Opinion of the Economic and Social Committee on "Development of human resources in the Western Balkans"
Date: 2001-04-25
Institutions: European Economic and Social Committee
Subjects: Western Balkans, personnel administration

10.7.2001

EN

Official Journal of the European Communities

C 193/99

Opinion of the Economic and Social Committee on ‘Development of human resources in the
Western Balkans’

(2001/C 193/20)

At its plenary session on 12 and 13 July 2000, the Committee decided, in accordance with Rule 23(3) of
the Rules of Procedure, to draw up an opinion on ‘Development of human resources in the Western
Balkans’.

The Section for External Relations, responsible for preparing the Committee’s work on the subject,
adopted its opinion on 11 April 2001. The rapporteur was Mr Sklavounos.

At its 381st plenary session on 25 and 26 April 2001 (meeting of 25 April), the Economic and Social
Committee adopted the following opinion by 59 votes in favour to one vote against, with four
abstentions.

1.

The need and the scope of the opinion

The need and the scope of

1.1.
following:

the opinion are the

1.1.1.
gration.

The importance of the Balkans for European inte-

1.1.2.
The importance of human and social capital for
economic development in the area and for sustainable enlarge-
ment towards the south.

Association agreements are a very useful instrument for the
integration of the countries of the Western Balkans in the
European structures, but there is a great need for a more
coherent/comprehensive approach embracing the region as a
whole.

The European Economic and Social Committee is of the
opinion that the regional approach and all sectoral policies for
the Western Balkans have to be integrated in a regional
development programme.

1.1.3.
Mediterranean basin into European ‘structures’.

The importance of the Balkans for integration of the

2.

The importance of human and social capital for
growth in the region

1.2.
The scope of the opinion is to highlight the importance
of these forms of capital and to provide a range of proposals
necessary to formulate a holistic approach towards the devel-
in the Western
opment of the human and social capital
Balkans.

There is an undisputed need for clear, effective and
1.3.
decisive European Foreign Policy in general and towards the
Balkans in particular.

The ‘costs’ of war and instability in the Western Balkans will
be unbearable for the process of European integration. Thus
peace and stability in the Western Balkans is not a regional
problem, it is a European problem.

There is also a need for a strong and decisive re-invigoration
of the Stability Pact to enable it to meet the expectations of
broader European society and of the social partners on the one
hand, the goals set up by the world community in reference to
the Stability Pact as well as the needs of the local societies on
the other.

There is a need for organised, well-structured and programmed
involvement of European civil society in the development of
human and social capital, the participatory culture and struc-
tures of social dialogue in the Western Balkans.

2.1.
The World Bank report under the title ‘The road to
stability and prosperity in Southeastern Europe: A regional
strategy paper, 15 March, 2000’ gives a very high importance
to human and social capital development as a necessary factor
and/or prerequisite for sustainable development in the area.
Two chapters (5 and 6) are related if not devoted to the
development of social and human capital.

Higher education for leadership development,

2.2.
human capital development, for social change.

for

The development of elites with multicultural edu-
2.2.1.
cation and horizons, the education of the younger generation
on a similar basis are considered as investments in social
capital and vital to a peaceful sustainable future.

2.2.2.
A well-trained human capital is considered as the
essential factor for the economic development of the area,
combating poverty and environmental degradation.

But at

2.2.3.
the moment, on the one hand we face
deterioration of the educational system, lack of opportunities
for well-educated and skilled people and on the other hand we
face a massive brain drain from the area. At the same time the
urgent need for ‘modernising’
the educational system is
recognised by all sides.

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3.

The problem

The massive and continuous destruction of human
3.1.
resources, human and social capital, as well as a brain drain,
and emigration result in an urgent need for an effective holistic
approach for their re-assembly, reconstruction, development
as a critical, decisive factor for the economic reconstruction of
the area.

3.2.
Irrespective of causative factors of the problems and of
degrees of differences between countries in the area, the
aftermath of the transition and the last Balkan war finds the
Western Balkans in the following situation:

3.2.1.
Destruction or fatal depreciation of the infrastructure
necessary for the sustainability of human and social capital.
Crisis of legitimacy of the institutional framework, public
administration and authority, law and order systems.

Social fragmentation: break down of social bonds,
3.2.2.
fragmentation, segregation on a clan basis, religious affiliation,
politically partisan ‘machines’, politically and clan-related
regional identities.

Antisocial

exclusive defensive group solidarity.
3.2.3.
Regressing to family loyalty as the only stable loyalty when
loyalties beyond the family boundaries are increasingly chang-
ing and fluid.

3.2.4.
those who do not belong to the family.

Distrust towards foreigners in general as well as

Difficulties in cooperating among each other and
3.2.5.
mistrust towards collective bodies and institutions including
from trade union and political parties.

In a few words, we face destruction, or serious
3.3.
weakness of all embracing social-bonds, value system, values
structures.

The conflicts between the different nationalities and
3.4.
the wars, provided a cover up and a defensive exclusive
national solidarity obscuring the existing dissatisfaction and
fragmentation within the ethnic groups, political disintegration
and underdevelopment.

3.5.
An accurate description and a sound understanding of
the current reality on human and social capital has to take into
consideration the substantially different but parallel historically
tragic experiences of Albania and Former Yugoslavia, in the
post World War II era.

3.6.
The Albanian goal (under Hotza) of establishing an
Albania identity and a communist consciousness among the
different clans, ethnic groups, religious affiliations of Albania,
did not work.

3.8.
The different but parallel goal of Tito was to establish
a Yugoslav identity and a socialist consciousness among the
different south-slav nationalities, non-slav minorities, other
minorities through a weak decentralised federation.

3.9.
The collapse of communism, the two poles system of
world organisation, the Yalta arrangements, among other
different factors, for the Albania and the Yugoslavia, con-
tributed to a quick collapse of the Albanian regime and a slow
but tragic disintegration of the Yugoslav federation.

The present party systems, with most of their cadres
3.10.
springing from the same sources of the past regimes, without
real open transparent democratic participatory traditions and
experience, without transparent funding, without a real mem-
bership and locally democratically elected on a bottom-up
basis, they constitute rather mechanisms of social control,
mechanisms struggling to re-establish a socially accepted and
legitimised order, than parties as understood in the Western
democratic and parliamentary traditions.

One main dimension of ‘the problem’ is the difficulty
3.11.
of donor countries, world institutions and NGOs to grasp
what the World Bank lately recognised:

‘More important, we must de-emphasize policies and
emphasize institutions. Institutions in the sense in which
Douglas North interpreted them: ideas, ideologies, preju-
dices, rules of behaviour, not organisations or other
physical entities. To transform this kind of institutions, the
culture must be changed.

This involves much more than simply privatising state-
owned enterprises or passing laws. It involves changing
the attitudes of public officials, even the attitude of the
private sector.

We realize that the Government can not just create and
legitimise new institutions and behavioural norms and
parachute them from the top to the public through laws
and policy actions. Civil society should feel the need for
change. Therefore we have to be in a position to help both
the public and the government — both sides of this
transformation (1).’

The iron rule, overly centralised elitist bureaucratic
3.7.
one-party system and the titanic effort to uproot the Albanian
past were doomed to failure with ruinous long-lasting effects.

(1) TRANSITION: The Transition Newsletter about reforming econ-

omies — Nov. Dec. 2000/Jan. 2001.

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4. Municipal system

The municipal system is weak and ineffective (especially in
Albania) because it functioned as a lower level appointed
administrators and/or party appointed functionaries, rather
than elected local leadership responsible for the management
of local wealth and accountable to the local people. During
the conflict periods, the ethnic and religious barriers paralysed
the municipal system and ethnic ‘machalas’ enclaves within
the villages or ethnic villages complicated the evolution of the
municipal system.

5.

Public administration and public sector management

5.1.
The culture of the one-party system and the party
controlled administration and public sector in Albania, and
the same culture but working on federal and ethnic basis in
Yugoslavia,
led to the ineffectiveness of the past and the
weakness of the present.

5.2.
The years of the conflict, of wars, of embargoes, of a
semi-official black market, to cover state and public needs, has
multiplied and deepened the crises in the public administration
and the public sector.

outnumber the employed in FYROM and the massive lay-offs
are not accompanied with any consideration of training or a
hope for a future job.

7.

Living standards

7.1.
A deterioration of living standards in all countries in
the area has been the hard reality for at least the last decade.
Real wages decline with registered unemployment for example
reaching 36 % in FYROM and 30 % in Yugoslavia, 55 % in
Bosnia Herzegovina in 1998.

7.2.
In Bulgaria poverty ‘headcount’ increased seven times
between 1995 and 1997, while in Romania it increased five
times in the period 1989-1998.

7.3.
Displacement of populations. About 3 million people
have been displaced only due to the war involving Serbia,
Herzegovina, Croatia, excluding the Kosovo crisis.

7.3.1.
Serbian sources indicate that 1 million refugees are
at present in Serbia and at minimum cost of a dollar per day
they constitute on strictly economic basis a devastating cost
for the economy of the country.

6.

The general social disintegration

7.3.2.

13 % of the Montenegrin population are refugees.

6.1.
The breakdown of the political system, the value
system in Albania, the soul searching in FYROM, Croatia,
Serbia, Montenegro, Bosnia Herzegovina, over the slow-tragic
break down of Yugoslavia’s federalism, socialism, the civil war
and the embargo, the dramatic economic crisis, have effects
on the judicial system, the law and the order functioning.

7.3.3.
The system of social security and healthcare as
well as of social support broke down increasing social
dissatisfaction, disaffection, and disintegration. The deterio-
ration of the environment, governmental and social inability
to use effective measures of environmental protection are all
contributing to the escalation of the problem and the dangers
for social health. The situation of minorities, especially of the
Roma people, has been worsening due to the last war.

6.2.
The transition experiences, the pyramids in Albania,
the non-transparent privatisation processes in FYROM and
Croatia, the black market in Serbia and Montenegro, have
culminated in a general social climate of distrust of the citizens
among themselves and of the citizens towards the authorities.

8.

Education and youth

6.3.
A crisis of legitimacy on all levels in all spheres of
authority has been established and is getting deeper due to the
sustainability of corruption.

6.4.
The breakdown of the social security systems and the
inability of the state to pay even pensions and basic salaries
has been enforcing the vicious circle of anomie and invigorat-
ing the black market, the grey economy, the penetrations of
organised crime in society. For example the unemployed

Public allocations to education remain low in all
8.1.
countries. Fiscal allocations as shares of GDP have decreased
during the past years. As all countries have experienced
significant declines in GDP throughout the transition, the
education resource envelope available for each student has
declined significantly. In several countries institutional capacity
in the education sector has been weakened with dilapidated
infrastructure, poorly paid, trained and motivated teachers,
outdated education materials, curricula and teaching styles. All
the above were intensified in ethnically mixed communities
where the difficulties to formulate and apply multicultural
educational programmes were significant.

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8.2.
In virtually all the SEE countries, the needs for furniture,
equipment and learning materials are daunting. Even more
important are capacities to manage and operate the education
systems.

9. Crime and corruption

Corruption as factor contributing to anomie, social economic,
political underdevelopment in the Balkans in general and in
western Balkan in particular is considered very high. Among a
total of 99 countries, Transparency International Corruption
Perceptions Index, ranked FYROM 63 (along with Romania)
Croatia 74, Albania 84.

9.1.
The continuity of conflict and insecurity, of extreme
poverty, is feeding corruption and organised crime and is also
fed by it. The trafficking of women and children as it has been
well highlighted in the last meeting of the MP Network for
South Eastern Europe (February 26 and 27, 2001, Skopje,
FYROM). Its high profits are feeding corruption.

9.2.
This corruption and organised crime are factors for
further social, economic, political and moral disintegration in
foreign troops in the area is
the area. The existence of
considered as a factor contributing to trafficking of women, to
prostitution and thus to corruption.

9.3
Corruption is fed by and feeding crime. Trafficking of
children and women, selling of poor children’s organs, child
labour and child prostitution are thriving in the area, as an
outcome of corruption and a factor in its sustainability.

10. The other side of the coin

10.1.
The history of the Balkans in general and the western
Balkan in particular, it is not a history of continuing conflict,
hate and blood. As several historians, sociologists have docu-
mented there exist historical periods and experiences of co-
existence and symbiosis, of close and varied contact.

10.2.
Among the relevant publications is ‘the classic study
of Serb — Albanian osmosis’ described by Milan Sufflay in his
book Srbic Arbnasi (1925).

10.4.
Also in Kosovo history, social conflicts have not
evolved only on the lines of ethnic differences but on the basis
of land ownership as well, with poor Muslim and Christian
Albanian and Serb populations opposing Albanian landlords.
Also during the Hotza period progressive Kosovars were more
in trouble in Albania than Serbia proving the political dividing
lines equally strong some periods.

11. There is historical scientific proof and social memory
which can be used for a new beginning of peace and
cooperation

Thus the area has enough natural resources, great cultural and
historical heritage geopolitical importance and a flourishing,
economically and culturally, diaspora in northern Europe in
Australia, in Canada and the US so that in general terms the
integration of the area in the EU structures and the EU itself
will be a great advantage for Europe.

12. Existing actions, plans and strategies

There exists a very rich and profound work on strategies for
the Balkans, actions, plans, strategies.

The Stability Pact remains an all embracing ‘mechan-
12.1.
ism’ and plan for the area,
including an interest for the
development of social and human capital. Surely the world
community, the average European citizen, the Western Balkans
citizens place a lot of expectations on the Stability Pact. The
creation of the Stability Pact is an achievement in itself. But if
the Stability Pact fails to achieve its goals then the loss will
have long term catastrophic effects. With the changes in the
Former Republic of Yugoslavia we hope there will be no
reason for delaying a decisive transformation of the Stability
Pact into a coherent development pact.

12.2.
There is an excessive and even confusing number of
NGOs, institutions, world and UN organisations, European
and American organisations, agencies, dealing with the Balkans
in general and western Balkans in particular, in Bosnia, in
Kosovo, in Albania.

12.3.
of high quality we can include:

Besides the ESC’s reports and opinions as documents

12.4.
The CEPS plan for the Balkans (Centre for European
Policy studies 2000A.804 Michael Emerson, Daniel Gros
Editors).

10.3.
In Montenegro and Northern Albania also for centuri-
es we observe strong links between Albanian and Montenegrin
Clans, intermarriages and war alliances. Montenegrin clans can
be considered off-shoots of Albanian families and vice versa.

The Task Force report, promoting sustainable Econ-
12.5.
omies in the Balkans: Report of an international Task Force
sponsored by the Council on Foreign Relation of the USA.

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12.6.
The Road to Stability and Prosperity in South-eastern
Europe: A regional strategy, paper 1 March, 2000, World
Bank. Europe and Central Asia Region.

Proceeding for a Balkan Free trade area.

Euro-isation of the Balkan currencies.

12.7.
ready to be implemented in the area.

A very concrete Greek action reconstruction plan is

Establishing Regional Policy instruments on the level of the
EU or for example:

13.

Important common denominators among the pro-
posed plans of the different institutions, indicate
common ground for action

13.1. With the political will expressed from every stake-
holder for peace and stability in the area.

13.2. With the existence of hundreds of organisations,
specialists, already involved and financed to work in and for
the area.

13.3. With the commitment of the EU the IFIs (International
Financial Institutions), the countries in the area and the world
community are expecting results.

13.4. With the changes in Yugoslavia the obstacles for a
new start in the regional approach, a new revitalised and
effective strategies for the western Balkans and a new approach
towards the south enlargement are naturally on the EU agenda.

14. Preconditions for successful strategies for the devel-

opment of human and social capital

Human and social capital
in order to develop require an
appropriate climate, supportive of a psychology of hope
and security, an encouragement to participate, and some
in local and national
in business,
guarantees of fair play,
policies and in the judicial system and processes.

There are necessary measures from the world community,
from the EU, the signatories of the stability pact, the Govern-
ments of the Region towards this such as:

Commitment from the signatories of the stability pact for
concrete timetables for each ‘table’ of the stability pact, in
relation to certain priorities for example guaranteed borders:

— Reduction of expenditure on defence.

— Commitment on a Concrete Regional Plan and a pro-
gramme for its implementation including planning, coor-
dinating, funding, functions.

— a South Eastern TEN Desk

— a South Eastern ISPA Desk

— a Phare South Eastern Desk.

— a South Eastern municipal and urban development Desk.

Establishing Regional Policy instruments within each of the
south-eastern governments as well as regional — sectoral
functions on a Balkan basis.

14.1. Towards a positive Domino and new state responsibilities in

the area

14.1.1.
The responsibilities in each and every state in order
to promote human and social capital development as goals
setting have been repeated in each and every document for the
area. Governments one after another are losing credibility,
unable to establish social bonds or all-embracing inclusive
solidarity, because these social ‘elements’ are not provided by
governmental decrees and ministerial orders.

14.1.1.1.
Commitment to community causes, to state and
regional causes cannot emerge if we do not reach a critical,
breaking point of the presently prevailing vicious circle with a
decisive positive domino emergence and mechanisms of a
sustainable peace, security, and regional cooperation and
intensive development.

14.1.2.
priority an evaluation of the progress of the Stability Pact.

In each and every Presidency has to be placed as a

14.1.2.1.
and stability in the area.

Commitment of the world community for peace

Commitment from the main signatories of the
14.1.2.2.
‘stability pact’ for a drastic emergency programme of maxi-
mizing coordination, and effectiveness of the engagement in
the area, of reducing the ‘bodies’, institutions and organisations,
involved to the minimum necessary and utilising the cost
reduction for the benefit of the beneficiaries.

Identification of Transnational priority projects and estab-
lishing the responsible Project Authority for each priority
project.

14.1.2.3.
Announcing the transformation of the regional
approach to a regional programme and committing the EU to
the highest possible degree of streamlining and coordinating
its engagement.

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14.1.2.4.
stability and association processes for the area.

Harmonizing the enlargement process with the

any shortcomings, will allow South Eastern Europe to optimise
the usefulness of NGOs in the development of civil society and
democracy.

14.1.3.
for the societies and the governments in the area.

These kinds of commitment will work as a catalyst

14.1.3.1
encouraged, to proceed to regional and state initiatives.

On this basis the area governments can be asked,

On this basis the regional and the world business
14.1.3.2.
community will respond positively to an invitation to partici-
pate, the brain drain will stop, the expatriated Balkans will be
encouraged to come back and the Balkan of the Diaspora to
get involved in the reconstruction of the area.

14.2. Establishing regional financial instruments

14.2.1.
The implementation of policy, of a regional policy,
of a project, requires financial resources, financial program-
ming, management.

The formation of Regional Project Authorities,
14.2.2.
instruments, regional policy instruments
regional financial
supporting a Regional Plan will optimise synergies. Compli-
mentarities will have multiplier effects not only on planning
and financing, but also on providing the foundation for
Public Private Partnerships and the effective engagement of
International Financial Institutions.

14.2.3.
This kind of measure will build the positive domino
effects. They will help the formation of a positive social
psychology in the local societies, and business communities.
They will minimise the risks for corruption as the projects will
be on a pan-Balkan scale and sequentially on pan-Balkan and
EU scrutiny.

This kind of measure (Regional project Authorities,
14.2.4.
Regional Financial
Instruments, Regional Planning and
Implementation) will require and encourage the formation of
regional
institution building, for example in research and
development on environmental protection and sustainability,
water management, forest and river protection, university
cooperation on Regional Social Dialogue, banking, reforming
public administration promoting information society, facing
urban problems and cooperating in sectoral economic strategi-
es, tourism, agriculture ...

14.2.5.
On such a concrete basis it will be possible to
revitalise the social interest. The involvement of the citizens in
a new spirit of collective action, in new participatory culture
and civil society building. NGOs may contribute to the
achievement of the above aim. The great positive experience
and the utilisation of best practices, as well as the avoidance of

14.3. Promotion of local involvement and empowerment: through

world and EU programmes

14.3.1.
Among the prerequisites for the development of
the social and human capital in the western Balkans is the
optimisation of the involvement of the local societies, in the
world and EU social and economic reconstruction pro-
grammes, the establishment of micro-credit and micro-finan-
cing systems to support the local economy and the family-
based SMEs to face youth unemployment. The up-to-now
expense of small-scale micro-finance in the Balkans and the
world experience of this type of programmes is positive and
hopeful.

It

14.3.2.
is becoming an urgent need to examine if
the activities of the already great number of organisations,
institutions, trade unions, NGOs churches, are well coordinated
in order to avoid counter-productive effects. There are very
serious observations in this direction.

From the highest possible level to the lowest it will
14.3.3.
be useful if there is communicated to the people that they are
not faced with competition among saviours but without a
hope for survival. There is a need for the media to explain a
clear political vision of the future and to show it can be
achieved.

14.3.4.
annual reports by all organisations using UN money,
funding.

A cost-benefit assessment has to demanded and
IFI

A call

for coordination for
14.3.5.
reduction of operation costs to the benefit of the beneficiaries
has to emerge from UN or the local Governments and the UN.

for cooperation,

A recruitment of

14.3.6.
local people to operate pro-
grammes and actions, a replacement of the greatest number of
foreigners by local people in Bosnia Kosovo-Albania and
the effort to avoid the mistakes of the past affecting the
reconstruction of Serbia.

14.3.7.
Closer cooperation is needed between international
financial institutions and local social partners and civil society.

14.3.8.
Clear co-operation between organised civil society,
organisations and social partners and for the development of
independent local media which are supportive of human
rights, participatory culture and equal opportunities.

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14.3.9. Movement for the re-generation and empowerment
of municipalities should be encouraged with the help and
support of the relevant European organisations.

The state Department

14.4.4.3.
is using a number of
coordinators. A coordinator for the stability pact Implemen-
tation, a coordinator for south Eastern European Assistance, a
coordinator for south-eastern cooperative initiatives, a special
Adviser for Kosovo.

14.4. Need to improve Coordination and effectiveness of the recon-

struction efforts, actors, actions

14.4.4.4.

The US Agency for International Development.

14.4.1.
It has been well documented that close cooperation
and coordination is necessary. The joint EU World Bank office
in Brussels is not enough to solve the problem of coordination.

14.4.4.5.

The commerce department.

14.4.1.1.
and level of engagement in the Balkans.

Overlapping responsibilities occur in every sector

14.4.2.
groups are involved.

In the private sector we are facing at least three

14.4.5.
Besides the EU and US the presence of the World
Bank, the International Monetary fund, the European Bank of
Research and Development in the Balkans are engaged also
hundreds of NGOs, most of them (also financed from state
budgets) pursuing their own goals and serving their own
causes.

14.4.2.1.
the stability Pact investment package.

One: advising governments on how to implement

15. Recommendations for regional initiatives

14.4.2.2.
tic business dialogue.

One: established in the framework of Transatlan-

14.4.2.3.
cooperation Initiative.

One: working within the south-eastern European

It

is observed that

14.4.3.
in the EU level we face a
complicated multilevel and poly-polar policy formulation and
implementation for the Balkans.

15.1.
Initiatives combating social exclusion and re-estab-
lishing all-embracing social and regional solidarity, and
identity.

15.2.
Overcoming sectarian exclusive solidarity is a difficult
task, but it can be overcome with a well-organised effort to
align socio-economic and interest group across borders (ethnic,
cultural, religion, regional state) on the basis of decisively
important (for them) issues. For example:

14.4.3.1.
The European Commission as external economic
affairs, as external political affairs, enlargement, development
assistance, economic and financial affairs.

15.3.

On the basis of Adriatic and Ionian sea initiative.

14.4.3.2.

The Council of Ministers.

14.4.3.3.

The EU intergovernmental level.

15.3.1.
Cooperation of the environmental sea-protection
organisations. Encouragement for such cooperation from EU
programmes, Regional programmes, state programmes.

Besides the above you have the functioning of
14.4.3.4.
reconstruction task forces, in Kosovo and the old ones in
Bosnia.

15.3.2.
— Hotel Owners.

Sectoral cooperation: For example tourist industry

14.4.4.

On the US side.

14.4.4.1
multiplicity
implementing policy.

of

From the US side also we are facing with a
and
actors

formulating

centres

and

15.3.3.

Cities and Ports of Adriatic Cooperation.

15.4.
dialogue. Credible employers and employees’ organisations.

Cooperation to build the infrastructure of social

14.4.4.2.
The National Security Council with its special
regional office for south-eastern European affairs. The National
economic council, the economic affairs bureau, the European
affairs bureau.

15.4.1.

Cooperation on establishing a regions’ committee.

15.4.2.
academics and universities.

Encouraging regional associations of professions,

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15.4.3.
or sustainable development.

Regional research cooperation especially on issues

Establishing a clear strategy for: An effective law-
17.1.3.
abiding,
law-enforcing, accountable transparent and demo-
cratic state. An effective competitive well-defined public sector.

15.4.4.
TV, scientific magazines.

Regional media cooperation. Newspapers, radio,

15.5.
common orientation.

Regional cooperation of political parties with a

15.6.
eration on regional issues beginning with the environment.

Establishing a structured regular governmental coop-

15.7.
ishes.

Establishing cooperation among churches and par-

The grave,

increasing needs especially of children,
15.8.
women and the elderly have to be tackled — in coordination
at local, regional or national
levels and with international
cooperation and support.

16. Recommendations promoting sub-national cooper-

ation

16.1.
The promotion of sub-national cooperation: as a
strategy between sub-national organised entities (such as
municipalities cities, regions, cooperatives and so on) in two
directions, on the one hand between the Western Balkans —
and the Balkans in general, as well as between EU sub-national
authorities, and the Balkan ones:

16.1.1.
Providing structured dialogue on sub-national level
between cities, sustainable cities, child-friendly cities, healthy
cities, safe cities and the cities of the Balkans. Promotion of the
Principle of the ‘Balkan Dimension’ on each and every state
policy.

17. Recommendations

for national

responsibilities:
Action Plan for National Reconciliation future orient-
ed, establishing clear rules and commitment for a
developmental civil and social dialogue

17.1.
Establishing clear rules for social inclusion, partici-
pation of minorities, independent and merocratic adminis-
tration and justice.

17.1.1.
and full transparency in their funds.

Establishing public funding for the political parties

17.1.4.
A national plan to re-organise the municipalities,
cities from the lowest level of state bureaucracy to decentralised
democratic centres of authority and socio-economic develop-
ment.

17.2. Within this, security, stability and hope climate, the
‘word’ and ‘action’ of NGOs in rebuilding social bonds,
establishing a civil society, can be heard and followed.

17.2.1. Within this positive dominos climate a real and not
a mockery of civil dialogue can be rooted and effective social
involvement and participation re-emerge.

Emphasis on the micro-economic stability the small
17.3.
and medium business support, emphasis on a really strong
independent role for the municipalities in the local develop-
ment strategy, will allow a slow but secure bottom-up
development on social-economic levels on leadership levels.
The role of SMEs has to be considered of
indisputable
importance, not only for the economy but as well as for the
social cohesion, social development, employment, reconstruc-
tion and re-invigoration of the social bonds and the re-
emergence of local endogenous leadership. The support of
family SMEs has to be recognised as a particularly crucial
factor in re-constructing social cohesion.

17.4.
educational systems.

National strategies to re-generate the school and

17.4.1.
a European dimension in education.

Inter-university cooperation for the introduction of

17.4.2.
Harmonisation of the curricula to promote mutual
recognition and inter-university, inter-entity and trans-Euro-
pean student mobility.

17.4.3.
transfer systems.

The introduction of modular systems and credit

17.1.2.
for state media.

Independent commonly accepted governing bodies

National strategies to repatriate expatriated human
17.5.
capital, repatriate and include the Balkans of the diaspora in
reconstruction programmes.

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17.6.
Efforts to re-establish a role of the local university,
academic and cultural elites, in reconstructing the value system
and value structure of the countries.

18. Recommendations on the role of the ESC

18.1.
The European Economic and Social Committee is
playing among other ways through the Action Plana decisive
role in promoting social and civil dialogue in every country
and the region as a main instrument in the formation of a
positive domino in social reconstruction. An effort for a
coordination and a dialogue among the main NGOs in the
area could be very useful.

18.2.
Social and civil dialogue although it requires a certain
level of development of human and social capital in order to
function effectively it is also contributing to their sustainable
development.

18.3.
to develop:

Regional social and civil dialogue can be used in order

— Regional interest groups, common action and cooper-

ation;

— Regional elite and leadership socialising, working togeth-

er, trusting each other.

18.3.1.
Regional elite cooperation in order to formulate
and support regional development plans, to encourage youth
reinvolvement and participation in all
levels of decision-
making.

Brussels, 25 April 2001.

In cooperation with the Committee of the Regions
18.3.2.
loyalties and
and the Parliament to promote sub-national
loyalties in the Balkans in general and the
supra-national
western Balkans in particular. The latest creation of a south-
eastern European MP network is an excellent example of a
supranational network.

The ESC can proceed with initiatives such as
18.3.3.
organizing regional cooperation, structural dialogue on the
basis of Group I, Group II, Group III categories functioning in
the European ESC.

Inviting and encouraging Member State ESCs to
18.3.4.
provide training, scientific, information support to the ESCs of
the Balkan countries.

18.3.5.

Providing access to information and data bases.

18.3.6.
issues for example sustainable development, urban affairs.

Providing ESCs’ opinions on certain important

Organizing conferences in each of the countries to
18.3.7.
discuss the human and social capital development as the main
factor towards good governance and civil society development.

18.3.8.
Promoting the idea for the establishment of a south-
eastern Forum of Social and Economic Committees for a
Committee of the Regions, and a league of cities or at least of
the capitals.

Encouraging the cooperation of the Balkan univer-
18.3.9.
sities as the main sources not only of knowledge but of future
leadership as well.

18.3.10.
of a forum for the Balkan diaspora.

Supporting the formulation and the functioning

The President

of the Economic and Social Committee

Göke FRERICHS

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APPENDIX I

to the Opinion of the Economic and Social Committee

1.

The importance of human and social capital for growth.

1.1. World accumulated and evaluated experience of best practices, comparative management and governance
indicate the critical and decisive importance of human and social capital for economic development.

1.1.1.
priority as well as for the implementation of relative policies.

UN reports, World Bank reports are increasingly resenting its importance arguing for its recognition as

1.1.2.
policies include:

Policies on building and managing social capital are evolving, supported by the UN programmes. These

— developing social capital;

— bridging social capital;

— linking social capital.

1.1.3.
Research and comparative studies in developed nations, indicate that the primary importance of human
and social capital is not limited to developing nations (in order to combat poverty or speed up growth) but it is also
important to highly develop nations in order to maintain their competitiveness.

1.1.4.
It is well recognised that ‘geographic location, natural resources and even military power are no longer
decisive’. Instead, national prosperity depends on how a nation and its citizens organise and manage their economy,
the institutions they establish and the types of investments they make, both individually and collectively.

1.1.5.
intensive
The changes in management philosophy and practice, towards human and social capital
competitiveness strategies, indicate: transition from comparative advantages (low cost labour or natural resources) to
competitive advantages provided by distinct and effectively competing strategies in production, operations, in
marketing, in products and services.

Productivity rightly understood encompasses both value (prices) that a nation’s products demand in the

1.2.
market place and efficiency with which they are produced.

1.2.1.
necessarily guarantee higher profits (or wages). Higher profits require stable or rising prices of the products.

In simple terms it is obvious that producing more units of products per unit of labour or capital, does not

‘The central issue in the economic development is how to create the conditions for rapid and sustained productivity
growth’.

1.2.2.
and social capital accumulation development management.

A nation’s productivity is the sum of the productivity of all its enterprises. Thus it is the outcome of human

1.2.3.
Productivity as a process locally, socially, collectively, culturally evolving, goes hand in hand with the
development and the management of human and social capital. Management comparative studies on world level
indicate that:

For companies to afford surviving on international antagonism or even to rise to world competitive level they

2.
have to build upon productivity, to utilise the productivity of clustered local industries and interrelated enterprises.

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They have to be able to utilise accumulated knowledge, experience, expertise research institutions, availability of
well-trained personnel and well-educated staff, an effective and efficient local public administration, quality
infrastructure for basic services as communications and so on.

It has to be well understood that productivity is not and it cannot be a ‘one business show’. It is the outcome

2.1.
of processes, of collective processes in the business locality, environment and region.

2.1.1.
The locally accumulated human, social capital, institutional framework, cooperation formal and informal
links, the accumulated management experience, diffusion, of the above ‘capitals’ constitutes the tangible and
intangible foundation on which productivity evolves and competitiveness is routed and sustained.

Companies competitiveness requires a ‘fertile’, a positive business environment,

2.1.2.
legal environment,
bureaucratic, scientific, academic research, university and banking environment, prevailing business practices and
code of business culture.

The business environment cannot be the outcome of business action. It will be the outcome of the overall
2.2.
process of effective cooperation of the business community, the scientific academic community, the state, the
relations between the company/ies and the employee/s. The prevailing culture in the functioning and cooperation of
the local elites and leaderships.

APPENDIX II

to the Opinion of the Economic and Social Committee

Key Terms

— Human resources

Usually the term human resources refers to the population size, age categories and labour force.

— Human capital

As human capital is defined per capita:

— education, knowledge;

— experience, expertise, specialisation;

— craftsmanship, creativity;

— ability and willingness to take initiatives;

— willingness and ability to cooperate in the process of meeting personal, group or social needs.

Sometimes, human resources and human capital in development literature are incorporating the two definitions.

— Social capital

As social capital in a given society is defined: the prevailing hierarchy of values and needs. The prevailing work ethic.

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The existence of social solidarity and social bonds, social sensitivity, the ability to solve and/or overcome conflict.

To institutionalise cooperation, dialogue between elites and leadership groups.

To give importance, to value, to respect and even to be willing voluntarily to serve the common good, the common
interest, the social interest in all their expressions: invisible and immaterial capital is used many times in the above
mentioned meaning. In the case of a firm we have a differentiation of the meaning of invisible and immaterial
capital... and is ‘capital’ built within the firm and outside of it.

— Social bond

Is a clearly sociological term indicating what connects individuals in a society and what constitutes a ‘community’,
indicates the binding forces, but those which are not legally obligatory or imposed from above. Sometimes the social
bond is also interpreted as a sense of belonging to a particular society.

— Civil society (1)

A civil society is defined as such in contrast to a non-civil to an authoritarian one. Thus the constitutive, the decisive
characteristic of the one or the other type of society depends upon the processes of the decision-making, the nature
of the degree of social inclusion and participation in the decision-making, the effectiveness of the social participation.

Civil society is a society in which:

— the state functions and policies are freely, decisively, influenced-determined and evaluated by the organised

social interest groups, the organised society itself;

— the social interests groups, independently from the state freely and democratically are involved in defining,
redefining and serving common interests, public interests, or group interests, are serving the human rights or
the rights of particular groups, and the development of a democratic participatory culture and social structures.

— Civil society development

The development of civil society is not measured by the growing number of NGOs competing (on public expense)
to increase their patronage and the dependent excluded social categories they serve.

Is measured by the nature, the role, the functioning of the civil society organisations.

A civil society is developing to the degree that: the civil society organisations are serving the empowerment of society
and the average citizen, organisationally institutionally, to participate critically and effectively in solving social
problems, in influencing the government in decision-making, in developing social inclusion, democratic participatory,
culture and structures. Civil society does not develop with the existence of a strong NGOs’ movement aiming to
substitute the state in providing social care or to substitute society by providing philanthropy.

(1) In September 1999, the ESC has provided an opinion on the role and the contribution of civil society

organizations to the building of Europe (OJ C 329, 17.11.1999).

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APPENDIX III

to the Opinion of the Economic and Social Committee

Statistic and information material

Table 1: EU Assistance to Balkan Countries 1991-1999 (1) (millions of dollars) (2)

Country

Albania

Bosnia

Bulgaria

Croatia

Macedonia

Romania

Total

EU

842

2 124

1 525

365

416

1 867

7 139

European
Investment Bank

EU Members

Total

47

0

778

0

62

1 169

2 056

733

523

774

1 201

183

3 161

1 622

2 647

3 077

1 566

661

6 197

6 575 (3)

15 770

(1) Includes assistance for economic programs, democracy, institution-building, humanitarian aid, balance-of-payments support,

and infrastructure.

(2) Converted from euro figures at euro 1 000 = $ 1,03.
(3) Total aid for period 1991-1997.
Source: EU press release dated November 19, 1999.

Table 2: US Assistance Funding for Balkan Countries: Economic Restructuring, Institution-Building, and

Social Development Programmes, Fiscal Year 1991-1999 (1) (millions of dollars)

Country

Amount

Albania

Bosnia

Bulgaria

Croatia

Macedonia

Romania

To tal

217

958

296

99

109

278

1 957

(1) US assistance provided through SEED Act funding. Does not include
substantial humanitarian assistance provided under other programmes.

Source: US State Department.

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Table 3: Breakdown of US Aid Commitments to Kosovo, November 1999/December 2000 (1)

(millions of dollars)

Programme

Amount

Economic Reforms

Agriculture

Human Services Infrastructure

Criminal Courts

Administration of Justice

International Police

Police Training

KPC

Demining

UNMIK Budget

Media

OSCE/Elections

Civic Education

Total

6

4

10

2

5

48

20

15

4

5

4

25

9

157

(1) Commitments made at the aid coordination conference in Brussels on

November 17, 1999.

Source: US State Department and World Bank/European Commission webp-
age on Economic Reconstruction and Development in Southeast
Europe (www.seerecon.org).

Table 4: Transparency International Corruption Indicators (1)

Country

1999 CPI Score
(Index ranges
from 1-10)

Country Rank
(among 99 countries
rated)

Hungary

Bulgaria

FYROM

Romania

Croatia

Albania

5,2

3,3

3,3

3,3

2,7

2,3

31

63

63

63

74

84

(1) The Transparency International Corruption Index for 1999 has been published on October 26,
1999. CPI scores relate to perceptions of the depth of corruption as seen by business people, risk
analysts, and the general public and ranges between 10 (highly clean) and 0 (highly corrupt).

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Table 5: Currently Displaced Persons (Refugees and IDPs) in SEE Region

Country

Total Population
(millions)

Displaced Persons
(thousands)

Percentage of Total
Population

Croatia

BiH

FRY

FYR Macedonia

Albania

Total

Source: UNHCR, November 15, 1999.

4,6

4,2

10,6

2,0

3,4

23,8

69,5

878,7

747,3

21,9

3,6

1,5

21

7

1

Negligible

1 720,9

7

Table 6: Selected Indicators on Political Process/Accountability/Paticipatory Institutions

Albania

BiH

Bulgaria

Croatia

FYROM Romania

FRY

Hungary

FH

FH

FH

Political processes

4,50

5,00

2,75

4,25

3,50

3,25

5,00

1,25

Civil society

4,25

5,00

3,75

3,50

3,75

3,75

5,00

1,25

Independant media

4,75

4,75

3,50

4,75

4,00

4,00

4,50

1,25

KKZ Voice and Accountability

index

– 0,01

– 0,97

0,6

– 0,32

0,09

0,41

NA

1,20

Note: Bigger numbers indicate better governance for KKZ, and worse governance for FH.

Table 7: Selected Corruption Indicators

Albania

BiH

Bulgaria

Croatia

FYROM Romania

FRY

Hungary

EBRD bribes as percent of firm

revenues

NA

NA

3,50

2,10

NA

4,00

NA

3,50

EBRD percent firms paying brib-

es frequently

NA

NA

23,90

17,70

NA

50,90

TI

TI index (0-10)

2,30

NA

3,30

2,70

3,30

3,30

KKZ Graft index

– 0,99

– 0,35

– 0,56

– 0,46

– 0,52

– 0,46

ICRG Corruption (0-6)

FH

Corruption/3

2

4

NA

3

4

3

2

3

NA

3

3

3

NA

NA

NA

NA

4

31,3

5,20

0,61

5

1

Note: Bigger numbers indicate worse governance for FH, EBRD bribery questions — bigger numbers indicate bettergfovernance TI,

KKZ, and ICRG.

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Table 8: Selected Legal/Judicial Indicators

Albania

BiH

Bulgaria

Croatia

FYROM Romania

Kosovo Hungary

FH

Rule of law

5,25

6,00

3,75

4,75

4,50

4,25

5,00

1,75

WDR Predictable judiciary

EBRD Law and order index

4,66

NA

NA

NA

4,61

NA

4,28

NA

1,38

1,43

NA

1,07

KKZ Rule of law index

– 0,92

– 1,11

– 0,15

0,15

– 0,26

– 0,09

ICRG Law and order (0-6)

2

NA

4

5

NA

4

NA

NA

NA

NA

3,65

2,34

0,71

6

Note: Bigger numbers indicate worse governance for FH abd WDR97. Bigger numbers indicate better governance for EBRD law

and order index, TI, KKZ, and ICRG.

Table 9: Summary of Social Indicators for SEE, 1997

Country

HDI score and ranking
1997 (1)

IMR
(1997 unless stated)

Life expectancy at birth
1997

Albania (2)

Bosnia and Herzegovina (3)

Bulgaria

Croatia

FYROM

FY Yugoslavia (4)

Romania

0,699/ 100th

NA

0,758/ 63rd

0,773/ 55th

00,749/ 73rd

NA

0,752/ 68th

25,8

12,7

17,5

8,2

15,7

14,3

22,0

72,8

72,3

71,1

72,6

73,1

72,3

69,6

(1) HDI is composite index of three components: life expectancy at birth; educational attainment (as measured by adult literacy and

enrollment rates); and real per capita GDP (in $PPP).

(2) IMR for Albania is 1996.
(3) FRY life expectancy 1996, and BIH 1995.
(4) FRY life expectancy 1996, and BIH 1995.
Source: WB ECA Social Protection Strategy (1999 draft); UNICEF Transmonee report (1999); UNDP Human Security in SEE (1999).

We have to indicate that the situation is severely deteriorating from 1995/1996 up to 2000.

Box 1: Characteristics of poverty in the SEE region

— There are strong regional variations in poverty levels in all countries: between upland/mountainous areas and
the coastal plain in Albania; between Republika Srpska (RS) and the Federation in BiH (and within each entity);
and between the North and the South in Romania. Differential in terms of consumption are reinforced by
variable access to quality social services, increasing the likelihood of geographical areas of persistent poverty.

— Rural poverty is worse than urban in all countries. Rural poverty rates were: 80 percent higher in Romania
(1994); 23 percent higher in Bulgaria (1997); around five times higher in rural Albania than non-Tirana urban
areas (1996); and substantially higher in Croatia (1998). In addition, the depth of poverty (i.e. how far the
average poor person falls below the poverty line) and the severity of poverty (which takes account of inequality
amongst the poor) are significantly worse in rural areas.

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— The educational attainment level of the household head is strongly correlated with poverty, with university
qualifications making a household highly unlikely to be poor, and households headed by those with less than
secondary education having far higher than average poverty rates. Those with less than secondary education
account for around 80 percent of all poor in FYR Macedonia and Albania, and over 40 percent of the poor in
BiH.

— Households with unemployed heads have amongst the highest poverty rates.

— In spite of the high poverty rates among the unemployed, households with working heads make up a substantial
share of the total poor, due to their large share in the overall population. For example in Albania, around
70 percent of the poor work. In Romania in 1994, around 70 percent of the poor were either working or
pensioners.

— Larger households are poorer. In Albania, the poor have larger households, and an average of 3,4 children
against the population average of 1,5 children. In FYR Macedonia, the number of children in a household is
positively correlated with poverty, with households with three or more children having almost double the
national poverty rate and constituting almost half of the total number of poor people. In Bulgaria, poverty rates
are also worse for large households, and children are more at risk of poverty than the elderly. The one country
where this does not appear to be the case is Croatia, where the elderly — who live in smaller than average
households — dominate amongst the poor. Preliminary results from NiH also suggest this same pattern.

— The Roma stand out as very poor and persistently poor, though this is difficult to quantify in due to restrictions
on ethnicity questions in some surveys. Roma households typically display several characteristics associated
with high poverty rates, including high birth rates, low education attainment (including substantial illiteracy),
and high unemployment. In Bulgaria, Roma poverty rates were around 85 percent, or almost two and a half
times the national average. This is also consistent with findings from CEE, e.g., Hungary.

Source: These conclusions are based on a series of World Bank studies: Albania: Growing Out of Poverty
(1996), and Albania: Poverty and Social Welfare (Rashid et al., 1999); Poverty in Bosnia and
Herzegovina: the Legacy of War (Bisogno, draft mimeo, WB, 1999); Bulgaria: Poverty During the
Transition (WB, 1999); Croatia: Economic Vulnerability and Social Welfare Study, Issues Paper (mimeo,
WB, 1999); FUR of Macedonia: Focusing on the Poor (two vols., WB, 1999); and Romania: Poverty and
Social Policy (two vols., WB, 1997).

Box 2: Actions against corruption in Albania

In Albania, a Commission Against Corruption was created by the Government Decree No 72 of 30 January 1998
with the formal objectives (i) to establish a strategy for the organisation and direction of the fight against corruption;
(ii) to realise an effective co-ordination of the anti-corruption activities of the state institutions and private sector;
and (iii) to ensure the necessary cooperation with the International Financial Institutions supporting the Government’s
anti-corruption initiatives.

In collaboration with the World Bank and USAID, independent surveys of enterprises and households, as well as
interviews with public officials were conducted by the Albanian Centre for Economic Research, a non-governmental
organisation.

The surveys indicated that:

— more than one-half of the firms admit they pay bribes to public officials, the cost of corruption to these firms

is approximately 7 percent of turnover;

— the incidence of bribery from firms to public officials is greater for trade and construction enterprises than in
manufacturing and services; approximately three-quarters of firms in trade or construction admit to paying
bribes;

— almost one-half of private citizens admitted to paying bribes since 1991;

— public officials confirm that corruption is pervasive: more than two-thirds of public officials surveyed said that

bribery is extremely prevalent in Albania;

— according to public officials, more than 50 percent of customs inspectors ‘purchase’ their positions;

— 1/4 of private citizens who had a family member who was seriously ill admitted to paying bribes to state medical

workers.

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A major programme of institutional and policy reforms designed to reduce corruption was developed and openly
discussed at a workshop on 30 June 1998 in Tirana. The workshop provided an opportunity for the Prime Minister
to demonstrate significant commitment to the programme. A government action plan to address corruption was the
subject of intense debate during the workshop. The results and conclusions of the Workshop made the headlines of
all newspapers and TV stations, opening up a robust public debate.

The success of the workshop depended on the extensive planning and analytical work that had preceded it, and on
the compelling date concerning corruption provided by the surveys.

The flagship reforms proposed to the Workshop were:

1)

2)

3)

4)

Support for the judiciary in its radical overhaul.

Radical overhaul of tax and customs.

Budget transparency for schools, hospitals and other public services, facilitating customer complaints.

Further improvements in public procurement, audit and civil service professionalism.

Overarching these flagship reforms, government is committed to publish the recent survey data, undertake regular
surveys in the future, and work with NGOs to review progress on the agreed action plan.