GREENLAND Kalaallit Nunaat (Denmark) ICELAND SWEDEN years FINLAND RUSSIAN FEDERATION NORWAY ESTONIA SCOTLAND LATVIA DENMARK LITHUANIA UNITED KALININGRAD ULSTER KINGDOM (RUSSIAN FED.) IRELAND NETHERLANDS BELARUS POLAND WALES ENGLAND The European Investment Bank in the Western Balkans GERMANY BELGIUM EIB Group financing and advisoryCZECH REP. services in Albania, Bosnia and Herzegovina, LUX. the former Yugoslav Republic of Macedonia,SLOVAKIA Kosovo*, Montenegro and Serbia KAZAKHSTAN FRANCE MOLDOVA Candidate Countries UKRAINE WesternLIECHT. Balkans AUSTRIA SWITZ. HUNGARY SLOVENIA Albania Total GDP CROATIA ROMANIA The former Yugoslav EUR Republic of Macedonia BOSNIA AND billion 85.5 HERZEGOVINA SERBIA Montenegro M.C. Serbia UZBEKISTAN Population MONTENEGRO KOSOVO* BULGARIA GEORGIA AND. ALBANIA THE FORMER million YUGOSLAV REPUBLIC 19 OF MACEDONIA PotentialTURKEY Candidate Countries AZERBAIJAN ITALY TURKEY TURKMENISTAN GREECE ARMENIA Surface Bosnia and Herzegovina PORTUGAL TURKEY 2 SPAIN 218,750 km Kosovo* * This designation is without prejudice to positions on status, and is in line with UNSCR 1244 and the ICJ Opinion on the Kosovo Independence Declaration MALTA TUNISIA SYRIA CYPRUS IRAQ ALGERIA LEBANON AFGH. IRAN MOROCCO New signatures in the region, 2017 EUR million 330 total financed since 2007 EUR billion 7 EIB President Werner Hoyer Foreword EIB President Werner Hoyer and Vice-President Dario Scannapieco rom ancient times to the recent past, the Western F Balkans has been an essential part of European history. Its culture, arts and economy have contributed to shaping the face of Europe. The European Investment Bank, which is the financial arm of the European Union, has been active in the Western Balkans since 1977. It is the largest international financier in the region. After the tumultuous 1990s in the Balkans, the EIB intensified its effort to steer the area towards European integration. In the late 1990s, financing focused on urgent recon- struction and repairs to damaged bridges and railways, EIB Vice-President Dario Scannapieco ports, airports and roads. Year after year, we have been working with state governments, municipalities and companies in the region, as well as with the European leasing companies. Small businesses are the backbone Commission and other financing partners. We want to of the economy. Making sure they have access to credit improve people’s lives by rebuilding infrastructure and is essential for their prosperity. helping the region become more modern and self-suf- ficient. Recognising the magnitude of the challenges, the EIB launched the Economic Resilience Initiative (ERI), a Over the last decade, the EIB has expanded its lending programme that helps countries in the EU neighbour- into sectors such as health care and education while hood improve their economies and respond to the also addressing the global migration crisis. We want migration crisis. This new programme encourages to foster a skilled workforce, with talented developers, small business development and helps countries improve scientists, economists, engineers, lawyers and teachers. infrastructure. To fight the global economic and financial crisis and We are committed to improving living conditions and to continue encouraging the recovery, the EIB has economic standards in the region. We will ensure that increased its support for small businesses and local the future of the Western Balkans is part of the future authorities through lines of credit with local banks and of Europe. 2 The European Investment Bank in the Western Balkans Introduction ince 2010, the EIB has expanded its work in the West- Small companies are important drivers of investment, S ern Balkans into many new areas, such as health care, economic growth, and job creation. In 2017, we signed education, research and development. deals in the region worth €330 million, bringing the total amount financed since 2007 to €7 billion. We also have started helping the private sector, making foreign direct investments and offering assistance to small and medium-sized enterprises (SMEs). EIB Activity in the Western Balkans (2007-2017) Signatures - TOTAL 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 volume (€m) Albania 26.3 10 50.8 35 5.3 18 145.4 Bosnia & H. 251.7 280 150 72 180 206 212.7 172.5 130 1654.9 FYROM 1.4 10 100 52.34 125 110 103 45 546.74 Kosovo 10 87 10 42 149 Montenegro 3.2 50 108 49.2 18 45 7 75 50 55.5 120 580.9 Serbia 133.6 170 887.9 760.2 710.6 275 317.8 115 130 196 210 3906.1 TOTAL 426.2 597 1255.9 984.54 1033.6 671 655.8 380.5 222 426.5 330 6983 (€m) he EIB’s regional activity follows the EU’s objective of The strengthening economy is creating more jobs in T helping the Western Balkans towards accession and the private sector. Employment has been growing rapid integration into the European Union. more than 2% yearly and the unemployment rate has come down from 20.9% in 2015 to 16.7% in 2017. Despite a challenging economic environment, GDP growth in the Western Balkans is gradually stabilizing, driven by investment and private consumption. GDP growth in the region is expected to rise from 3.1% in 1 EIB Staff calculations based on WIW database, EC forecast and IHS forecast. 2016 to around 3.6% in 2019.1 The European Investment Bank in the Western Balkans 3 GDP and Investment growth in the Western Balkans Investment acceleration, the major driver of the recent economic growth 8 Public debt and unemployment rate in 6 the Western Balkans 4 Declining indebtedness 2 68 0 67 -2 66 65 -4 2013 2014 2015 2016 2017 64 63 GDP, real growth rate in %, WB weighted average Gross Investments, real growth rate in %, WB weighted 62 average 61 Sources: EIB Staff calculations based on WIW database and 60 National Statistical Offices. 2014 2015 2016 2017 Public debt, % of GDP, WB weighted average here are still a number of challenges in the region. Improving labour market condition Investment as a share of GDP has not recovered to the T 25 pre-crisis level and is not sufficient for the Western Bal- kans countries to graduate to higher-income status. 24 Transport infrastructure is better, but it still needs a lot of 23 improvement.2 Better connections to neighbouring 22 countries and the EU transport network still need to be 21 established to reduce transport costs and improve trade. 20 There has been some progress in energy infrastructure, 19 but inadequate electricity supply remains a key challenge, increasing costs to businesses.3 18 17 The education sector is not aligned with labour market 16 needs, which leads to low employability. In terms of 15 competitiveness and innovation, the Western Balkans 2013 2014 2015 2016 2017 is significantly behind the EU. Over the last few decades, Unemployment rate in %, WB weighted average the region’s growth has largely relied on foreign invest- ment in sectors with low labour costs and low to medium Sources: economic value added. EIB Staff calculations based on WIW database and National Statistical Offices. 2 Among the main recent achievements, the construction of the Trans Adriatic Pipeline in Albania and the Bar-Boljare highway are worth mentioning- The modernisation of the port of Bar is also underway in Montenegro. 3 Such as the construction of hydro power plants on the river Devoll in Albania and the first wind energy project, a 72-megawatt wind farm in Montenegro. 4 The European Investment Bank in the Western Balkans Structural strengths and weaknesses Distance from EU average in standard deviations Albania Bosnia and Herzegovina University-Industry PISA score Rail University-Industry Rail Collaboration High Tech Density 4 Collaboration Density 4 Exports 2 2 Mobile 0 0 Subscriptions Mobile Competitive -2 High Tech Subscriptions -2 -4 Exports -4 advantage -6 -6 Health -8 Competitive -8 Expenditure advantage Health Value Chain Expenditure Sophistication Reneable Energy Value Chain Consumption Sophistication Reneable Energy CO₂ Consumption Emissions** Energy CO₂ Dependence** Energy Emissions** Energy Energy Loss** Dependence** Loss** Montenegro The Former Yugoslav Republic of Macedonia Secondary PISA score Rail Tertiary Mobile University-Industry Education 4 Density 4 Education Subscriptions Collaboration University- 2 Mobile 2 Industry 0 Subscriptions 0 Collaboration Health -2 High Tech -2 Expenditure Exports -4 Health -4 High Tech -6 Expenditure -6 Employment -8 -8 Reneable Competitive Reneable Energy advantage High Tech Energy Exports Consumption Consumption Energy Value Chain Energy Competitive Dependence** Sophistication Dependence** advantage Energy CO₂ Energy Value Chain Loss** CO₂ Sophistication Loss** Emissions** Emissions** Serbia Before the crisis (2006/2007/2008) Rail PISA score After the crisis (latest data point available 2011-2015) R&D Density 4 ** in line with other indicators a negative figure means a worse performance 2 University- than the benchmark Mobile Industry Subscriptions 0 -2 Collaboration Sources: EIB Staff calculations based on Eurostat, OECD, WEF Global competitiveness -4 index and World Bank data.4 Health -6 High Tech Expenditure -8 Exports 4 Sources: Eurostat data used for secondary education (calculated as a reverse of early Reneable leavers from education and training of persons aged 18 to 24), tertiary education Energy Competitive advantage (% of population with completed university), R&D investment (as % of GDP), high- Consumption tech employment (as % from total employment), high-tech export (as % from total Energy export). OECD data used for PISA score, WEF Global competitiveness index for uni- Value Chain industry collaboration (survey based index), competitive advantage (survey based Dependence** Sophistication Energy CO₂ index), value chain sophistication (survey based index). World Bank data used for CO2 emission (kg per 2011 PPP $ of GDP), energy loss (% of output), energy dependence Loss** Emissions** (% of energy use), renewable energy consumption (% of total energy consumption), health expenditure (constant 2011 international $, mobile subscription (per 100 people) and rail density (km of rail per 100 sq.