Will western Balkans receive EU encouragement?

Western Balkans countries – namely Albania, Bosnia-Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia – are keeping a close eye on developments in Brussels as the fate of long-frustrated hopes to join the EU now rests with a new legislature bringing new actors and interlocutors to the table – first and foremost Ursula von der Leyen, the new president of the European Commission.

“I wish for the western Balkans to be as close to the EU as possible,” Ms von der Leyen said as she unveiled her team of proposed commissioners.

Yet the enlargement project is provoking mixed feelings among EU members. On one hand, western European members apparently favour a cautious approach to any further enlargement as they want to prioritise a consolidation of current members, particularly in the wake of the UK's Brexit vote and the crises of the past decade. On the other hand, central and eastern European countries, spearheaded by the Visegrad group (the Czech Republic, Hungary, Poland and Slovakia), are advocating for quicker negotiations leading to the membership of Western Balkans countries.

While Brussels seeks to reach common ground, countries in the western Balkans are taking steps to access and navigate official accession talks, and thus clinch a membership that would be a game-changer for their economies.

Common values

“Albanian people want to be part of the EU,” says Eduard Shalsi, Albania’s minister for the protection of entrepreneurship. “The beginning of official talks would encourage Albanian politicians to do even more. In the field of justice alone, Albania has undertaken a judicial reform like no other country has. We demolished the old system and built a new system. All our efforts [concern] the common values and interest we have with the EU.”

Both Albania and North Macedonia have long anticipated obtaining the European Council’s green light to begin official EU accession talks. In particular, North Macedonia’s membership talks have been on hold for a decade over a controversy with Greece – a fully fledged EU member and therefore retaining veto power over any new member – over its name, which was eventually changed in February 2019.

The European Council failed to find a consensus over the talks with Albania and North Macedonia in June 2019, when some members, including Germany and France, were unwilling to proceed – mirroring the current divisions within the bloc over the enlargement process into the rest of the western Balkan countries. A European Council meeting is scheduled for October 17 to 18, with renewed hopes that Albania and North Macedonia will finally be admitted to the accession talks.

“The opening of negotiations will trigger more investors to come [to Albania]. It will be an official acknowledgement of our efforts to modernise the country,” says Mr Shalsi.

The stability dividend

The western Balkan countries have capitalised on a combination of fresh stability and foreign investment over the past decade to rise from the ashes left by the conflicts that plagued the region in the 1990s, and embrace export-oriented growth models that can foster the development of a local manufacturing and services base.

Serbia has been the most successful in joining global supply chains and has attracted major investors from EU countries and China in automotive and other sectors, according to greenfield investment monitor fDi Markets.

Overall, the current stock of accumulated FDI in the western Balkans remains low in absolute terms, although in relative terms it is above the average of EU new member states (the 11 countries that joined the bloc in 2004 or later) because of the small size of local economies, according to figures from the OECD.

Uncertainty prevails

Typically, new EU members have experienced a surge in FDI as they began talks to access the bloc and eventually join it. However, the accession of western Balkans countries has been hampered by a lingering uncertainty, which has curtailed the typical FDI dividend generated by the prospect of EU membership, as highlighted by a 2018 paper by the IMF. 

Countries in the region are also having to make structural reforms to close the gap with EU standards, so local authorities have scope to improve institutions, the rule of law and, eventually, their countries’ business environment, and unlock investment once the current doubts over their accession fade away.       

“Potential gains in FDI can be substantial for western Balkan countries,” said the paper. “Empirical results point to significant gains from closing the gap related to institutional quality, participation in vocational training and higher public investment. Meanwhile, despite a statistically significant coefficient, estimated FDI gains from corporate income tax and unit labour costs are low due to the already low corporate income tax rates and wage costs in the western Balkan countries.”     

Feeling fatigued?

While an economic dividend from joining the EU can be widely expected, it remains to be seen whether the EU will reach a consensus over the future of its enlargement process. 

“It has been too slow so far, to the point that people don’t believe it’s going to happen anymore,” says Željka Cvijanović, president of the Serpska republic, one of the two autonomous regions that make up Bosnia-Herzegovina. “I personally think western Balkans countries will eventually join the EU, but they will join a different EU, an EU that has been able to remodel itself. It is necessary for the EU to redefine its model, and the level of integration that is necessary for it to prosper.”

After years of talks, the EU enlargement process appears “fatigued”, according to Hungary’s prime minister Viktor Orbán (the latest member to join was Croatia in 2013). The October meeting of the European Council will be an opportunity to reduce the frustration spreading among western Balkans countries by admitting Albania and North Macedonia to accession talks, thus signalling its willingness to do the same with other countries in the region.

But a fresh Brexit deal could also be on the table, and if Brexit dominates the meeting, the topic of EU enlargement may drop down the priority list. That may mean more delays – and a deepening of the exasperation felt by western Balkans countries.