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  • 26 Jun 2024
  • OECD
  • Pages: 231

Inclusive and sustainable economic growth in the six Western Balkan (WB6) economies depends on greater economic competitiveness. Although the gap is closing gradually, the standards of living in WB6 are well below those of the OECD and EU. Accelerating the rate of socio-economic convergence will require a holistic and growth oriented approach to policy making.

This is the fourth study of the region (formerly under the title 'Competitiveness in South East Europe') and it comprehensively assesses policy reforms in the WB6 economies across 15 policy areas key to strengthening their competitiveness. It enables WB6 economies to compare economic performance against regional peers, as well as EU-OECD good practices and standards, and to design future policies based on rich evidence and actionable policy recommendations.

The regional profile presents assessment findings across five policy clusters crucial to accelerating socio-economic convergence of the WB6 by fostering regional co-operation: business environment, skills, infrastructure and connectivity, digital transformation and greening. Economy-specific profiles complement the regional assessment, offering each WB6 economy an in-depth analysis of their policies supporting competitiveness. They also track the implementation of the previous 2021 study's recommendations and provide additional ones tailored to the economies’ evolving challenges. These recommendations aim to inform structural economic reforms and facilitate the region’s socio-economic convergence towards the standards of the EU and OECD.

Through the development of a modern, sustainable, efficient, interoperable and integrated transport network, a sound transport policy can promote closer co-operation with neighbouring economies and be a key driver of competitiveness, both for an economy as well as for the region. The first sub-dimension, planning and management, measures the extent to which an orderly, coherent, consistent and transparent process is in place for developing transport policy and implementing infrastructure projects. The second sub-dimension, regulation and connectivity, determines how well transport modes and networks are regulated and operated, as well as how they are leveraged to promote regional connectivity. The third sub-dimension, sustainability, measures progress towards resource efficiency, environmental protection, reducing health impacts and increasing safety as well as social inclusion.

Effective trade policy is vital for regional integration and alignment with the European Union. This chapter examines how the government of Kosovo uses trade policy to ease market access and harness digitalisation for enhanced trade facilitation. The first sub-dimension, trade policy framework, assesses the government’s ability to formulate, implement and evaluate trade policy, examining the institutional formulation and co-ordination of trade policy, public-private consultations and the network of free trade agreements. The second sub-dimension, digital trade, focuses on the legal framework for digital trade policy and digital trade facilitation and logistics. The third sub-dimension, export promotion, explores the effectiveness of export promotion agencies and programmes, especially in the context of deepening regional integration.

Sound and robust frameworks are essential for the tourism sector to drive positive economic development, enhance competitiveness, and strengthen resilience within economies, particularly those heavily reliant on tourism. This chapter assesses the comprehensiveness of the legislative structure and practices governing tourism across three sub-dimensions. The first sub-dimension, governance and enabling conditions, assesses the effectiveness of efforts aimed at strengthening strategic co-ordination and co-operation in tourism across governance, vertical co-operation, public-private dialogue, and data collection. The second sub-dimension centred on accessibility, tourism offer and human resources, examines progress and challenges in addressing the sector’s connectivity framework and infrastructure, accommodation capacity and quality, and availability of qualified workforce. The third sub-dimension, sustainable and competitive tourism, explores the impact of tourism branding and marketing strategies, natural and cultural heritage valorisation frameworks, and operations promoting sustainable development.

A well-planned tax policy provides the necessary incentives to promote economic growth. This chapter, along with two sub-dimensions, explores the effectiveness of tax policy and tax administration. The first sub‑dimension, tax policy framework, assesses the soundness and efficaciousness of the legal framework, the tax system, and the incentives for investment in promoting steady economic growth. The second sub‑dimension, tax administration, focuses on the efficiency and transparency of the tax administration organisation while also reflecting upon the tax filing and payment procedures and taxpayer services.

  • 27 Mar 2023
  • Andrew Davies, Monika Kurian, Isabelle Chatry, Maria Varinia Michalun, Thomas Prorok
  • Pages: 68

Subnational governments play a significant role in ensuring good public governance. The way that they are organised and function has a direct impact on the economic and social well-being of citizens and public trust in government. This report presents the system of multi-level government in the six Western Balkan economies, comparing them both with one another and in the context of broader international trends in multi-level governance. The report covers territorial and institutional organisation, competences of local governments, human resources and accountability, public financial management and vertical and horizontal co-ordination, in each case identifying key characteristics and recent trends.

State-owned enterprises are important economic actors and can enhance economic activity and competitiveness if a level playing field with private companies is ensured. This chapter, along three sub-dimensions, explores the importance of implementing policy, institutional and legal frameworks that contribute to competitive neutrality between private firms and state‑owned enterprises. The first sub-dimension, efficiency and performance through improved governance, assesses clarity of the ownership policy and the board nomination framework, including independent and professional boards, and privatisation practices. The second sub-dimension, transparency and accountability, focuses on the financial and non-financial reporting and audit practices, including anti‑corruption integrity measures and protection of minority shareholders. The third sub-dimension, ensuring a level playing field, explores the discrepancies in the legal and regulatory treatment of SOEs compared to private businesses, and the financing conditions of SOEs.

An effective institutional and policy context for science, technology and innovation (STI) is essential to boost the knowledge economy. This chapter, along three sub-dimensions, analyses the overall STI trends and performance in the region, the development of sustainable and impactful STI policies and processes. The first sub-dimension, STI system, assesses the STI regulatory framework and strategies, including smart specialisation strategies and the institutional framework for STI policy. The second sub‑dimension, public research systems, analyses the governance of the public scientific research sector, funding approaches and human resource capacity to foster academic research excellence. The third sub-dimension, knowledge exchange and co-creation, assesses policies that support integration between scientific research and the private sector, which is critical for technology transfer, as well as policies and initiatives to promote European and regional collaboration in STI.

  • 20 Jun 2024
  • Lech Marcinkowski, Anca Butnaru, Aleksandra Rabrenović
  • Pages: 200

Public sector remuneration systems are shaped by an intricate interaction of administrative culture, economic conditions, and political systems. This paper discusses critical considerations to bear in mind when designing, planning and implementing reforms of public service wage systems. It explores key concepts such as job evaluation, pay structures, performance-related pay, market analysis for competitive pay levels and wage bill planning. It provides guidance on the process of reforming public sector salary systems to enhance their competitiveness, equity, transparency and affordability. The paper offers insights drawn from the reform efforts of several EU Member States and SIGMA partners in the Western Balkans, Moldova and Ukraine, presenting real-life examples and updated guidelines for effective, sustainable salary system changes. The primary focus is on reforms of wage systems within central government administrations, acknowledging the complexity arising from diverse classifications of civil service and public employees, and the varying scope and structure of salary systems. This paper serves as a practical guide, presenting options along with their advantages and disadvantages to aid policymakers in aligning reforms with their national public administration context and strategies.

Small and medium-sized enterprises (SMEs) are essential drivers of sustainable economic growth in the Western Balkans and Turkey, where they make up 99% of all firms, generate 65% value added and account for 75% of employment. Nevertheless, SMEs across the region continue to face obstacles such as difficulties accessing financing, low levels of digital uptake, regulatory barriers and relatively low participation in international trade. The situation has been further exacerbated by the COVID-19 pandemic: SMEs found themselves fighting for survival amidst reduced demand, lockdowns and travel restrictions, and supply chain disruptions. 

This report provides an overview of the implementation of the Small Business Act for Europe during the period 2019-22. It is designed to help policy makers design, implement and monitor policies to support the recovery of SMEs from the pandemic, boost their competitiveness based on OECD and EU good practices, and further enhance the region’s economic growth and resilience.  

  • 06 May 2019
  • OECD, European Training Foundation, European Union, European Bank for Reconstruction and Development
  • Pages: 977

Robust SME sectors are critical to the prosperity of the six Western Balkan economies and Turkey, accounting for over 70% of those employed in the business sector and generating 65% of value added in these seven economies. Yet their potential remains untapped, as SMEs across the region grapple with numerous challenges that hamper their growth and productivity. They are still under-represented in international trade, and their contributions to value-added remain comparatively low as they have difficulties in moving or expanding into high value-added activities.

This report provides a comprehensive overview of the implementation of the ten principles of the Small Business Act for Europe (SBA) in the seven EU pre-accession economies over the period 2016-18. It monitors progress against similar assessments performed over the past decade and identifies the outstanding challenges affecting SMEs. It also provides targeted recommendations to remove barriers to SME development and unleashing their potential for driving inclusive economic growth.

Small and medium enterprises (SMEs) are the backbone of Western Balkan economies but until recently received relatively little attention from policy makers. Governments focused on consolidating macroeconomic stabilisation and the restructuring and privatisation of large companies. The adoption in 2003 of the European Charter for Small Enterprises contributed to a change in policy perspective.

The SME Policy Index 2007 presents the first comprehensive and comparative assessment of progress made in implementing the Charter. The assessment is based on the SME Policy Index, an analytical tool designed by the OECD Investment Compact and the European Commission, and uses collaborative benchmarking to measure progress in the ten dimensions of the Charter:

• Education and training for entrepreneurship
• Cheaper and faster start-up
• Better legislation and regulation
• Availability of skills
• Improving online access for tax filing and company registration
• Getting more out of the single market
• Taxation and financial matters
• Strengthening the technological capacity of small enterprises
• Successful e-business models and top class business support
• Developing stronger, more effective representation of small enterprises

Governments of the region have already started to take action based on the results of the report through the creation in April 2007 of a South East European Investment Committee which aims to develop detailed guidelines on how to implement reforms in priority areas including the SME environment.

Albania, Bosnia and Herzegovina, Croatia, FYR Macedonia, Montenegro, Serbia and UNMIK/Kosovo are assessed in this report. A second SME Policy evaluation will be conducted and published in 2009.

Following the first three Western Balkans Competitiveness Outlook assessments, published in 2016, 2018 and 2021,the fourth assessment cycle was launched on 27 April 2023. In Kosovo*, the Investment and Enterprise Support Agency (KIESA) held the main role of co-ordinator for the assessment process, while for each of the 15 thematic policy dimensions, a relevant line ministry was delegated as policy dimension co-ordinator and responsible for input collection. Once the assessment was launched, the OECD team introduced new digitalised frameworks for assessing each of the 15 policy dimensions. Consisting of qualitative questionnaires and a statistical data sheet, these frameworks were presented and explained by the OECD, with particular attention paid to new questions and indicators.

Parliaments have a unique role in ensuring that adopted laws, regardless of who initiated them, are evidence-based and fit-for-purpose. For the executive branch, laws are vital instruments through which they deliver public policy. Governments therefore rely on parliaments to scrutinise and adopt legislation in a timely, well-planned and co-ordinated manner. Parliamentary scrutiny of government lawmaking and its role in ex post evaluation of law implementation helps the legislature hold the executive to account. Evidence-based lawmaking is especially critical to EU integration processes as they involve adoption of many new laws. This paper reviews how laws are planned, initiated, prepared, scrutinised and evaluated by the parliaments of six Western Balkan administrations. The report discusses the concept of lawmaking within a parliamentary system of government. It considers how parliaments and governments co-operate and co-ordinate their legislative activities throughout the lawmaking cycle, providing a comparative analysis of existing rules and procedures as well as lawmaking practices. A set of key findings and policy recommendations are provided to support the Western Balkan administrations to plan and implement future reforms.

This paper studies the differences between the organisation of budget management in selected government administrations in the Western Balkans and the Republic of Moldova and good practice across the European Union (EU). It observes that the ministry of finance (MoF) in these administrations typically engages in direct budget negotiations with a large number of budget organisations. This practice is in stark contrast with the budgeting approach observed in the EU, where the MoF only deals directly with government ministries and a limited number of constitutional bodies. The paper highlights the adverse consequences for the strategic role of the MoF for fiscal policy, the accountability of line ministries for budgeting and service delivery in their sector and the introduction of modern public financial management instruments such as medium-term budgeting and performance-based budgeting. This paper recommends that governments reduce the number of first-level budget organisations and give line ministries more responsibility for budget management in their sector. At the same time, the paper recommends strengthening line ministries’ accountability for budget management towards the parliament.

  • 22 Oct 2021
  • Jesper Johnsøn, Lech Marcinkowski, Dawid Sześciło
  • Pages: 74

Good governance of public agencies requires the application of a set of regulatory and managerial tools to find the right balance between autonomy of agencies and adequate oversight from portfolio ministries and other actors. This paper provides insights from EU and OECD good practices, with a detailed analysis of EU acquis requirements for national regulatory agencies. New empirical evidence shows that public administrations in the Western Balkans and European Neighbourhood area lack clear policies and regulations for agency governance and misinterpret the EU acquis. This leads to a proliferation of agencies, duplication of functions and waste of public resources, a lack of accountability to portfolio ministries and generally a governance vacuum. Implementation of government policy is blocked and democratic accountability generally undermined. Finally, recommendations for better organisation of public administration are provided, based on the empirical analysis and lessons learned from SIGMA's engagement in such reforms.

The Western Balkans region has come a long way over the last two decades in achieving economic and social progress. Its people are the region’s greatest asset. Yet faced with a lack of opportunities many, particularly the young, decide to emigrate. To make the most of its future the region must invest in its attractiveness as a place to live, work and invest in.

This report comes as a follow-up to the earlier publication Multi-dimensional Review of the Western Balkans: Assessing Opportunities and Constraints. It builds on an extensive peer-learning process that brought together experts from across the region and beyond. The report provides suggestions and recommendations for three strategic priorities that can help create opportunities and boost the quality of life. First, better education and more competencies are the basis for raising productivity, creating jobs, encouraging civic participation and making the region an attractive destination. Second, social cohesion is the bedrock of resilient societies and requires stronger labour market policies and effective social protection that can cushion people’s hardship and provide them with new opportunities. Third, cleaner air and more sustainable energy are indispensable for boosting the region’s quality of life and economic opportunities.

The Western Balkans region has come a long way over the last two decades in achieving economic and social progress. With a population of 17.6 million, the region today boasts a combined gross domestic product (GDP) of close to EUR 100 billion, an average GDP per capita of about EUR 5 400 and a comprehensive process of integration with the European Union.

This report provides multi-dimensional assessments across the economic, social, finance, governance and environmental pillars of sustainable development for five economies of the region. The region’s location, its deep relationships with Europe and its academic tradition present many opportunities for future development, especially at a time when distances are shrinking further with digitalisation. Making the most of this potential will require collaboration in tackling challenges, which have been further exposed during the COVID-19 pandemic. Boosting competences and education, strengthening social cohesion and ensuring a green transformation towards clean energy and the valuation of the region’s natural wealth, emerge as strategic priorities. Beyond practical and financial constraints, future solutions must address considerable institutional and governance challenges that remain across the region.

Creating an attractive environment for investors is essential to stimulate economic activity and to foster sustainable economic growth. This chapter assesses the scope and effectiveness of existing policies and strategies that aim to enhance investment volume and quality. The first sub-dimension, investment policy framework, assesses the robustness of legal framework for investment, the efficiency of dispute settlement mechanisms, as well as intellectual property rights enforcement and awareness-raising capacity. The second sub-dimension, investment promotion and facilitation, focuses on investment promotion agency structures, investment promotion strategies and investor incentives, all geared towards attracting foreign direct investment. The third sub-dimension, mobilising sustainable investment, explores the strategic framework for a sustainable investment governance, while also reflecting on the scope of financial and technical support allocated to sustainable investment.

Supreme audit institutions (SAIs) are a critical part of public accountability systems. They ‘watch’ over governments’ use of public money and report about it publicly, helping to increase transparency. SAIs have an interest in strongly engaging with external stakeholders – including citizens – to make sure that their work is relevant, understood and used to hold governments to account.

This paper provides a compilation of European SAIs’ practices on communication, co-operation and collaboration with external partners and is intended to provide inspiration to SAIs of EU candidate countries and potential candidates to further strengthen their engagement with their non-governmental stakeholders.

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