SECI Southeast European Cooperative Initiative Tenth Meeting of the Business Advisory Council to SECI October 21, 1999 Hotel Toplice, Bled, Slovenia Chairman: Mr. Costa Carras SECI: Dr. Erhard Busek Ms. Vera M. Budway BAC Members: Mr. Ferenc Bartha Mr. Giorgio Dominese Mr. Nikos Efthymiadis Mr. Svetozar Janevski Mr. Bosko Kostic Mr. Günther Mittl Mr. Michael Mix Mr. Florin Pogonaru Mr. John Scherer Mr. Vassili Takas Mr. Matthew Trilling Mr. Vebi Velija Participants: Mr. Cumhur Atilgan, TURKPRO Mr. Michael Hyryschyn, OHR Mr. Will Keenan, UN/ECE Mr. Nikolay Minkov Mr. Philip Moellar, World Bank Mr. John Edwin Mroz, EastWest Institute Ambassador Richard Schifter Mr. Graham Smith, World Bank Ms. Ingrid Walling, Raytheon Mr. François Vuilleumier 1) Opening The Business Advisory Council to SECI (BAC) meeting was opened and chaired by Mr. Costa Carras. Mr. Carras began by asking all those present to rise and observe one minute of silence to honor the memory of late BAC member Peter Rigl. He then excused the absence of Rahmi M. Koc, Celik Arsel, Muhtar Kent, Misu Negritoiu and Gianfranco Zoppas. He welcomed the two new members of the BAC, Günther Mittl and Florin Pogonaru. 2) Adoption of the Agenda The Agenda of the meeting was unanimously adopted. 3) Adoption of the Conclusions of the Ninth Meeting The Conclusions of the Ninth Meeting were unanimously adopted. 4) Role of the BAC and the Stability Pact Dr. Busek explained the Stability Pact structure, focusing on the Regional Round Table and the work plan of the three Working Tables. He pointed out that there is no real link between the EC/World Bank’s High Level Steering Group and the Regional Round Table. Concerning funding, what is done in Kosovo is largely financed through a UN loan to UNMIK. SECI has been present at all three meetings of the working tables and has proven to be the one initiative that has something to show. Dr. Busek announced that he is planning to go to Brussels and Luxembourg to meet with those responsible at the World Bank/EC and the EIB in order to ask them how to proceed with the SECI project priority list. He also urged the BAC members to use the project priority list (distributed at the meeting) in their own circles. One of the goals outlined in the Workplan of Working Table Two of the Stability Pact calls for the “establishment of a business advisory council for prominent business leaders to provide advice on establishing practices and norms conducive to growth and job creation in the private sector and a sound climate for foreign direct investment.” Dr. Busek was asked by the Office of the Stability Pact Coordinator to come up with a proposal for a Stability Pact BAC that would use the experience of the SECI BAC (Annex I of this report). He then explained the process of how the final version of the proposal came into being (Annex II of this report). In the end it was decided that the SECI BAC will remain as it is and work in parallel with the Stability Pact BAC, which envisions a body comprised on 15 CEOs from top multinational corporations. The Stability Pact proposal envisages the creation of a Business Advisory Council, a Business Investment Forum and Business Promotion offices. In this context, the proposed SECI BAC offices in Trieste, Thessaloniki and Istanbul will serve the latter. Dr. Busek as SECI Coordinator will be the link between both BACs and the two co- chairs of the SECI BAC will be invited to participate in the Stability Pact BAC. Mr. Takas asked about the relationship between the Stability Pact and the Agenda Committee and Dr. Busek explained that Ed Kronenburg, Coordinator of Working Table Two, will be present at the Agenda Committee meetings. Ambassador Schifter reported on a meeting he had with Stability Pact Coordinator Bodo Hombach who praised SECI for its pragmatic approach and ability to produce results and even went as far as to say that the Stability Pact is following the SECI paradigm. Ambassador Schifter called the Stability Pact an important political statement that encourages the concept of integration. SECI is the one organziation that is in the position to do something. There is no need to create superstructures that will hinder progress. Ambassador Schifter then explained the SECI priority lists “A” and “B” which resulted from a meeting of officials from the transport, energy and environment sectors from the region on 4 October in Vienna. Finally, he stressed that the BAC can play a very useful role in promoting better coordination and interaction between lenders, donors and the private sectors. Mr. Dominese stressed that the business community should do more to promote the goals of SECI in the region. The discussion then turned to the proposed Trieste Business Promotion Office that should be launched as a joint SECI/CEI effort. Dr. Busek said it was important to produce a concept for the office that would clearly outline its goals and objectives. Mr Carras reminded that the success of an initiative depends on the people behind it. SECI is fortunate to have such people of vision like Ambassador Schifter and Dr. Busek. He noted that the Stability Pact did not get off to a good start mainly because it is creating a mega structure, which is producing conferences. Furthermore, the inaugural meetings of the working tables were held outside the region and it is attempting to create a business advisory council of 15 CEOs who have little to no knowledge of the region. In this respect the SECI BAC had a dual challenge, namely to get the message across that action is required in Working Table Two and to effectively expand its field of activities. The SECI BAC cannot become a part of the Stability Pact BAC structures and the Stability Pact BAC should come to the Budapest meeting in order to familiarize itself with what the SECI BAC is doing. Mr. Carras then presented a draft resolution proposed by the BAC co-chairmen concerning the SECI BAC’s relationship with that of the Stability Pact (Annex III). After brief discussion the document was amended and adopted. It was also suggested that a list of SECI Participating and Supporting States and BAC members be attached to the document to enhance its credibility. Dr. Busek said he will present the resolution to the Stability Pact Business Advisory Council. Mr. Carras continued to say that someone from the SECI BAC should be at the Stability Pact BAC inaugural meeting on Berlin on 1 December. Mr. Dominese then announced that the “Adriatic Lane” project of the Adriatic Initiative could become a working group of SECI. Mr. Carras moved to jump ahead to item 11 on the Agenda which is “dates and preparations of the next meetings.” He reminded the group that we have had meetings in every country of the region except from Croatia and Bosnia Herzegovina. He proposed that meetings in the year 2000 should be held in the cities where the business promotion offices are located, that is Trieste, Thessaloniki and Istanbul. After consulting with Rahmi Koc, Mr. Carras proposed the following: 23-24 March in Venice/Trieste; 10-11 May in Thessaloniki and in September in Istanbul. 5. Proposed Modifications to the Structure and Procedure of the BAC Mr. Carras then presented proposals that he formulated with Rahmi Koc on modifications to the structure and procedure of the BAC (Annex IV). The proposals concern membership and attendance, the formation of country committees and the idea of co-chairmanships. It was decided that country committees will be established for Albania, Bulgaria, Bosnia and Herzegovina, Croatia, FRYROMacedonia and Romania and each committee would consist of a group of about 6-7 business people. BAC members also suggested that representatives from multinational corporations as well as international financial institutions should be included in the country committees. The country committees could also be useful in supporting the activities of the PRO committees and can make a significant contribution to the Stability Pact BAC. The structure and composition of the committees will be finalized at the next meeting in Budapest. Mr. Pogonaru said that it is important to involve both multinational corporations as well as international financial institutions in the country committees. Mr. Minkov further suggested that the country committees work as partners with the PRO committees. Mr. Carras asked the BAC to think of who wants to serve as chairs of the country committees and that these committees will eventually be a part of the regional investment forum. Mr. Dominese pointed out that the Adricatic Initiative can also be useful because it focuses on another area. He proposed the establishment of a working group within SECI that would deal with the “Great Adriatic Lake” and could represent a sub regional aspect. Mr. Efthymiadis stressed that SECI needs more technical support. The BAC must remain regional and needs to consolidate the many ideas and organizations that are in the process of being established. Ambassador Schifter mentioned that the World Bank team will prove support for the SECI trade facilitation efforts. Dr. Busek said that the initiative is open to all suggestions and ideas. Mr. Efthymiadis announced that he has identified sources of funding from the Athens and Thessaloniki Chambers of Commerce that would fund a BAC technical secretariat in Thessaloniki. This Secretariat would coordinate the BAC investment promotion offices and and country committees as welll as provide needed follow up on SECI projects, such as the MoU on Road Transport signed in Athens. The proposal will be considered and discussed at the next meeting in Budapest. 6) SECI Collaboration with EastWest Institute and the MoU Dr. Busek explained the nature of the Memorandum of Understanding of institutional cooperation with the EastWest Institute. Mr. John Mroz, President and Founder of the EastWest Institute (EWI), introduced his organization to the BAC. With a staff of 90 in five offices (New York, Prague, Moscow, Kyiv, Kosice) EWI is an action research organization that seeks to bring government decision makers into contact with leading business figures to promote an exchange of ideas on how to resolve economic and social problems resulting decades of ineffective centralized planning during the Iron curtain era. Mr. Mroz explained that they were attracted to SECI because of its coordinator, Dr. Busek. While EWI has never before entered into the type of collaborative relationship outlined in the memorandum of understanding, Mr. Mroz believes that they can make a positive contribution to SECI and the Business Advisory Council. At the same time, EWI has heavy agenda so it will be necessary to identify the most effective form for future cooperation. 7) EastWest Institute Task Force and the BAC Mr. Vassili Takas explained to other BAC members the objectives of the “task force” established by EWI and co-chaired by himself and Mr. Celik Arsel. The task force is one of the activities of EWI’s new Action Network for Southeast Europe (ANSEE). Directed by Ms. Vera Budway, ANSEE aims to develop an inform network of businessmen and scholars to develop new ideas for consideration by political leaders in Southeast Europe. The task force has been charged with developing a policy paper that will guide ANSEE’s future work programme. The members of the BAC appreciated the information provided by Messrs. Mroz and Takas concerning EWI and ANSEE. One of the first collaborative steps will be a conference on overcoming obstacles to foreign investment in Albania and the former Yugoslav Republic of Macedonia. This meeting will be held in Skopje 19-20 November and be organized jointly by EWI and Messrs. Janevski and Velija of the BAC. 8) Report on the Trilateral PRO meeting Mr. Will Keenan of the UN Economic Commission for Europe reported on the “trilateral meeting” of BULPRO, HELLASPRO and MAKPRO, held in Thessaloniki on 21 September. The meeting originated from a suggestion of the World Bank experts who have been reviewing the SECI loan application that it would be useful for the PRO Committees to analyse the possibility to synchronize the hours of operation and the services offered on both sides of common border crossing points. The trilateral meeting was chaired by Mr. Keenan and assisted by Ambassador Ken Hill of the United States, who has been assigned responsibility for supporting transport-related projects within Ambassador Schifter’s SECI office in Washington. The consensus was the meeting achieved its objective by identifying opportunities to eliminate the need to shut down the Bulgarian borders for an hour twice a day during shift changes by changing the procedures for transferring responsibilities, similar as to what is done in Greece and the former Yugoslav Republic of Macedonia. Having a smaller group of PRO Committees meeting to discuss less ambitious objectives than those undertaken to date by the full SECIPRO is an approach that will be discussed at the next SECIPRO meeting in Budapest on 13 December. The next item on the agenda was a presentation by Messrs. Graham Smith and Philip Moeller of the World Bank, who have assumed responsibility for managing the SECI Border Crossing Facilitation loan application for physical infrastructure improvements. The replaced the previous World Bank team following differences between the Bank staff, the European Commission, and representatives of the SECI Participating States concerning the scope of activities to be covered by the loan. Mr. Smith arrived in Bled after visiting with representatives of the European Commission in Bucharest, as well as meeting with the responsible officials in the SECI countries. The loan application appears to be back on track, with the additional decision to move forward in January 2000 with those three countries where the details have been resolved (BG, MK and RO) and bringing in the other countries later in the year. The World Bank is establishing a Trade and Transport Facilitation Programme for Southeast Europe that builds upon the work of the original SECI Border Crossing Facilitation project group and should provide support for institutional reforms, in line with the objectives of the several SECI PRO Committees. In addition, the Bank has drawn up a Memorandum of Understanding to be signed by the Ministries of Finance from the borrowing countries whereby they will establish a regional committee to oversee progress in implementing the reforms agreed to by the countries. This parallels the Regional Road Transport Committee established under the MoU for Facilitation of Regional Road Transport developed by the SECI Project Group. Dr. Busek expressed concern that the World Bank has already pushed back the decision for the fifth time and that it does not send a good signal to keep announcing dates and not sticking to them. Francois Veuilleumier felt that the SECIPRO/World Bank cooperation is the best form of trade facilitation and that it is important to be able to provide “deliverables.” Ambassador Schifter called on the BAC to make concrete suggestions to the World Bank to support this process. This should be discussed in greater detail in Budapest. 9) Report on the Progress of the Working Groups Dr. Busek reported that the SECI Center to Combat Cross-Border Crime and Corruption will be open and operational by the end of the year. The Bulgarians are moving ahead with the shuttle train project and the Regional Road Committee established by the SECI MoU on Transport will plan to meet soon. The gas pipeline project is still on hold due to lack of gas demand. There is also progress with the energy efficiency and electricity grids projects. Dr. Busek also mentioned the good cooperation with the Global Environment Facility with regard to the SECI water project. As a result of the earthquake in Turkey, the meeting of the regulators has been postponed until April 2000. In general, all the projects need to be reviewed in the framework of the Stability Pact. The issue of arbitration and mediation should also be on the next BAC agenda. Finally, Dr. Busek said that a proposal for banking should be developed and perhaps the EastWest Institute’s Economic Task Force can be of some help. 10) New Members of the BAC The BAC needs to indentify a new member from Slovenia and well as someone of integrity from Croatia. There is still not progress on identifying someone from Bosnia. This is important in light of the proposed country committees and should be discussed further in Budapest. It was also suggested to involve the IFIs on the BAC as well as the Black Sea Trade and Development Bank. Mr. Takas stressed that duplication could be avoided if the IFIs were more closely involved and that the PRO committees should act as the World Bank’s steering committee. Mr. Atligan then provided some information on the Regional Road Committee and said that the IFI’s should also be represented on the regional transport committees. 11) Dates and Preparations for the Next Meetings The next BAC meeting will be held on 13-14 December in Budapest. SECI PRO will have a review session on 13 December. Meetings in the year 2000 are mentioned above. 12) Other Business Dr. Busek mentioned a proposal for the creation of a regional optical information highway (attached herewith) and asked for any interested partners.