THE STABILITY PACT FOR SOUTHEAST EUROPE: ONE YEAR LATER
                             July 26, 2000

On July 30, 1999, President Clinton met with European leaders and heads of multilateral institutions in Sarajevo to launch the Stability Pact to build a more secure and prosperous future for the Southeast corner of Europe.

The Stability Pact, initiated by the European Union with strong U.S. support and placed under the auspices of the OSCE, is based on a solid partnership between the international community and countries of Southeast Europe. It seeks to stabilize and revitalize the region by increasing the pace of political and economic reform and expanding cooperation among the countries of the region.

The United States is working with the international community to mobilize political and financial support toward these goals, to strengthen regional cooperation and to accelerate the region's integration into Euro-Atlantic institutions. This work in support of the Stability Pact's objectives complements efforts by the United States and others to foster peace and security in Kosovo and Bosnia-Herzegovina.

MAJOR ACHIEVEMENTS SINCE THE SARAJEVO SUMMIT

Mobilizing International Support
-- At the March 2000 Regional Funding Conference for Southeast Europe, the international community committed approximately $6 billion in development assistance to the countries of Southeast Europe for 2000. Over 85 percent of this assistance is being provided by European countries and institutions, and international financial institutions. -- Of this $6 billion, the international community pledged more than $2.3 billion for over 200 "Quick Start" projects -- covering everything from economic development to security and democratization. Much of this package is focused on energy, water and transport infrastructure improvements that will have an immediate impact on people's lives, with the longer-term goal of improving links to the rest of Europe. More than 50 of the Quick Start projects are already under way -- including improvements to the main border crossing between Macedonia and Kosovo, major road work in Albania, improved cross-border communication between parliaments and non-governmental organizations, an expert review of history teaching to identify and eliminate ethnic and religious stereotypes, training programs for local police, and a wide range of demining activities.
-- The Stability Pact has also established a Donors' Network for Southeast Europe to exchange information on assistance to the region and improve coordination of proposed projects.

Advancing Reform in Southeast Europe

• Improving the Investment Climate: Recognizing that trade and investment are essential to long-term economic growth, the countries of Southeast Europe have formed an Investment Compact to identify changes to their legal and regulatory environments that will attract investment. They have agreed to launch initiatives to create common approaches to investment policy in six areas:
  • standardizing and improving data collection on foreign direct investment;
  • improving adherence to international accounting standards;
  • additional training in OECD policy norms;
  • supporting small/medium enterprises;
  • promoting regional investment; and
  • developing a regional model tax treaty. Privatization continues across the region in banking and other sectors. The Stability Pact's Business Advisory Council, which includes leading Southeast European and foreign firms, is visiting all of the countries of Southeast Europe to offer advice on regulatory and other issues related to investment decisions. Under new private sector initiatives, the European Bank for Reconstruction and Development (EBRD) expects that new private investment in the region will reach 2 billion Euros (approximately $1.87 billion) in the next two years. The project pipelines of the EBRD and the International Finance Corporation, two leading institutions for mobilizing private investment, grew 22 percent in 1999.
• Reducing Regional Trade Barriers: Macedonia has led an initiative to reduce trade barriers within the region. As a first step, the countries in the region are collecting data on existing trade regimes and identifying priority areas.
• Strengthening Civil Society: The countries of the region have agreed to a Media Charter committing them to implement principles vital to an independent media, such as the free flow of information, the ability of media organizations to control their own means of production and distribution, and the independence of broadcasting regulatory bodies. In Kosovo and in Bosnia, new regulations governing the operations of non-governmental organizations (NGOs) have been passed. In Kosovo, the number of NGOs has since increased from 10 to 400.
• Reducing the Threat of Small Arms: All regional countries pledged to destroy illicit and surplus small arms and light weapons and ensure safe storage of legitimate stockpiles. The United States and Norway have formed assessment teams to identify what each country needs to fulfill these commitments. A team has already visited Albania and others will soon visit Bulgaria and Macedonia.
• Combating Corruption: Under an Anti-Corruption Initiative, the countries of Southeast Europe have committed to make domestic government procurements more transparent, take specific measures to promote public service integrity and establish a review body to monitor integrity in the administration of foreign aid programs and national anti-corruption efforts.
• Fighting Cross-Border Crime: Under the Southeast European Cooperative Initiative, countries in the region are cooperating to combat cross-border crime. This fall, a Center will be operational in Bucharest to serve as a central regional clearinghouse on cross-border crime issues. The countries in the region are also establishing joint task forces on three critical issues: trafficking in human beings, customs fraud and smuggling, and narcotics trafficking. The work of the human trafficking task force has already contributed to the rescue of several trafficking victims in the region.

Strengthening Regional Cooperation
-- In the past year, the countries of Southeast Europe have signed several bilateral agreements, including a border treaty between Croatia and Bosnia-Herzegovina; a cooperation agreement between Romania and Moldova; trade agreements between several countries including Bulgaria, Macedonia, Albania and Croatia; and an agreement resolving the long-standing debate between Romania and Bulgaria over the location of a new bridge over the Danube.
-- Under the "Szeged Process," Hungary has worked to bring local municipalities from other Southeast European countries and donor countries (including four U.S. cities) together with Serbian municipalities led by the democratic opposition. These partnerships support the opposition-led Serb municipalities in providing effective services to their constituents by working with them on the details of local government from budgets to contracting. The "Szeged process" is also working to strengthen independent Serb media.

Integrating the Region into Europe and International Institutions: International leaders are delivering on their commitment from Sarajevo to help the countries of Southeast Europe integrate more deeply into Euro-Atlantic structures.
-- The European Union has opened accession negotiations with Romania and Bulgaria. It has also established a process of Stabilization and Association Agreements for countries not yet involved in accession negotiations, and has begun discussions with Macedonia and Croatia on these agreements.
-- The World Trade Organization (WTO) has approved the accession of Albania and Croatia as new members. The WTO has also established working parties to consider membership applications by Macedonia and Bosnia-Herzegovina.
-- Croatia has joined NATO's Euro-Atlantic Partnership Council and Partnership for Peace programs.

U.S. SUPPORT FOR THE STABILITY PACT
The U.S. has moved quickly on President Clinton's commitment last July to support economic development and reform throughout Southeast Europe with several concrete initiatives.

Increasing Investment in the Region
-- The Overseas Private Investment Corporation (OPIC) today launched a $150 million equity investment fund that will be managed by Soros Private Funds Management. It will invest in companies in the region in a range of sectors, including telecommunications, light manufacturing, distribution and consumer goods.
-- The United States and the European Bank for Reconstruction and Development (EBRD) have created a $150 million fund to provide technical assistance and lending in cooperation with local financial institutions to promote micro, small and medium enterprise development in Southeast Europe. The United States will work with the EBRD to expand the operation of this fund and other activities to Montenegro. -- In March 2000, OPIC and the Government of Montenegro signed an Investment Incentive Agreement authorizing the operation of OPIC programs in Montenegro.
-- The United States has identified more than $220 million in existing equity funds supported by the EBRD and International Finance Corporation available for investment in sectors ranging from small-enterprise and tourism to communications. The United States has worked with the multilateral banks and Stability Pact's Investment Compact to raise awareness of these resources.

Promoting U.S. Business Involvement
-- Then Secretary of Commerce William Daley, the President of the Overseas Private Investment Corporation (OPIC) George Munoz, Trade and Development Agency (TDA) Director J. Joseph Grandmaison and a senior representative of the Export-Import (EXIM) Bank led a commercial mission to Sofia, Bulgaria in October 1999. Over 250 matchmaking meetings between 76 American and 62 regional firms were held. -- The United States expanded its commercial presence in the region by opening a joint OPIC/EXIM/TDA office in Croatia and a new commercial post in Thessaloniki, Greece.
-- OPIC and EXIM provided new financing for U.S. investments in the region. EXIM, for example, provided a $77 million guarantee for Westinghouse's participation in the overhaul and modernization of the Kozloduy nuclear power plant in Bulgaria. Overall, EXIM has provided approximately $500 million in loans and guarantees in support of U.S. exports to Southeast Europe in the past year. OPIC has already surpassed the $200 million target set last year for credit and insurance projects ranging from power generation to agri-business investments.

Encouraging Participation of Local Firms in Reconstruction Work -- The United States spearheaded the creation of the Southeast European Business Network to provide procuring offices an easily accessible database of local firms providing products and services. In the last year, the number of firms listed on the Network has doubled to over 4,500.
-- The United States has worked with the World Bank to complete a schedule of procurement assessments for all the countries of the region by 2001. The EBRD is currently considering the creation of a new facility that will provide working capital and information to local contractors and suppliers. These projects will assist local firms to compete for procurement opportunities.

Creating Conditions for Increased Trade -- Officials from the office of the U.S. Trade Representative and the Department of Commerce have trained regional officials on World Trade Organization (WTO) procedures and standards to help aspiring and new WTO members take full advantage of their membership. -- The United States negotiated intensively with Croatia and Albania to complete their accession to WTO.
-- The U.S. Agency for International Development has financed the establishment of a Trade Development Center in Bulgaria to promote exports and facilitate business-to-business relations in the region. -- The Administration has transmitted to Congress the "Southeast Europe Trade Preference Act" which, when enacted, will extend duty-free treatment to additional products of Southeast European countries, with several countries eligible for over 80 percent duty-free entry.

Supporting the Stability Pact's Quick-Start Projects The United States has pledged funds to support more than 50 different projects in the Stability Pact's Quick-Start package. More then half of the projects funded by the United States are already under way and the rest will begin prior to the March 2001 deadline.

NEXT STEPS
The United States will continue its strong support for the Stability Pact and broader stabilization efforts. The critical challenge for the Stability Pact in the coming months is to advance implementation of the commitments made by regional countries and by the international community. While both sides of the partnership have already achieved much, progress on all fronts should be accelerated.

Countries in the region must continue to tackle the challenges of economic and political reform. The Stability Pact will continue to provide these countries with important assistance, particularly through the Investment Compact and the Anti-Corruption Initiative, to identify priority reforms and implement the necessary changes. Donor countries and institutions will work closely with the countries of the region to review their reform efforts and facilitate coordination.

Donors should fulfill their funding pledges. All Stability Pact partners must work together to ensure that the rest of the Quick Start projects begin as soon as possible, and not later than the March 30, 2001 deadline.

The Stability Pact must also focus greater attention on the implementation of several other initiatives, including: -- a Refugee Return Initiative that promotes returns within, to and from Bosnia and Croatia, to which the United States has pledged $18.5 million;
-- a Disaster Preparedness and Prevention Initiative that will help fill the gap in national disaster preparedness capacities by forming a network of regional cooperation leading to the establishment of a regional coordination center;
-- the strengthening of contacts and cooperation among regional non-governmental organizations;
-- more intensified efforts to combat human trafficking through enhanced cooperation at the Bucharest Anti-Crime Center; and -- further steps toward a developing a regional electricity market and integrating it into the Western European market.

The United States will continue the efforts it has launched to expand business and investment opportunities in Southeast Europe. The U.S. commercial presence on the ground provides even greater opportunities to bring U.S and local businesses together and help the region take full advantage of the trade and investment programs that donors have established. The Trade and Development Agency will sponsor a transport and energy conference this fall to promote greater U.S. investment in those sectors. In addition, the Export-Import Bank will review its operations in the region and explore ways to expand the range of its activities, particularly with the private sector.

A key factor in the transformation of Southeast Europe remains progress toward deeper integration with the rest of Europe and transatlantic institutions. The United States applauds efforts by the European Union to play a leading role in the Stability Pact and welcomes closer relations between the EU and the countries of the region, which are vital to anchoring the region more firmly in Europe. The United States is urging the EU to strengthen these important ties and to act quickly on proposals to further open its markets to Southeast European products. The United States also remains strongly committed to working with allies in Southeast Europe to help them become stronger candidates for NATO accession and to realizing the full potential of NATO's Southeast Europe Initiative.

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