Contributions of Regional Programmes to National Competitiveness Investment Compact for South East Europe 31 March 2011 November 2010

Structure of the Investment Compact and SEEIC 2 Investment Compact for South East Europe Analytical support Project management Investment Compact for South East Europe Analytical support Project management SEE Investment Committee OECD donor countries SEE country economic teams International organisations Private sector Co-chairs: OECD Country (Austria) + SEE Country (Serbia) + OECD Secretariat (DAF/PSD) Regional Cooperation Council Policy Dialogue: Regional Working Groups Human Capital Investment Promotion Regulatory Reform Trade Assessment: Investment Reform Index SME Policy Index Assistance and training for implementation Regional Competitiveness Initiative Strategy: Sector-specific Sources of Competitiveness

Three main regional activities 3 Investment Climate & competitiveness SME Policy Promoting Free Trade under CEFTA Recent publications Investment Reform Index 2010 Sector Specific Sources of Competitiveness SME Policy Index 2009 Intellectual Property Rights in the CEFTA 2006 Signatory Parties National Treatment Restrictions and Review of Bilateral Investment Treaties Trade Integration, Industry Concentration and FDI Flows Projects Regional Competitiveness Initiative SME Policy Monitoring and Implementation Study on the impact of trade integration on investment localisation at sub-national level Independent monitoring of the elimination of Non-Tariff Barriers among CEFTA Parties

I. Policy Dialogue Regional Working Groups 4 Investment Promotion Improving business linkages between SMEs and foreign investors Human capital Internships between industry and education Regulatory Reform Role of parliaments in economic reform Tax Policy Analysis Tax treatment of R&D Innovation Policies to support absorption of technology. Sharing of best practices at regional level. Mechanism for regional peer-based reviews. Identified synergies for regional collaboration. Sharing of best practices at regional level. Mechanism for regional peer-based reviews. Identified synergies for regional collaboration. I. Policy Dialogue Regional Working Groups What does the Investment Compact / SEEIC do?

5 II. Policy assessment: Investment Reform Index 2010 Results A comprehensive assessment of SEE investment climate released in March SEE economies were assessed using 8 policy dimensions and over 100 indicators IRI – SEE average score 5

Example of policy assessment (from IRI 2010) Note: (1) Dimensions on SME policy, which was derived from the SME policy index and on infrastructure were not scored IRI – SEE average score Main improvement points – Investment Policy and Promotion Land title registration and cadastre is slow Permits for foreign workers are cumbersome in BiH and FYROM FDI Incentives on sub-national level need more clarity FDI-related capital transfer barriers remain in AL, SRB and BiH One-stop shop for investors (IPAs to approve permits) Weak aftercare in BiH, BG, MNE and RO Legal frameworks for PPPs to be developed Need to improve IP rights enforcement

What does the Investment Compact / SEEIC do? III. Sectoral Policy Strategy: Sector Specific Sources of Competitiveness Results Developed strategic policy recommendations on improving: Access to finance in garment sector Regional investment promotion activities in automotive sector Linkages between education and industry in the information and communication technology sector 7

What does the Investment Compact / SEEIC do? 8 IV. Assistance and training for implementation: WB Regional Competitiveness Initiative Objectives Support long-term competitiveness of the Western Balkans. Provide capacity building support through pilot projects and horizontal working groups. Focus Areas Human capital development – focus on skills gaps. Innovation – technology absorption by the private sector. Timeline: First four country projects in Voucher scheme Establishment of a Competence Technology Centre (CTC) Development of a policy framework for innovation Co-operation projects researchers-business-government WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION

1.Focus effect: Provide a platform and consensus on high impact country project sthrough voluntary comparative assessment 2.Multiplier effect: Spread results and knowledge from successful country projects to regional partners 3.Mirror effect: Motivate economies to introduce better policies by comparing progress highlighting best practice examples 4.Awareness effect: Strengthen awareness and adoption of latest international policy standards and instruments 5.Coordination effect: Avoid duplication of country initiatives and get better return on investment from donor contributions 6.Image effect: Send strong signal to private sector of joint government commitment to make markets more attractive 7.Regional issue effect: Address policies challenges that can only be tackled through regional collaboration (eg; CEFTA NTBs) Contributions of effective regional programmes to national competitiveness

Need to complement horizontal policy approaches with a focus on improving policies for competitiveness in specific sectors with the highest potential for value added => next phase of WB RCI (WB RCI II) will focus on highest potential sectors Systematically involve business and civil society in the development of better policy, including at the sector level => dedicated session with BAC and MEDEF at next SEEIC in Paris on 4 May 2011 Top level vision and political impetus is fundamental to ensure effective change => High level Ministerial on 23/24 November in Paris Some lessons learned from regional programmes

Calendar of activities 4 MaySEE policy dialogue between industry and public sector 5 May 8 th SEE IC at OECD headquarters in Paris, France MaySmall Business Act (SBA) assessment launch in Istanbul 8-10 June RCI working groups on human capital and innovation (Croatia) Mid Oct2nd RCI working group meetings (TBD) 22 to 23 Nov CEFTA week 1-day event and CEFTA joint committee meeting (at ministerial level) in Paris 24 NovSEE Ministerial on competitiveness and 2020 vision (Paris)

Anthony OSullivan Head of Division Private Sector Development Organisation for Economic Co-operation and Development (OECD)