Honorable Prime Ministers and Distinguished Participants,
Thank you for asking me to make a short introduction to the topic of this first session—related to achieving the free trade of goods in the Western Balkans.
This is an important topic—no small country can become rich without accelerating its exports and deepening its integration into the international economy. Successful upgrading of exports can drive growth in productivity, employment, and GDP as well as faster income convergence.
Yet, exports in the region remain very low. What is holding states in the Western Balkan region back?
There are broad, economy wide reforms that were mentioned in the opening session that provide an overarching framework. This session focuses on what makes importing and exporting of goods so costly in the Western Balkans.
Tariffs do not make trade costly in the region, but let me touch on a few topics that would reduce costs: (i) streamlining border procedures, (ii) reducing the cost of logistics, (iii) transport facilitation, and finally (iv) the importance of monitoring. Much of this aligns with what is already envisioned in the Multi-Annual Action Plan for a Regional Economic Area.
On border procedures - in the Western Balkans, the high cost of exporting and importing relates mostly to border compliance and the time spent at borders. This includes customs clearance and inspections by border agencies. International experience shows that there are large benefits from simplifying and harmonizing procedures and borders and ensuring sufficient capacity to handle trade.
Just a couple of numbers. The number of trucks and drivers needed in the Western Balkans due to delays at border crossings is five times that in an efficient EU country. Trucks spend 26 million hours—almost 3,000 years—at border crossings in the Western Balkans every year.
Many country specific obstacles can be removed with trade facilitation. Early wins could include implementing joint border controls and a harmonized national single window, introducing an Authorized Economic Operator system to reduce the need for customs inspections, and developing a system for joint risk management at customs.
On the cost of trade logistics - there is scope for large gains. We estimate that savings in the region would exceed €900 million annually (about 1 percent of the region’s combined GDP) if logistics costs were brought in line with those of the EU.
Many logistics improvements relate to the ones I hinted at on customs. But there are also other actions that can be considered. For example, actively using National Trade Facilitation Committees to bring together private and public stakeholders has been used successfully in many countries to identify and address key constraints. New technologies can also be used to develop collaborative platforms that can help consolidate loads and reduce empty running. This reduces costs and is good for the environment.
Transport facilitation is also essential. While there have been massive investments in transport—over €12 billion since 2004—these investments are not always efficiently utilized. In the Western Balkans, the main transport corridors are largely completed – over 80 percent of the core network. Facilitating transport means a switch from creating capacity to improving the efficiency in the use of those assets. This means:
- Increasing the focus on maintenance
- Focusing new investments on infrastructure bottlenecks and completing the core corridors
- Reforming the transport sector SOEs
- Opening transport markets to increased competition
- Using technology to improve transport efficiency and predictability
The high cost of transport investment also reinforces the importance of addressing border and logistics costs. If hundreds of millions of euros are invested in a road or rail corridor to save a few hours in journey time, these investments are wasted if the truck/train then spends days at the border post.
Finally, a word on monitoring. Availability to you of information on how your transport corridors are performing—what are journey times, what are border processing times, where are their corridor bottlenecks—can be a powerful tool to drive reforms. You can’t manage what you can’t measure.
Monitoring approaches, like those we are supporting in Bosnia and Albania, use GPS tracking and big data to keep data collection costs low and make them easily replicable. This information can help you know where attention is needed. On non-tariff barriers, a first step to monitoring would be to undertake surveys of importers/exporters to measure procedural and regulatory barriers to trade. Here, as elsewhere, a close partnership is needed with the private sector. By undertaking regular surveys of private operators it is possible to keep track of the non-tariff barriers which affect trade and business confidence, and help you know where actions are needed.
In the Western Balkans, there is high potential to increase trade and regional and global economic integration, contributing to stronger, vibrant growth and job creation. A range of trade and transport facilitation measures can be one important element in reducing the cost of trade and meeting this potential.
The World Bank has been working with each of the Western Balkans on these issues, and much can be accomplished at the country level. But, the benefits and results will be magnified if these issues are addressed collectively at the regional level.