1. Target setting for the SEE 2020 strategy Sarajevo, Bosnia and Herzegovina October 3 rd 2012 1

2. Agenda Introduction and objectives Target setting for the Overall Strategic Goals Target setting for Integrated Growth Target setting for Smart Growth Target setting for Sustainable Growth Target setting for Inclusive Growth Target setting for Governance for Growth 2

3. Transforming the SEE 2020 Vision SEE 2020 Vision adopted at the SEE Ministerial Conference: i.Integrated growth to deepen regional trade and investment linkages; ii.Smart growth – innovation and competition based on value-added rather than labour costs iii.Sustainable growth – private sector competitiveness, entrepreneurship, greener and energy-efficient development; iv.Inclusive growth – skills development, employment creation & labour market participation by all v.Governance for growth – improve capacity of public administrations to strengthen the rule of law and reduce corruption A set of headline targets to be adopted at the next Ministerial 3

4. The proposed process Nov 2011 Apr 2012 Jun 2012 Sep 2012 Nov 2012 Vision adopted First draft targets Targets discussed Second draft targets Written procedure & third draft SEE Min SEE IC Final draft targets Targets adopted SEE Min 4 1 st Task Force Meeting 2 nd Task Force Meeting

5. Overall Strategic Targets: a)Increase of GDP per capita expressed in PPP relative to the EU b)Growth of total trade of goods and services c)Reduction of trade deficit Integrated Growth a)Growth of intra-regional trade in goods and services b)Growth of overall FDI inflows Smart Growth a)Growth of GDP per person employed An initial set of target indicators 5 Sustainable Growth a)Growth of enterprise creation b)Growth of export of goods and services per capita Inclusive Growth a)Growth of overall employment rate b)Increase of rate of population with tertiary education Governance for Growth a)Increase government effectiveness

6. Overall Strategic Targets: a)Increase of GDP per capita expressed in PPP relative to the EU b)Growth of total trade of goods and services c)Reduction of trade deficit Integrated Growth a)Growth of intra-regional trade in goods and services b)Growth of overall FDI inflows Smart Growth a)Growth of GDP per person employed An initial set of target indicators 6 Sustainable Growth a)Growth of enterprise creation b)Growth of export of goods and services per capita Inclusive Growth a)Growth of overall employment rate b)Increase of rate of population with tertiary education Governance for Growth a)Increase government effectiveness

7. 7 Overall Strategic Targets: Increase in GDP per capita expressed in PPP relative to the EU Source: World Bank data used for 2000-2009.Data submitted by SEE economies for 2010 only. Eurostat data used for Bosnia and Herzegovina and Croatia due to discrepancy between national and Eurostat sources. Averages weighted by population. Data labels show the average for 2010 No data submitted for Kosovo* and weights were adjusted accordingly. * This designation is without prejudice to positions on status, and is in line with UNSCR 1244 and the ICJ Opinion on the Kosovo declaration of independence.

8. 8 Overall Strategic Targets: Increase in GDP per capita expressed in PPP relative to the EU 1. Increase of GDP per Capita Relative to the EU expressed as a percentage of EU GDP per capita 20102020MultiplierNotes ALB28.0035.001.3 BiH29.0035-401.3 CRO59.0070.001.2 KOS MKD36.4840-451.2 MNE41.0048-491.2 SER34.0041.001.2 SEE average 37.76 45.771.2 Weighted average based on economies' share in the total population of the region. No data was provided for Kosovo*. Weights are adjusted to reflect missing data.

9. 9 Overall Strategic Targets: Growth of Total Trade in Goods and Services Source: SEE economies provided data for 2010 baseline. World Bank data used for 2000-2009. Data not provided by Kosovo*. Montenegro only provided baseline 2010. No data for Serbia was available for 2000 to 2006 so the economy is not included in the sum for SEE for these years.

10. 10 Overall Strategic Targets: Growth of Total Trade in Goods and Services 2. Growth of Total Trade in Goods and Services expressed in millions of USD 20102020MultiplierNotes ALB10,18822,0002.2 BiH14,02431,9782.3 Baseline figure shows high discrepancy with int'l sources CRO46,909120,0002.6 KOS MKD10,31220,0001.9 MNE4,080 SER32,97678,0002.4 SEE118,489 279,086 2.4 The target sum is calculated by multiplying the regional baseline for 2010 by the weighted multipliers of the 2020 targets provided by SEE economies. Weights are adjusted for missing data and are based on Eurostat data for GDP at purchasing power standard.

11. Overall Strategic Targets: Reduction of Trade Deficit 11 Source: World Bank data for 2000-2009. SEE economies for 2010 baseline. Averages weighted by GDP PPP based on Eurostat 2010 data Kosovo* did not submit data for 2010 and data only available from 2000 to 2005 so the economy is not included in the average. Weights were adjusted accordingly.

12. Overall Strategic Targets: Reduction of Trade Deficit 12 3. Reduction of Trade Deficit / Improvement of Trade Balance expressed as percent of GDP 20102020DifferenceNotes ALB-21.0-12.09.0 BiH-20.8-27.0-6.2 Deficit forecast for 2015 CRO0.0 KOS MKD-19.0-17.02.0 MNE-28.4-20.08.4 SER-17.0-14.82.2 SEE-13.0 -11.8 Weighted average based on economies' share in the total GDP of the region. No data provided for Kosovo*. Weights are adjusted to reflect 6 economies and based on Eurostat data for GDP at purchasing power standard.

13. Overall Strategic Targets: a)Increase of GDP per capita expressed in PPP relative to the EU b)Growth of total trade of goods and services c)Reduction of trade deficit Integrated Growth a)Growth of intra-regional trade in goods and services b)Growth of overall FDI inflows Smart Growth a)Growth of GDP per person employed An initial set of target indicators 13 Sustainable Growth a)Growth of enterprise creation b)Growth of export of goods and services per capita Inclusive Growth a)Growth of overall employment rate b)Increase of rate of population with tertiary education Governance for Growth a)Increase government effectiveness

14. Integrated Growth: Growth of Intra-Regional Trade in Goods (and Services) 14 Sources: OECD ICTS (International Trade by Commodity Statistics) Database and SEE economies for 2010 baseline. Years: 2004 and 2009 For 2004, the exchange rate used was 1.324$=1 No data submitted for Kosovo* so the economy is not included in the SEE sum.

15. Integrated Growth: Growth of Intra-Regional Trade in Goods (and Services) 15 4. Growth of Intra-regional Trade in Goods expressed in million EUR 20102020MultiplierNotes ALB436.01,5263.5 BiH3,185.3 CRO3,645.012,0003.3 According to the target and projections of OECD for SEE KOS MKD1,238.03,5002.8 MNE800.5 SER3,20212,0033.7 SEE12,507 42,983 3.4 The target sum is calculated by multiplying the regional SEE baseline number for 2010 by the weighted multipliers of the 2020 targets. Weights are adjusted for missing data and are based on Eurostat data for GDP at purchasing power standard.

16. Integrated Growth: Growth of foreign direct investment net inflows 16 Source: SEE economies for 2010 baseline. World Bank data for 2000-2009. Kosovo* did not submit data. No data for Kosovo* available for 2000 to 2003 so the economy is not included in the SEE sum for these years. No data for Montenegro was available for 2000 to 2006 so the economy is not included in the SEE sum.

17. Integrated Growth: Growth of foreign direct investment net inflows 17 5. Growth of Overall FDI Inflows in current USD million 20102020MultiplierNotes ALB1,0492,9662.8 BiH2907632.6 CRO5441,0882.0 KOS MKD2107803.7 MNE717 SER1,1382,9582.6 SEE3,948 9,992 2.5 The target sum was calculated by multiplying the regional SEE baseline number for 2010 by the weighted multipliers of the 2020 targets. Weights are adjusted for missing data and are based on Eurostat data for GDP at purchasing power standard.

18. Overall Strategic Targets: a)Increase of GDP per capita expressed in PPP relative to the EU b)Growth of total trade of goods and services c)Reduction of trade deficit Integrated Growth a)Growth of intra-regional trade in goods and services b)Growth of overall FDI inflows Smart Growth a)Growth of GDP per person employed An initial set of target indicators 18 Sustainable Growth a)Growth of enterprise creation b)Growth of export of goods and services per capita Inclusive Growth a)Growth of overall employment rate b)Increase of rate of population with tertiary education Governance for Growth a)Increase government effectiveness

19. Smart Growth: Growth of GDP per person employed 19 Source: SEE economies provided data for the 2010 baseline in euros. Data from 2000-2010 World Bank. Averages weighted by population No data submitted by Kosovo*. Weights are adjusted accordingly. The 2020 target is calculated by multiplying the regional baseline number by the weighted multipliers of the 2020 targets provided by SEE economies.

20. Smart Growth: Growth of GDP per person employed 20 6. Growth of GDP per Person Employed in EUR 20102020MultiplierNotes ALB9,76713,9861.4 BiH14,91120,8751.4 CRO29,11737,8521.3 According to the target and projection of OECD for SEE KOS MKD16,70821,7001.3 MNE14,823 SER12,31916,1131.3 SEE16,333 21,909 1.3 The regional SEE 2010 baseline is a weighted average based on the economies' share in the population of the region. The target sum is calculated by multiplying the regional baseline by the weighted multipliers of the 2020 targets provided by SEE economies. Weights are adjusted for missing data and are based on data for population.

21. Overall Strategic Targets: a)Increase of GDP per capita expressed in PPP relative to the EU b)Growth of total trade of goods and services c)Reduction of trade deficit Integrated Growth a)Growth of intra-regional trade in goods and services b)Growth of overall FDI inflows Smart Growth a)Growth of GDP per person employed An initial set of target indicators 21 Sustainable Growth a)Growth of enterprise creation b)Growth of export of goods and services per capita Inclusive Growth a)Growth of overall employment rate b)Increase of rate of population with tertiary education Governance for Growth a)Increase government effectiveness

22. Sustainable Growth: Growth of Export of Enterprise Creation 22 7. Growth of Enterprise Creation (Net) number of companies registered in the reporting period - number of companies de-registered 20102020MultiplierNotes ALB12,5049,700 Net company creation in 2020: 13,500 registered – 3,800 deregistered BiH1,608 Baseline figure refers to 2012 CRO4,5099,000 KOS MKD1,0231,000 MNE SER-1,91430,000 SEE2,643

23. Sustainable Growth: Growth of Export of Goods and Services per Capita 23 Source: World Bank No data for Kosovo* and Montenegro were available so the economies are not included in the SEE sum. The 2020 target was computed by multiplying the 2010 baseline with the weighted multipliers of the 2020 targets provided by SEE economies.

24. Sustainable Growth: Growth of Export of Goods and Services per Capita 24 8. Growth of Exports of Goods and Services per Capita expressed in EUR 20102020MultiplierNotes ALB1,1132,9662.7 BiH952 2010 figure shows a large discrepancy with WB data - services export data most probably not included CRO4,0088,0022.0 In accordance with the agreed projection KOS MKD1,5473,0942.0 MNE1,748 SER1,3813,6482.6 SEE1,827 4,389 2.4 The regional SEE 2010 baseline is a weighted average based on the economies' share in the population of the region. The target sum is calculated by multiplying the regional SEE 2010 baseline by the weighted multipliers of the 2020 targets provided by SEE economies. Weights are adjusted for missing data and are based on IMF data for population.

25. Overall Strategic Targets: a)Increase of GDP per capita expressed in PPP relative to the EU b)Growth of total trade of goods and services c)Reduction of trade deficit Integrated Growth a)Growth of intra-regional trade in goods and services b)Growth of overall FDI inflows Smart Growth a)Growth of GDP per person employed An initial set of target indicators 25 Sustainable Growth a)Growth of enterprise creation b)Growth of export of goods and services per capita Inclusive Growth a)Growth of overall employment rate b)Increase of rate of population with tertiary education Governance for Growth a)Increase government effectiveness

26. Inclusive Growth: Growth of overall employment rate 26 Source: SEE economies provided baseline data for 2010. World Bank data used for 2001 – 2009. Averages weighted by population based on World Bank 2010 population data. The regional average includes Albania, Bosnia and Herzegovina, Croatia and the FYR Macedonia for all years as well as Serbia for 2005 to 2010. Weights are adjusted accordingly. Kosovo* did not provide data.

27. Inclusive Growth: Growth of overall employment rate 27 9. Growth of Overall Employment Rate (15+) employment rate in the 15+ age group 20102020MultiplierNotes ALB47.0053.001.1 Indirect calculation taking in the consideration employment and population growth BiH32.5033.101.0 Forecast for 2015 CRO46.6055.001.2 KOS MKD38.7042-451.1 MNE40.30 SER37.9042.301.1 SEE40.20 44.78 1.1 The regional SEE 2010 baseline is a weighted average based on the economies' share in the population of the region. The target sum is calculated by multiplying the regional SEE 2010 baseline by the weighted multipliers of the 2020 targets provided by SEE economies. Weights are adjusted for missing data and are based on IMF data for population.

28. Inclusive Growth: Increase Rate of Population with Tertiary Education 28 10. Increase of Rate of Population With Tertiary Education per cent of population 30-34 years old - census data or other sources 20102020MultiplierNotes ALB8.8515.001.7 Indirect calculation taking into consideration average student graduation increasing by 1% annually BiH8.20 Per cent of working age population CRO24.3035.001.4 KOS MKD17.10 MNE23.60 SER23.0038.501.7 SEE17.96

29. Overall Strategic Targets: a)Increase of GDP per capita expressed in PPP relative to the EU b)Growth of total trade of goods and services c)Reduction of trade deficit Integrated Growth a)Growth of intra-regional trade in goods and services b)Growth of overall FDI inflows Smart Growth a)Growth of GDP per person employed An initial set of target indicators 29 Sustainable Growth a)Growth of enterprise creation b)Growth of export of goods and services per capita Inclusive Growth a)Growth of overall employment rate b)Increase of rate of population with tertiary education Governance for Growth a)Increase government effectiveness

30. Governance for Growth: Increase Government Effectiveness 30 Source: World Bank Year: 2010 The average is a simple average of the economies scores.

31. Governance for Growth: Increase Government Effectiveness 31 11. Increase Government Effectiveness Score on the World Bank Institute index is transformed into a score between 0 to 5. Original scores are on a scale between -2.5 and 2.5. 20102020MultiplierNotes ALB2.232.681.2 BiH1.772.121.2 CRO3.123.741.2 KOS1.902.281.2 MKD2.322.781.2 MNE2.583.101.2 SER2.402.881.2 SEE2.33 2.801.2 The SEE average is a simple average of the economies' scores (ranging between 0 and 5).

32. Thank you for your attention 32

33. Annex 33

34. 34 Overall Strategic Targets: Growth of Total Trade in Goods and Services 2. Growth of Total Trade in Goods and Services expressed in million USD 20102020MultiplierNotes ALB10,18822,0002.2 BiH14,02421,1771.5 Baseline figure shows high discrepancy with int'l sources; Forecasted figure is for 2015 CRO46,909120,0002.6 KOS MKD10,31220,0001.9 MNE4,080 SER32,97678,0002.4 SEE sum118,489 265,773 2.2 The target sum is calculated by multiplying the regional baseline for 2010 by the weighted multipliers of the 2020 targets provided by SEE economies. Weights are adjusted for missing data and are based on Eurostat data for GDP at purchasing power standard.

35. Integrated Growth: Growth of foreign direct investment net inflows 35 5. Growth of Overall FDI Inflows in current USD million 20102020MultiplierNotes ALB1,0492,9662.8 BiH2904701.6 FDI forecast for 2015 in EUR CRO5441,0882.0 KOS MKD2107803.7 MNE717 SER1,1382,9582.6 SEE3,948 9,411 2.4 The target sum was calculated by multiplying the regional SEE baseline number for 2010 by the weighted multipliers of the 2020 targets. Weights are adjusted for missing data and are based on Eurostat data for GDP at purchasing power standard.