CEP: Open Balkan Initiative - Less History, More Business

13.09.2021

Photo: Open Balkan conference in Skopje; Photo: Flickr / Government of North Macedonia

At the Economic Forum on Regional Cooperation held in Skopje on 29 June, leaders of Albania, North Macedonia, and Serbia unveiled a new name for what was colloquially known as Mini-Schengen, which, from now on, will be officially called the Open Balkan initiative. The trio signed one interstate Agreement and two Memorandums of understanding, deepening political and economic ties between these countries. However, questions were raised over the complementarity of this initiative with the already existing Common Regional Market initiative, with the rest of the Western Balkan countries remaining sceptical and deciding not to participate. With regional cooperation taking a swing with a number of agreements recently reached, this blog aims at shedding some light on the Open Balkan initiative and potential challenges arising from it, whilst analysing what it means for broader regional cooperation and the reasons behind the decisions of some not to participate.

What was Signed in Skopje?

Besides signing an Agreement on cooperation in the event of a catastrophe and a Memorandum designated to facilitate the free movement of goods, the most notable proposal arising from the Open Balkan initiative is to create free access to the labour market in the region. If implemented, this proposal would enable citizens from all three countries to find employment opportunities across the region under the same conditions as domestic citizens. As only Albania already has a suitable legal framework to allow this to take place, a Memorandum of understanding has been signed with Serbia and North Macedonia, anticipated to make necessary changes to their legal frameworks as well by 15 October. An interstate agreement, marking the implementation of free access to the regional labour market, is expected to be signed in Belgrade at the beginning of November when the trio will meet again. With almost 40% of companies in these countries claiming that they face a lack of an adequate workforce, according to the Western Balkan Chambers of Commerce, allowing free movement of labour, with the announced qualifications recognition, would help companies to overcome these challenges whilst offering ample job opportunities for citizens.

Additionally, more than a year and a half after the idea was first introduced, the trio has shown a clear commitment towards achieving a Schengen-like free movement area. At the Skopje summit, they proclaimed an ambitious agenda that would see border controls between their countries completely abolished by the 1^st of January 2023, for citizens and commerce alike, potentially saving up to €2.7 billion each year, according to World Bank estimates. In order to facilitate the free movement area, separate lanes for citizens and goods coming from the Open Balkan participating countries would be established at border points where no checks will be conducted. Moreover, leaders announced that they were closely collaborating with businesses on possible discounts at various hotels and restaurants for their citizens alongside the touristic routes, further incentivising travel. Completely abolishing border controls and creating a Schengen-like free movement area, could yield up to 6-9% lower operative costs for businesses, according to data presented at the Skopje Summit, additionally increasing their competitiveness while at the same time making these countries more attractive vacation destinations for their citizens.

Possible Challenges to Opening up Borders

Successful implementation of the Open Balkan initiative could be accompanied by several challenges. For instance, abolishing border controls could exacerbate drug trafficking and various criminal activities. The European Commission has already, in this regard, highlighted that the so-called Balkans route is one of the main entry points for various types of illegal drugs into the EU. Accompanied by a high level of corruption, with organized crime and officials often engaging in acts of corruption with impunity, abandoning border controls could turn out to be fertile soil for criminal activities. Additionally, in a borderless region, it could prove nearly impossible to keep track of third party citizens’ entries and imports of goods from different markets. With the former putting heterogeneous visa regimes of participating countries under severe stress, the latter would be particularly challenging in light of diverse customs policies and import duties. Unless these challenges are properly addressed, they could be a stumbling block to deepening regional cooperation.

If the strong commitment to this initiative persists, remedies to the presented challenges could be found. At the Skopje Summit, the trio announced that steps to create a common software and information sharing system are already in motion. Coupled with a high level of coordination between the interior ministries, the risks of an increased volume of cross-border criminal activities can be mitigated. On the other hand, sharing information alone is not sufficient to prevent third party citizens from entering one country without visa restrictions and then simply crossing to another where such arrangements with the country of origin do not exist. Creating a common visa regime might be the only solution. The same logic could also be applied to goods entering a borderless market if they are required to pay different-level customs to each state. In this case, however, harmonising customs’ policies alone would not be sufficient as countries would inevitably lose border revenues due to the lack of internal borders. Creating common regional institutions and external tariffs could be the required action. Otherwise, Open Balkan participating countries risk porous borders like those between Norway and the EU, with common violations.

How does the Open Balkan Initiative Relate to the Common Regional Market?

The Open Balkan initiative builds on an already achieved level of regional cooperation and trust established with the implementation of the Common Regional Market (CRM), but offers a substantial contribution to further regional integration. Whilst the CRM envisaged significantly lower border waiting times for goods and citizens travelling with nothing more than IDs, the Open Balkan initiative would completely abolish border controls, therefore, reducing waiting times to zero, for both citizens and commerce. Additionally, as the free movement of labour under the framework of the CRM would be of limited scope, with work permits removed only for intercompany transfers and particular service providers, the Open Balkan initiative would go a step further by enabling all labour to be employed across the region with one work permit being sufficient. Therefore, the Open Balkan initiative offers more in-depth integration to those willing to pursue it whilst sharing the same goals as the CRM, namely increasing the level of intraregional economic and societal connections.

Notable Absentees

Despite the potentially transformative power of the initiative on the political and economic landscape of the region, some Western Balkan countries have remained reluctant to participate so far. The government in Pristina has repeatedly reiterated that yet unsettled relations with Belgrade are an impediment to its commitment and, instead, offered suggestions for revised models of regional cooperation such as SEFTA. The prime minister of Albania has on several occasions urged the government of Kosovo* to leave history behind and open up to regional cooperation for the benefit of its citizens, but was met with little understanding in Pristina. Citizens and businesses from Kosovo* could particularly benefit from this initiative, with increased trade turnover and potential visa liberalisation if regional border control is successfully abolished. With the US, the closest ally of Kosovo*, supporting the Western Balkans to deepen and strengthen inclusive regional economic integration, and Germany arguing that any regional cooperation is beneficial, increased pressure on the government in Pristina to eventually join the initiative can be expected.

On the other hand, Bosnia and Hercegovina, and Montenegro have sent mixed signals, mostly comparing the Open Balkan initiative to the CRM. Both governments have said in their official statements that they do not see any added value in the Open Balkan initiative, as all aspects of economic integration are already covered by the CRM, rendering the Open Balkan redundant. Consistent with this, the heads of different ministries in Sarajevo have sent conflicting messages in this regard, leading to a conclusion that the country’s complex institutional setup might be impeding the decision along the ethnic lines, with Bosnian leadership protesting that regional economic integration endangers Bosnia’s independence. When it comes to Montenegro, hopes of a swift EU accession, potentially by the 2025 set deadline, keep the country at loggerheads with any substantial regional integration endeavours. Failing to see that regional cooperation is an essential part of the European integration process and that economic convergence is in the citizens’ best interest, could keep the benefits of this initiative limited to only a few willing to take the next step.

Making the Balkans Really Open

The Open Balkan initiative offers more in-depth integration to participating countries, demonstrating a clear commitment to creating a functional common market. Creating an EU-like integrated market, which is the end goal of the CRM, would eventually make any border controls redundant. Therefore, steps envisioned by the Open Balkan initiative are merely means to achieve full implementation of the four core freedoms and an advanced level of economic and societal cooperation already agreed to by the WB6. Strongly backed by economic reasoning, it attests to growing trust between the political leadership and is a way forward from the historical burden. The rest of the WB nations’ failure to engage shows political short-sightedness as geographic proximity conditions trade and societal connections which will not disappear upon the EU accession. With its intentions being in full compliance with EU values, the Open Balkan has the potential to strengthen the European perspective of the region, with those not participating missing out on the advanced regional cooperation implemented by those in the EU long ago.

Author: Dušan Ristić - European Policy Centre – CEP

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