitment - to complete the network of Bilateral Free Trade Agreements by 31 December 2002.

The "achievable" stems from the Memorandum of Understanding on Trade Liberalisation and Facilitation signed in June 2001 by seven countries of SEE: Albania, Bosnia-Herzegovina, Bulgaria, Croatia, FYR Macedonia, Romania and FR Yugoslavia - Moldova associated itself to the process through a statement of intent and has an extended timeline.

Under article 1 of the MoU, the Signatory Countries undertook to complete a network of bilateral Free Trade Agreements (FTAs) between all countries of the region by 31 December 2002, in accordance with specified provisions. This network of bilateral free trade agreements will provide the basis for a free trade area in SEE covering approx. 55 million consumers.

The end of 2002 requires a total of 21 FTAs. Currently, 11 agreements have been concluded, 8 are under active negotiation and 2 negotiations are due to be launched shortly.

Infrastructure

Commitment - timely implementation of projects and removal of obstacles to implementation

The infrastructure projects agreed at the two SP Regional Conferences have been merged into one comprehensive list - Regional Infrastructure Projects This of 46 infrastructure projects includes transport, energy, water and environment and cross border trade facilitation. The number of projects started by June 2002 has doubled compared to December 2001 and amounts to 50 % of all projects (23). Additional 5 projects are expected to start before the end of 2002.

The Infrastructure Steering Group, which oversees the infrastructure development in SEE, is working on identifying barriers to project implementation, as well as regional strategies for future infrastructure development. Information flows between the Infrastructure Steering Group and the countries of the region is improving. It should be noted that inclusion of new projects on the list will reflect progress made in securing financing for infrastructure projects promoting regional objectives in the transport, energy and environmental sector and meeting the agreed criteria of technical, economical and environmental feasibility.

Commitment - regional energy cooperation will be strengthened, particularly in the field of electricity.

The European Commission with the active support and assistance of the Stability Pact launched the South East Europe Electricity Regulatory Forum (SEEERF) in June. Improving the stability of electricity supply for the countries of the region is fundamental for economic development and political stability. The SEEERF initiative proposes to the countries to open their national electricity markets by 2005. This market will be based on the principles of the Electricity Directive (96/92) and its relevant secondary legislation and will allow the electricity systems and companies of the region to participate fully in the Internal Electricity Market of the European Union.

Refugees

Commitment - to provide sustainable solutions for at least 100,000 refugees and displaced persons by increasing the level of return and integration assistance and credits for self-assistance, providing employment opportunities, accelerating the repossession of properties.

With regard to returns and sustainable solutions, more than 125.000 persons have found sustainable solutions during the first seven months of 2002. With regard to the housing sector, the Refugee Return Initiative (RRI) has successfully established inter-ministerial housing secretariats in Serbia and in Bosnia and has secured interaction expertise to support the in-country developments. In addition, 7 million Euro of direct investment from a housing association has been secured for construction of apartments in Sarajevo. Ongoing housing programs are estimated at 250 million Euro in 2002. The property legislation implementation rate (PLIP) in Bosnia Herzegovina has in August reached 59%. Repossession of property will be enhanced by the establishment of an RRI regional data exchange mechanism on property related information in the next months. At the request of the region and several donors, the RRI has launched a Collective Centre Initiative in order to close these centres and find sustainable solutions for the remaining 55'000 inhabitants.

Small Arms & Light Weapons

Commitment - to establish a "Regional Clearinghouse" in Belgrade under UNDP auspices.

On 8 May, Regional Clearinghouse for Small Arms and Light Weapons (SALW) was opened in Belgrade, under the auspices of the UNDP. The Clearinghouse is now elaborating programs in several countries aimed at reducing the excess supply and illicit trafficking of SALW throughout the region. The response of countries throughout the region has been uniformly supportive and donors also have responded to the opportunities afforded by such an excellent capacity building operation.

Organized Crime

Commitment - to establish a SPOC executive secretariat at the SECI Centre for Combating Transborder Crime and Corruption at Bucharest to be operational in the region.

In an attempt to streamline ongoing initiatives to fight organised crime, the secretariat of the Stability Pact Organised Crime Initiative (SPOC) is being established at the Regional Crime Centre at Bucharest to be operational in the region. The Centre is a good example of regional ownership and the Stability Pact hopes to concentrate the majority of its law enforcement activities at the Centre. The aim is to combine the efforts of the Centre with those of SPOC in the field of legislative reform and capacity building. Both parties benefit from this setting as input from the operational side is needed to identify shortfalls in the area of legislation (e.g. data protection, information exchange), while SPOC would then deliver the know-how solve these identified gaps. Interpol has established a liaison at the Centre and negotiations with Europol are on the way. Following the elections of the new Centre management at the 5-6 November meeting of the Centre's decision making body, the SPOC secretariat will be up and running in the same month.

Sub-regional Cooperation

Commitment - to start up an informal sub-regional dialogue and cooperation process between key principals on functional cross-border issues.

A process of promoting sub-regional cooperation was initiated by an August meeting in Salzburg between SRSG Michael Steiner, HR Paddy Ashdown, EUSR Alain Le Roy and SC Erhard Busek. This process is embedded in wider consultations initiated by the Council (Solana) and Commission (Patten). The four principals agreed to focus on trade liberalisation, the fight against organised crime, refugee returns and media development. Practical and pragmatic solutions are now being explored and applied to translate this commitment into reality in close cooperation with the governments concerned in order to give real ownership of the process to the region.

COMPLEMENTARITY with SAP and ACCESSION PROCESS

The Council "has stressed the importance of enhancing the complementarity between the Stability Pact and the Stabilisation and Association Process."

The Stability Pact is committed to coherence as well as mutual and complementary support to both the Stabilisation and Association Process (SAP) and the accession process for candidate countries, which also participate in the Stability Pact. The efficiency and effectiveness of the Stability Pact operation continues to rely on the leading role of the EU in achieving the goals of the Stability Pact, in line with the conclusions of the Zagreb summit.

An Informal Consultative Committee (ICC), with representatives from the Council, Commission, Presidency, SP and the region, has been established and six co-ordination meetings have taken place to date, in which participants reconfirmed mutual support.

REGIONAL OWNERSHIP

SEECP - Within the Stability Pact, the South Eastern European Cooperation Process has not only been revived, but it also agreed to send a representative of the (rotating) chair (FRY in 2002) to the Brussels based Informal Consultative Committee. Within this forum comprised of EU Commission, EU Council, EU Presidency and Special Co-ordinator of the Stability Pact, the SEECP representative gives SEE its "voice" and guarantees a mechanism of permanent consultation and co-ordination.

Other examples of regional ownership:

• Regional Arms Control Verification and Implementation Assistance Centre (RACVIAC) in Zagreb with eighteen participating countries.
  
  
• Taming the Dragon - Thirteen Countries Jointly Practised Forest Fire Fighting in Croatia in May 2002. Up to 1000 participants, including 100 fire fighting and rescue teams participated in 67 events.
  
  
• Sava River Basin Initiative (Bosnia and Herzegovina, Croatia, Slovenia and the Federal Republic of Yugoslavia)
  
  
• Danube Cooperation Process
  
  
• Regional Return Initiative (BiH, Croatia and FRY)
  
  
• eSEE : (chaired by FRY)

METHODS OF WORK

In order to reduce the number of Stability Pact meetings and rationalise Stability Pact structures the following changes have been implemented:

• Hold the Regional Table as the decision-making body annually at the end of each year;
  
  
• Reduce Working Table sessions to once annually in the middle of the year (to be held in co-chairing country) and focus agenda on specific initiatives;

The Special Coordinator has initiated two co-ordination meetings with regional initiatives (CEI, BSEC, SECI, Adriatic-Ionian Initiative) in order to harmonise calendars and agree on division of labour. The first was held on 23 April in Vienna and the second on 10 September in Istanbul (on BSEC premises).

The SC has brought SECI activities in line with the work of the Pact. Activities concerning the fight of organised crime will be integrated in the Regional Anti-Crime Centre and the Stability Pact and SECI Business Advisory Councils have agreed to merge and will hold their first joint meeting on 11 December in Skopje.