Regional Coordination Conference Brussels, March 31 st 2011 OECD INVESTMENT COMPACT

1. Regional Coordination Conference Brussels, March 31st 2011 OECD INVESTMENT COMPACT FOR SEE COUNTRIES Vesna Arsić, State Secretary Ministry of Economy and Regional Development Co-Chair, South East Europe Investment Committee (SEEIC)

2. Overview of the Investment Compact • A high-impact regional programme to support countries in South East Europe to increase growth, investment and employment through targeted business climate reforms, active since the year 2000 The geographical scope of the programme includes:  Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo under UNSCR 1244/99 (observer), Republic of Macedonia, Republic of Moldova, Montenegro, Romania and Serbia.

3. Evolution in the governance of the SEE InvestmentCommittee • Between 2000 and 2007, a high-level Steering Group defined the strategy and programme of work. This group, co-chaired by the OECD and an OECD member country, was composed of senior government officials from the region, donors and private sector executives. • In 2003, the IC introduced a system of regional co-chairmanship for the programme. The first co-chair from SEE was Romania (2002/3), followed by Bulgaria (2004/5) and has been Serbia since 2006. • In April 2007, creation of a new regional institutional structure: The South East Europe Investment Committee (SEEIC) that replaced the Investment Compact Steering Group. • Decisions on the strategy and programme of work now reside solely with the deputy ministers of economy and state secretaries representing the region. • All of the other actors – including the OECD, key donors, representatives from the private sector, and other international organisations – participate in the SEEIC as advisors.

4. Evolution in the governance of the SEE InvestmentCommittee (continued) • At the Fifth meeting of the SEE IC on 15 November 2009 at OECD headquarters in Paris it was agreed that the RCC Secretariat in Sarajevo would assume management and coordination of the SEE IC following a transition period (of 16 months). • The purpose for this transfer of responsibility is to give the Western Balkan economies greater ownership of activities to improve the investment climate and to allow the OECD IC to focus on providing analysis and policy guidance to the SEE IC. • On 18 December 2009 the OECD External Relations Committee endorsed the transfer to the RCC Secretariat of the management and coordination functions of the SEE IC, following a 16 month transition period. • The OECD Investment Compact continues providing analytical support and project work in the domain of policy assessment, strategy, assistance and training for implementation

5. Current organization of the Investment Compactuntil end 2011 SEE Investment Committee Co-chairs: OECD Country (Austria) + SEE Country (Serbia) + OECD Secretariat (DAF/PSD) OECD donor countries SEE country economic teams International organisations Private sector Regional Cooperation Council Investment Compact for South East Europe Analytical support Project management Policy Dialogue: Regional Working Groups Human Capital Investment Promotion Regulatory Reform Trade Assessment: Investment Reform Index SME Policy Index Strategy: Sector-specific Sources of Competitiveness Assistance and training for implementation Regional Competitiveness Initiative 5

6. Investment Compact Achievements • Enhanced the investment environment by: • Accelerating reforms through identification of priorities and guidance on how to implement them • Moving countries closer to OECD standards through adherence as observers to OECD Committees • Improving brand image with sector specific investment promotion events and engagement with OECD • Increased capacity of policy makers through the transfer of OECD methodologies, tools and instruments taking into account the specific circumstances of the region. • Promoted a culture of continuous improvement with the systematic monitoring and evaluation of reforms based the Investment Reform Index and the SME Policy Index • Helped establish a sustainable process for reform of the business climate at the regional level through a self-reinforcing mechanism of measurement and actions to improve measurements • Encouraged regional ownership of the reform process with the launch of the South East Europe Investment Committee and regional thematic Working Groups to improve policy dialogue and implementation of investment reforms.

7. The activity of the Investment compact for South East Europe focuses on three main areas

8. Investment Reform Index 2010 • The IRI assesses investment climate in 10 economies according to 8 dimensions • A total of 92 indicators were used Methodology • Assessment grids were completed both by independent experts and Governments • Reconciliation meetings were organised Results • A comprehensive publication was released in May 2010 • Presentation were organised in each SEE economies IRI – SEE average score

9. Regional Competitiveness Initiative Objectives • Support medium and long-term competitiveness of the Western Balkans. • Provide capacity building support to Western Balkan public administrations via pilot projects. Focus Areas • Human capital development – identify and address major skills gaps. • Innovation – strengthen innovative capacities and support absorption of technology by the private sector. • Sector specific policy reform – expedite reforms in sectors deemed to posses comparative advantages. Timeline • Launched in June 2010 at Sixth SEE IC Meeting in Paris. • First pilot projects are launched in Q1 2011 • Innovation and Human Capital Working Groups to be held in Q2 2011 Financial support by the European Commission (DG Enlargement)

10. SME Policy Monitoring and Implementation Objectives • Monitor, design, and implement effective policies to support the SME sector in South East Europe. Achievements • Two regional assessments of SME policy reforms have been published in 2007 and 2009 based on the European Charter for Small Enterprises and in co-operation with the EC, ETF, and EBRD. Nextsteps • A third SME policy assessment will be launched in 2011 based on the Small Business Act and with the inclusion of Turkey in the process. • In addition, PSD is assisting the Government of the Republic of Moldova in developing a coherent and well structured policy towards the SME sector.

11. CEFTA 2006 – related projects • Investment-related clauses (financially supported by EU) • 2008 – 2009: provided support in monitoring the implementation of the agreement investment-related clauses and estimated the impact of regional integration on FDI flows • 2010 – 2012: map FDI and investment location within CEFTA Parties and review progress in implementation of the CEFTA government procurement clauses (in cooperation with SIGMA) • Non-tariff barriers (NTBs) to trade • 2009 – 2010: delivered to the CEFTA Parties an action plan to eliminate NTBs and provided assistance in implementing the recommendations (financially supported by Hungary) • 2010 – 2012: perform independent monitoring of the elimination of NTBs among CEFTA Parties (financially supported by EU)

12. Policy deliberation • Multiple forums for policy dialogue, including: • SEEIC working groups: • Regulatory reform • Investment policy and promotion • Trade policy and facilitation • Tax policy • Human Capital • Innovation • Regional institutions and structures dedicated to specific policy areas (CEFTA, PPPs, A2F, Infrastructure, etc.) • Position SEEIC as the main focal point for all investment-related reforms and deliberations

13. Growth in real GDP 2010 (EBRD forecast as of January 19, 2011)

14. Key developments and challenges for sustainable growth of SEE countries • Although region have made a steady progress, the economy in SEE countries remains vulnerable to weakness in the global economy (GDP growth recovery, fiscal and current acc. deficits) • Transition indicators for 2010 shows maximum achievements in price liberalisation and trade • Further reforms are needed to improve the business environment, start up costs and administrative burden for enterprises • The degree of private sector in infrastructure and energy sectors is limited, and privatisation and companies restructuring are still not completed • FDI and know-how are needed to improve productivity and efficiency • Key priorities in financial sector are to further strengthen the regulation and support development of local capital markets

15. Creation of competitive advantages which would lead toward a knowledge-based economy and sustainable growth is of utmost importance Target outcomes Sustainable growth Knowledge economy Actions Creation of stable business environment Investments in infrastructure Incentives which will encourage investments in R&D Creation of efficient and transparent public administration Sources of competitiveness Innovative activity Well established education system Entrepreneurship activity Skilled workforce Stable business environment Macroeconomic stability Efficient public administration Infrastructure

16. Strong education system and infrastructure Start-up incubators WBTF Self-supportingcompanies Venture capital gap A Western Balkans Technology Investment Fund will provide much needed venture capital to innovative companies and help in retaining its top talents • 500 million Euro infrastructure investment from 2010 to 2015 • Goal is to facilitate the identification, education and nurture of technological and entrepreneurial talent • Regional based technology companies • Focused on driving high value add and export competitive products • Technology start-up incubators exist across the region • Belgrade Technology incubator houses several companies across diverse fields • Focus is on achieving self-sufficiency • Joint effort between all WB countries • 100 million Euros in capital • 11% WB country participation • 10% private capital • 79% (EC and IFIs)

17. Thank you for your attention! Republic of Serbia Ministry of Economy and Regional Development www.merr.gov.rs