23 sufficiency throughout most of its period under central planning and had virtually no transportation and commercial linkages with former SFRY, the result does not come as surprise. In fact, as long as there is no adequate transportation infrastructure in place, the expansion in Albania's trade with other SEE-5 economies is unlikely to occur.

Turning to other regional partners, our estimates of potential trade flows derived from the gravity model show that trade flows between SEE-5 economies and other Balkan countries are well below the predicted levels. The exception is Albania's trade with Greece. It appears that a large presence of Albanian expatriates in Greece combined with much better transportation access than to other Balkan countries explain why its trade with Albania was only 36 percent below its potential level. Romania is at the other extreme. Assessed against its GDP and proximity, trade of Romania with the region is particularly low indicating potential for an almost tenfold increase once barriers to trade are removed. Bulgaria and Greece are more involved in trade with SEE-5 countries but their respective ratios of actual to potential trade (29 and 34 percent) also indicate the potential for a hefty threefold increase (Table 5).

**_Table 5: Realization Ratios in Geographic Patterns_** _of_ **_Trade (in percent)"_**

||Albania|Bosniaand<br>Herzegovina|Croatia|FYR<br>Macedonia|FR<br>Yugoslavia|_Totalwith_<br>_SEE-5._|
|---|---|---|---|---|---|---|
|Albania||||||4|
|BosniaandHerzegovina|0|-||||_102_|
|Croatia|4|156|-|||_53_|
|FYRMacedonia|11|15|39|-||_58_|
|FRYugoslavia|1|129|18|142|-|_65_|
|TotalSEE-5|4|102|53|58|65|_57_|
|Greece|64|7|12|49|26|_29_|
|Bulgaria|12|_5_|3|41|84|_34_|
|Romania|4|14|4|6|32|_13_|
|**Total**|21|54|28|46|52|_35_|
|**MEMORANDUM:**|||||||
|Slovenia|3|152|113|58|10|_86_|
|**Total,Sloveniaincluded**|**19**|**69**|**48**|**48**|**46**|**44**|

_'/_ Realization ratios = actual trade/predicted trade. Values less than 100 suggest "undertrade" and those more than 100 suggest "overtrade." Predicted and actual data refer to 2000. _Source:_ Authors' own calculations. Data from for Albania-IMF estimate; for Bosnia and Herzegovina-National Statistics and IMF; for Croatia-official National Statistics; for FYR Macedonia-official National Statistics; for FR Yugoslavia-official National Statistics; and for other countries-IMF directions of trade statistics.

This would suggest that there is huge potential for expansion in trade between SEE-5 and other Balkan countries. However, it is not clear what impedes this trade. Since many countries already have FTAs, there is not much to remove in terms of tariff barriers. In fact, there was no positive correlation between over- or under-trading and the existence of pre-MOU FTAs. Take Bulgaria for instance. In 2000 it had FTA with FYR Macedonia but not with FR Yugoslavia. Yet the respective realization ratios were 41 percent with the former and 84 percent with the latter. Albania did not have FTA with the EU, yet the realization ratio of trade with Greece was the highest for Albania's trading partners in the Balkans. This is in sharp contrast to other SEE-5 countries, except FR Yugoslavia, which had had practically duty free access to Greece under the EU ATP regime in place prior to the SA process. Preferential access failed to spur trade. It appears that barriers other than tariffs have prevented trade in the region from reaching its full