Regional interconnectivity.

We know that trucks travel from Ljubljana to Tirana for more than three days. We know that the average GDP of the SEE countries is just a third of the average GDP of EU Member States. We know that the countries of the region doubled their public debt over the last five years and that 800,000 people lost their jobs. We know that regional infrastructure and economies are insufficiently interconnected. ." These are just some of the points I made in my letter to West Balkan media a year ago. So, what have our societies, our economies done about all this in the year 2014 whose results we are summing up now. A lot, and yet far from enough.

The second half of the year saw three major conferences in which connectivity was located at the heart of the reform agenda, as a key contributor to economic growth and jobs creation: The Conference on the Western Balkans in Berlin, in August, the Western Balkans Six Conference in Belgrade in October and, most recently, the Launch of the EU Strategy of the Adriatic and Ionian Region which took place in Brussels. Each and every one of these conferences didn't just emphasise the role of regional interconnectivity, but also represented an important step in aligning policy to achieve the desired goal.

Let us elaborate a bit on different aspects of interconnectivity, their role and their status at the end of 2014. The development of transport, energy and telecommunications infrastructure would have a direct impact on regional competitiveness and play an important role in promoting economic growth--making it more inclusive and attractive for new investments. This we know and understand. Yet at the same time, due to the moneys needed, creating an efficient regional infrastructure and improving interconnectivity is a major challenge for SEE.

Already in July 2011 in the EC Communication "EU and it's neighboring regions, a new approach to transport cooperation" the need to develop better connections within the Western Balkans and between this region and neighboring Member States was identified as a key priority. Improving the physical infrastructure is an important element for meeting the economic accession criteria, including as a part of the new approach to economic governance. It is also an essential element of the SEE2020 Strategy--Jobs and Prosperity in a European Perspective. However, developing new infrastructure needs to be combined with structural reforms. There are two areas where a lot could be done at a very reasonable cost: (1) setting up more efficient border crossing proceedings and (2) developing an infrastructure maintenance scheme. Both would make the Western Balkans networks more efficient and the region more attractive, especially for investors. Furthermore, the implementation of EU standards (of road safety, driving and rest times, environmental norms or Third Party Access to energy infrastructure) through the future Transport Community and the Energy Community will reinforce the added value of investments in infrastructure and connectivity.

Improving connectivity in the Western Balkans by following the above EU policies, would also help us all to push the region further along its path to EU integration. So, what are the models and instruments we could adopt and use?

EU and WB Cooperation Framework

Looking at the way the EU is handling issues in its transport sector, the Trans-European Transport Networks (TEN-T) Guidelines define and link transport policy needs and the requirements for the infrastructure of the comprehensive and core networks, in order to promote the development of a high-quality network throughout the Union by 2050. The Core network links all EU capitals, main economic centres and major EU ports. They enable a transparent decision making process and a harmonised and uniform approach across the countries. In that context, on the SEETO 10th Annual Meeting of Transport Ministers held in December in Skopje, it was agreed to apply a similar approach as in the TEN-T methodology for the future Core Network definition in the WBs. The participants agreed to base their own plans on the SEETO Comprehensive network as part of the TEN-T guidelines and on the bilateral discussions with the EC. This expects to extend the European Core Network to the WBs and facilitate EU financing including from the Connecting Europe Facility (CEF). Furthermore, the findings of the Regional Transport Study shall be examined in details by the transport authorities and EC and they could become an element of further regional transport planning through WB6 connectivity initiative.

In the energy sector, the Guidelines for the Trans-European energy infrastructure establish common rules for the timely development and interoperability of priority corridors. In this context, priority would be given to the Projects of Energy Community Interest (PECI) and the projects identified in the EU's communication on energy security. It is of mutual interest that the transport and energy infrastructure in the Western Balkans is aligned with the Trans-European Networks for Transport (TEN-T) and Trans-European Networks for Energy (TEN-E): sharing concrete objectives can also help ease political cross-border tensions.

Transport and Its Woes

The countries of the Western Balkans need far better connections among themselves and with the Union. The quality and capacity of the region's infrastructure, both on the national and cross-border levels, is a matter of grave concern. The region must not remain a blank spot on the maps of roads, railways and energy grids. Wherever we look, from infrastructure to management--the situation is alarming.

The transport sector right now simply isn't able to provide adequate services and participation in European and other markets, hampering industrial production in many countries of the region, straining budgetary resources, stirring social problems etc. Less than half of the road networks are considered to be in good or fair condition. This leads to extra costs and contributes to uneven economic and social development, isolating many areas from markets and business opportunities. Road safety is also a serious issue leading to deaths and injuries, and burdening the economies with the costs of up to 2% of annual GDP.

On the other side, the geo-economic position of the region has a vast potential, but it needs to be kick-started first and infrastructure projects could deliver that. Great new strategic opportunities will be provided by the development of the high speed railway connections between EU markets and Turkey, the Middle East, central Asia and China via the under-Bosphorus tunnel link.

Despite a chronic lack of investment , the SEE road network is undergoing a continuous process of modernisation and governments are doing that within their national borders. The countries have started to upgrade the current transport routes focusing in particular on improving the poor connections at cross-border points. They are considering instruments to encourage the combined and multimodal transport based on internationally recognized procedures and making efforts to remove the physical and administrative obstacles and enable a free flow in road, rail and air transport.

National and Regional Synergy

Naturally, governments tend to prioritize national needs, especially since the financing is a responsibility of the national authorities. Still, the need to have a regional approach to complement the national one remains important because, in practice, this is an additional vehicle for unhindered implementation of projects, especially the large-scale infrastructure ones. The regional approach to connectivity could play a major role in transport planning and the selection of priority projects. Thinking "out of the national box" is the first step forward. Taking the private sector view is something that can help us break out of the national box.

Inadequate infrastructure remains one of the main barriers that region's companies' face in connecting to regional, European and global value chains. In fact, in an OECD-WTO survey of developing countries in 2013, this was noted as number one obstacle to better value chain integration. Without improved connectivity with regional, European and global markets, the firms, especially the small and medium size ones, are condemned to remain only national, and often even local players.

The ability of our firms and industries to engage in trade is determined much more by the quality of their road, rail and port facilities (sea and air) than by the types of preferential access that they might enjoy in major industrialized markets. Reliable and cost-competitive infrastructure facilitates both trade linkages and FDI attraction. Significant gaps in the provision of infrastructure hold back competitiveness and the expansion of production in South East Europe. Our economies therefore need to invest more in infrastructure, but also to improve the effectiveness of public infrastructure policies.

Intra-governmental coordination between different ministries and agencies in charge of such policies is essential for overcoming multiple gaps, including coverage, access, and costs. Thus setting up these coordination mechanisms should include considerations on both investment, but also policy. In this sense, it would be necessary to include the line ministries (transport, energy, telecommunications), but also others that directly contribute to this, or have a vested interest such as ministries of finance, economy, various agencies such as customs and tax administrations, etc. These kinds of coordination mechanisms should ideally be led by the highest political level to ensure full political commitment. The EC is currently proposing similar vehicles in each of the enlargement countries called National Investment Councils.

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Further step would be linking these national investment councils regionally, through the work of different sectoral regional organizations, helping ensure coherence between the national and regional approaches.

The Bottlenecks on the Road to Growth

Looking at the current problems and challenges that the region is facing, the following pops up as the main obstacles to growth:

* Level of infrastructure development, performance and investments that severely affects the business expansion and choices that users have when it comes to transport routes;

* Different pace of the EU approximation of the national legislations creates gaps on the regional level including the cumbersome border-crossing procedures which although being facilitated to a certain level, require continuous attention and improvement;

* The lack of capacity of the national and local authorities and different stakeholders to cooperate more intensively at regional level;

* Lack of private sector involvement in the financing of public infrastructure and in general in the financing of transport, as well as energy and telecommunication networks, additionally, a lack of financial coordination and management between different level stakeholders;

* Lack of policy and administrative interoperability and harmonisation;

* Huge diversity in signalling, information and telecommunication systems used in the different countries constitutes a major obstacle to the integration of the different national systems.

Looking at the WB, progress has been made in identifying those areas where further interventions are needed at the regional level. Substantial resources, amounting in total to 9.2 billion euro were disbursed in the SEE Comprehensive Network in period 2004-2012. However, there is a lack of visible progress in the area of railway transport, road safety and maintenance. Estimated urgent investment needs to remove current road and rail infrastructure bottlenecks and less developed segments amount to approximately 12.41 billion euro (9.34 billion euro for rail network and 3.07 billion euro for road network). (1)

Therefore, governments and businesses alike are looking for ways to increase efficient movement of people and goods in order to boost productivity and create conditions for a more efficient use of private funds in financing regional infrastructure, to ensure its financial sustainability, improve accessibility and regional interconnectivity.

In order to alleviate the obvious and extreme imbalances in the use of various transport modes and infrastructure, the transport system in the SEE, needs to undergo further transformations. It must become more efficient and costeffective economically, socially and environmentally. Instead of separate sectoral transport policies, intermodality could provide more integration and complementarity between modes and thus lead towards more efficient transport chains. This would be a direct contribution to the economy which would facilitate regional and international trade and attract global transport flows.

Optimizing the performance of multimodal logistic chains and upgrading the transport service for energy-efficient modes, such as rail and shipping is the highest focus of the EU transport strategies. A shift from the current modal split (which today supports mostly road traffic) and therefore a contribution to environmental protection is of utmost importance in the SEE region as well. The intermodality and more efficient use of different transport modes as well as a modal shift to environmentally friendly modes has been mentioned many times in EU and regional strategic documents. Theory has to be translated into practice now.

What is the RCC Doing About all This?

In that context, the RCC, together with SEETO, is preparing the Regional Study on Intermodality to provide answers and options for developing a framework for an optimal integration of different modes and will create opportunities for general socio-economic development of South East Europe and at the same time will also contribute to the achievement of the main objectives of SEE 2020 Strategy. The Study will add to the overall goal--the creation of an efficient and cost-effective use of the transport system through seamless, customer-oriented, door-to-door services whilst favouring competition among transport operators. In addition, the Study will tackle many cross-cutting issues, notably with trade and logistics, energy and the environment sector. It has an added value for the entire region and elements of the study can be taken from other regional dimension coordinators under SEE 2020 to pursue bigger and more substantial joint flagship projects in order to have a greater and more sustainable economic impact.

The RCC is coordinating the overall efforts on implementation of the SEE 2020 Strategy, communicating the progress to the political level of the countries involved and will also be responsible for developing and implementing the overall monitoring system.

The RCC is already establishing the donor platform i.e. the process of raising funds for regional programmes, since multiple sources of funding can be matched (including the national budgets, budgets of the RCC and regional dimension coordinators, IPA II funds and other bi-lateral donors and international organizations) in order to implement the activities envisioned by the SEE 2020 Strategy.

Some of the key measures of the SEE 2020 Strategy under the Sustainable Growth Pillar identified by the Governments from the region as achievable until 2020 are: Improving the utilization rate of transport infrastructure on the SEE Transport Comprehensive Network by removing physical and non-physical bottlenecks and border-crossing barriers; Harmonisation with the EU transport regulatory framework for creating common market conditions and safety standards and liberalisation of rail services; Improving the percentage of rail and waterborne transport in use; Facilitation in air transport and cooperation; Developing and implementing measures to increase the efficient use of energy by achieving a minimum 9% energy saving target by 2018; Developing instruments to create an investment friendly climate and stimulate energy infrastructure development.

The RCC intends to further deepen the cooperation in the areas of transport as well as energy and environment and to boost regional competitiveness efforts during 2015-16. Regional cooperation efforts in sustainable development, infrastructure integration and competitiveness have produced considerable results over the past decade. Energy Community was established to help extend the EU internal energy policy to the countries of the region; South East Europe Transport Observatory (SEETO) has been instrumental in identifying regional transport priorities and the forthcoming Transport Community Treaty will help establish an integrated market for infrastructure and transport; cooperation in the area of competitiveness through regional instruments such as the South East Europe Investment Committee (SEEIC) is helping remove barriers for closer direct linkages between the economic operators in the region.

Together with the BiH authorities, the RCC co-organized the 4th BiH Congress on Roads in September 2014 in Sarajevo. It's participants discussed the Adriatic-Ionian Highway, which would connect Croatia, Bosnia and Herzegovina, Montenegro and Albania. Establishing a Task Force was proposed with the idea that it would include representatives of the ministries of transport, RCC, SEETO, and European Road Federation (ERF) as well the relevant EU institutions in order to start preparing the project documentation. The highway would also connect Central and Western Europe with Greece via the Western Balkans, running down the coast and also improving inter regional connectivity. It would have multiple effects on the strengthening of the economies of those countries, open new jobs, and contribute to the development of tourism.

What Next?

The focus will be on regional commitments towards the Western Balkans alignment with the Trans-European Networks for Transport (TEN-T) and Trans-European Networks for Energy (TEN-E), a more green and energy-efficient transport, while raising the level of investment including the private sector involvement.

The RCC will cooperate with its partners, SEE 2020 dimension coordinators ECS and SEETO.

In order to contribute to enhanced regional interconnectivity, a comprehensive and cooperative approach is needed to address the physical (hard) and non-physical (soft) infrastructure issues. The focus needs to be on border-crossing barriers, harmonisation with the EU transport regulatory framework for creating common market conditions, safety standards and liberalisation of rail services, enhancing the use of Intelligent Transport Systems (ITS). The aim is to use the synergy of the relevant partners, mobilise expertise and available funds to contribute to more sustainable mobility, accessibility and interconnectivity within the region and to and from the region.

It is imperative to expand the idea of connectivity in the context of regional trade to include financial and information aspects. In an ideally connected South-East Europe, obtaining trade finance, having institutions for contract enforcement and an exchange of information for extending business relations would not be all that difficult. Growth can be achieved only if we maximize the potentials of all markets, including the regional one and cutting down transaction costs for businesses entering into and executing trade deals with partners from their region.

The regional potentials could be used in a more efficient and effective manner by intensifying regional cooperation between the relevant regional structures. Therefore, the need for cooperation among regional organisations has become crucial and needs to be very high on the regional agenda.

This was emphasised strongly at the Western Balkans Conference held on 28 August 2014 in Berlin whose Final Declaration calls for improving the region's connections to the European markets since the demand is constantly growing. The participating States shared the view that the Transport Community for the Western Balkans could provide a positive impetus to the economic development. This is also the case when it comes to a reliable expansion of information and communications technology infrastructure.

The participating States also agreed that the European energy policy is of an increasing importance to the countries of the Western Balkans. Regional cooperation within the framework of the Energy Community for South East Europe is an important component, particularly on issues of energy security, energy efficiency targets and climate protection. In that context, the countries of the Western Balkans agreed to work intensively on further developing the Energy Community and on overcoming the shortcomings in its implementation.

In addition, the countries confirmed their willingness to increase their cooperation and they recognized the crucial role of the Regional Cooperation Council in this respect.

Further Help from the EU

The Berlin Conference also noted that Germany is willing to carry out further measures within the framework of existing programmes on economic cooperation and development in order to support the region's countries in making the most effective use of European assistance for bringing them closer to the EU via the Instrument for Pre-Accession Assistance (IPA). German development cooperation has provided reliable support to the countries of the Western Balkans for 25 years and is an integral part of German endeavors to bring the countries closer to the EU and European standards.

The RCC will be fully engaged in the implementation of the Berlin agenda in the coming period and establish a link with the SEE 2020 Strategy in order to focus on "Connectivity" as one of the set priorities in the Berlin process. The connectivity includes transport and energy cooperation platforms and large regional projects, to be identified and prioritized within a broad time frame, such as the Trans European Transport Network Corridors or the Projects of Energy Community Interest (PECI) and the projects identified in the EU's communication on energy security.

As a follow up to the Conference on the Western Balkans held in Berlin, the Ministers of Foreign Affairs and Economic Affairs of the Western Balkans gathered in Belgrade on 23 October 2014. Discussions were focused on economic governance and connectivity, and the Joint Statement reaffirmed the commitment to good neighbourly relations, regional cooperation and European integration. The Ministers also welcomed the European Commission's new approach to economic governance, competitiveness and sustainable growth for the Western Balkans and recognised the importance of intensifying structural reforms to support the process.

In line with this new approach, they made a commitment to annualy submit credible Economic Reform Programmes to the European Commission, the first ones are due by the end of January 2015 as a pilot exercise. These programmes will present measures to ensure macroeconomic and fiscal stability. In addition they will address a limited number of priority structural and competitiveness measures in the sectors (including covering physical infrastructure) that are most relevant for improved competiveness and growth. It is expected that they will include clear timelines and detailed budgetary implications.

It was noted that the implementation of the RCC coordinated SEE 2020 Strategy is relevant in the context of the national economic reform programmes and that the European Commission and the International Financial Institutions count on it to support the priority investments under the Western Balkan Investment Framework. Most importantly, the WB participants agreed in Belgrade to base their own plans on the SEETO Comprehensive networks as part of the EU TEN-T guidelines as this would extend the European Core Network to the Western Balkans and allow speeding up policy and regulatory reforms and concentrate investments on key corridors and interconnectors.

.An easier access to the EU available funds especially IPA II, WBIF, CEF should be used as a way to improve the coordination of all necessary actions at the regional level especially within the SEE 2020 Strategy framework and the Berlin process and this should be seen as a tool to co-finance investments.

Past experiences teach us that achieving consensus and political agreement is perhaps the most difficult and the most time consuming part of implementing change and innovation in the infrastructure sector. Concentrated activities on a set of tangible and result-oriented actions, while building closer relationships with national institutions and different regional structures, has proven to be a cornerstone of a successful regional cooperation strategy.

In that context, it will be a challenging task to establish the kind of coordination mechanism to link the RCC's ongoing work with this new attention and focus on transport and energy links and involve all the relevant regional structures (primarily the SEE Transport Observatory, Energy Community Secretariat, Danube Region's structures, Regional Environmental Center, Joint Service Provision Area Initiative and others) to work in a more coordinated and balanced way now so that we can meet these new expectations in the infrastructure area.

Our region needs a joint effort in addressing all these key areas where underdevelopment and lagging behind the rest of Europe could hurt our future economic and social growth. The EU accession road needs to be complemented by the region's synchronized efforts to build roads, transportation and energy corridors, railway systems and other infrastructural projects and thereby boost the industrial, economic and social status of the region.

To overcome the current crisis, the region needs strong and coordinated leadership, a brave and innovative approach, political commitment and the elaboration of rapid result-oriented ideas and projects. New ideas and joint efforts are needed and together we need to take responsibility for this accelerated development. Rapid development in priority sectors may prove to be the only way to address current and long standing needs of the countries in the region. The economic slowdown is harshly effecting the population, and adding to the long list of concerns in the region.

The RCC has a demanding and very challenging period ahead. Together with our key partners we need to transform the needs of the countries and the region into visible and viable infrastructure projects. We need efficient, safe and environmentally friendly energy networks as well as highways, railways and air traffic routes to link the capitals of our countries and to connect them to Europe. Without them, we will not just remain a blank spot on the map of Europe, we will first and foremost fail the people of the region who have sacrificed enough and deserve better.

Mr. Goran Svilanovic, Secretary General, Regional Cooperation Council.

(1) SEETO Comprehensive Network Development Plan 2014--Multi-Annual Plan 2014-2018; Common Problems--Shared solutions, December 2013.