Table II Projects and Programs

South East Europe Compact for Reform, Investment, Integrity and Growth

Substantial progress has been made with the work undertaken to date by the Stability Pact’s Working Table II on the South East Europe Compact for Reform, Investment, Integrity and Growth. This work has involved, in line with the mandate of the Stability Pact, close ongoing liaison between country members and international donor and technical assistance organisations. This report provides summary information on the work to date, ongoing work and expected results and the budget required over the next two years in order to implement the planned programme.

An Investment Compact text was approved by all members of the Working Table at a meeting in Skopje, Former Yugoslav Republic of Macedonia on the 10-11 February 2000. The objective of the Compact is to lay the economic and structural policy foundations for sustained growth and development in South East Europe. It sets out commitments for policy reform which countries in the region need to implement in order to create a robust and sustainable market economy and encourage increased local and foreign direct investment.

An Investment Compact Project Team (PT) under the chairmanship of the UK and the OECD was charged with advancing the preparatory work and co-ordination with donor and bilateral organisations. To mobilise the expertise and facilitate the co-operation and allocation of responsibilities of these organisations within the framework of the Investment Compact two inter-organisation meetings were held in Washington on 29 October 1999 and 26 January 2000. A chart outlining the responsibilities has been prepared and there is a continuing process of inter-action and communication between the organisations.

The Governments of the SEE countries were invited to nominate their national team leader and to establish a Country Economic Team (CET) that will discuss and instigate action in driving the implementation of the Investment Compact. To date all countries with the exception of Albania and Bosnia-Herzegovina have nominated their Team Leaders and begun the preparatory work for the first meeting of the CET.

Action to inform and engage business and civil society in the Investment Compact process was undertaken through various meetings with business representatives and NGOs, through discussion with the Business Advisory Council (BAC) of the Stability Pact and the OECD BIAC. This action has progressed well and is ongoing.

A three-phase approach to implement the Investment Compact was set out:

• Diagnosis of current investment conditions in the countries of the region.
• Development of country specific policy recommendations and design of regional policy initiatives.
• Implementation support and monitoring of progress in policy implementation, improvement of the investment conditions and investment performance in the region.

A Roadmap showing the detailed approach for each phase has been prepared.

Two mechanisms have been developed to progress the complex task of identifying policy reform issues and instigating action in implementation:

• Country and Policy Fact Sheets (CPFS) for country-specific reform action

These are succinct statements of the status of policy areas that are deemed vital to the reform and reconstruction of the SEE economies and summaries of key policy issues for consideration by the CETs. They draw on the knowledge of the OECD and extensive reports, work and experience of international donor and technical assistance organisations (e.g. EBRD, FIAS, MIGA, and USAID). They distil core issues from the work of such organisations and country reviews and are a ‘tool’ designed to assist the CETs and co-ordinate the discussion of all players in the Investment Compact. A key objective of the Fact Sheets is to facilitate the focus on key policy issues for consideration and action. They have been drafted in two forms (a) as Policy Fact Sheets that give cross regional and a comparative perspective on specific policy areas (b) as Country Fact Sheet that give similar information for each of the SEE countries.

Fact Sheets have been drafted for 10 policy areas: Foreign Direct Investment Policies, FDI Promotion Strategies and Programmes, SME Support Structures, Privatisation, Fiscal Reform and Taxes, Bribery and Anti-Corruption, Corporate Governance, Competition Law and Policy, Accounting Regimes/Practices and Financial Sector Reform. Other Fact Sheets on Capital Markets, Financial Support Systems for SMEs, Investment Guarantee Systems and Money Laundering will be added in due course (or will be addressed elsewhere under the Stability Pact). The process of refining and adding to the Fact Sheets is ongoing as new information is provided.

• Regional Flagship Initiatives

Alongside the discussion on policy reform and development there is an urgent demand for visible action under the Investment Compact. This was emphasised by delegates at the recent meeting of the Working Table in Skopje on the 10-11 February.

To focus attention and action here a series of specific Flagship Initiatives have been proposed. Currently ten Flagship Initiatives are under discussion within the CETs and PT. The Investment Compact Project Team believes that the ‘demonstration’ impact of such Flagship Initiatives is vital, not just to the specific initiative proposed but to the overall policy reform and implementation process in the SEE countries. They provide tangible examples of meaningful and agreed action that can be taken on a collective and co-ordinated basis.

The OECD in co-operation with other members of the Investment Compact Team is undertaking missions to all SEE countries during March 2000. The aim of the missions is to:

• Facilitate the efforts of each country in establishing their CET
• Advise on the essential work programme using the mechanism of the Fact Sheets
• Obtain their initial ranking and proposals for action on the proposed Flagship Initiatives and other suggested Initiatives.

The conclusion of these missions should ensure clear structures and identified teams to drive the implementation of the Investment Compact as well as indicators of policy priorities and Flagship Initiatives. Much of the policy reform will inevitably take many years and it is important at this stage to seek to ensure that the appropriate structures, tools and process are in place.

In addition a Ministerial conference of SEE country development ministers has been proposed by Slovenia for April to facilitate the exchange of regional experience and to underpin the rationale and work of the Investment Compact. The next meeting of the Project Team will take place back-to-back with this Ministerial conference.

II.B.1  Compact for Reform, Investment, Integrity and Growth

EURO 6.337.000

The UK and the USA took the initiative, ahead of the Bari meeting of Working Table II, in October 1999, to launch the Investment Compact Initiative. After a series of discussions and concertations with all relevant actors and partners, including the countries of the Region, the Compact was formally adopted at the Skopje meeting of Working Table II.

By endorsing the Compact, Stability Pact members fully recognised the urgent necessity to implement all principles and actions presented in the Comapct. The objective of the Compact is to lay the economic and structural policy foundations for sustained growth and development in South East Europe. It sets out commitments for policy reform which countries in the region need to implement in order to create a robust and sustainable market economy and encourage increased local and foreign direct investment.

A three-phase approach to implement the Investment Compact has been set out:

Diagnosis of current investment conditions in the countries of the region.

Development of country specific policy recommendations and design of regional policy initiatives.

Implementation support and monitoring of progress in policy implementation, improvement of the investment conditions and investment performance in the region.

A Roadmap showing the detailed approach for each phase has been prepared.

Two mechanisms have been developed to progress the complex task of identifying policy reform issues and instigating action in implementation:

Country and Policy Fact Sheets (CPFS) for country-specific reform action. These are succinct statements of the status of policy areas that are deemed vital to the reform and reconstruction of the SEE economies and summaries of key policy issues for consideration by the CETs. They draw on the knowledge of the OECD and extensive reports, work and experience of international donor and technical assistance organisations (e.g. EBRD, FIAS, MIGA, and USAID).

Fact Sheets have been drafted for 10 policy areas: Foreign Direct Investment Policies, FDI Promotion Strategies and Programmes, SME Support Structures, Privatisation, Fiscal Reform and Taxes, Bribery and Anti-Corruption, Corporate Governance, Competition Law and Policy, Accounting Regimes/Practices and Financial Sector Reform. Other Fact Sheets on Capital Markets, Financial Support Systems for SMEs,

Regional Flagship Initiatives: Alongside the discussion on policy reform and development there is an urgent demand for visible action under the Investment Compact. This was emphasised by delegates at the recent meeting of the Working Table in Skopje on the 10-11 February.

To focus attention and action here a series of specific Flagship Initiatives have been proposed. Currently ten Flagship Initiatives are under discussion within the CETs and PT. The Investment Compact Project Team believes that the ‘demonstration’ impact of such Flagship Initiatives is vital, not just to the specific initiative proposed but to the overall policy reform and implementation process in the SEE countries. They provide tangible examples of meaningful and agreed action that can be taken on a collective and co-ordinated basis.

Substantial progress has been made with the work undertaken to date by the Stability Pact’s Working Table II on the South East Europe Compact for Reform, Investment, Integrity and Growth. The Investment Compact was approved by all members of the Working Table at a meeting in Skopje, on the 10-11 February 2000. An Investment Compact Project Team (PT) under the chairmanship of the UK and the OECD has been charged with advancing the preparatory work and co-ordination with donor and bilateral organisations. To mobilise the expertise and facilitate the co-operation and allocation of responsibilities of these organisations within the framework of the Investment Compact two inter-organisation meetings were held in Washington on 29 October 1999 and 26 January 2000. A chart outlining the responsibilities has been prepared and there is a continuing process of inter-action and communication between the organisations.

The Governments of the SEE countries were invited to nominate their national team leader and to establish a Country Economic Team (CET) that will discuss and instigate action in driving the implementation of the Investment Compact.

Rolf Alter OECD, 2 rue Andre Pascal, 75 775 Paris Cedex 16, France,
Tel 33 1 45 24 14 10, Fax : 33 1 45 24 78 52
Rolf.alter@oecd.org