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Exchange: The Magazine for International Business and Diplomacy. To Download the PDF format, click on the above arrow
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Number 5 Autumn 2011
INSIDE THIS ISSUE:
Exchange interviews
H.E. Otabek Akbarov,
Ambassador of Uzbekistan to
Martin Davidson, CEO
British council
EBRD Examines Business
Exclusive interview with
Jean-Marc Peterschmitt
Managing Director
Central and South Eastern Europe
European Bank for Reconstruction and Development
the United Kingdom and Norway
Opportunities in South East
Europe
C O N T E N T S E x c h a n g e : The Magazine for International Business and Diplomacy Autumn 2011
Editorial Prosperity through synergies: the new
spirit of regionalization
6
South East Europe
Doing business in South East Europe: a summary of the World’s Bank doing
business in South East Europe 2011 report 10
EBRD examines business opportunities in
Malta: a stable investment destination 20
Britain A global stimulus package: the potential
economic returns of the British Council's international cultural activities 22
Asia
Uzbekistan: 20 years of political stability and economic growth 26
Middle East and North Africa Policy responses to the Arab Spring in
the Gulf 31
A trade agenda for the ‘Arab Spring’: Global integration and the dangers of
neoliberalism! 32
Foreign direct investment in Egypt
after the revolution: Prospects and policy recommendations 34
IBDE Events
Financial Markets: A Gateway to Balkans Prosperity
Project Finance considerations for infrastructure financing in South Eastern
Europe
The Culture Exchange The Culture Exchange 2011-12 London Arts
Season
36
38
40
Society 44
Sponsorship Opportunities
PUBLISHER:
International Business and Diplomatic Exchange
1 Northumberland Avenue London, WC2N 5BW T: +44(0)2071931485 E: [email protected] www.ibde.org
Registered in England as a non-profit company limited by guarantee registration number 7181393
International Standard Serial Number (ISSN) Exchange: ISSN 2045-3175
Editor: Rudi Guraziu
Associate Editors: Penelope Bridgers Jacques N. Couvas
Articles, comments and letters should be sent to: [email protected]
Permission to reprint or republish in any form must be sought from the editor: Email: [email protected]
Disclaimer:
The International Business and Diplomatic Exchange (IBDE) is an independent Organisation and does not express opinions of its own. The opinions expressed in this publication are, therefore, the responsibility of the authors. Copyright is normally owned by IBDE
Whilst every care has been taken in the preparation of Exchange, IBDE does not warrant the accuracy or completeness of the information in this publication and it reserves the right to alter specifications without notice. No recommendations are expressed or implied regarding the quality of services provided. The Publisher disclaims all liability for the accuracy of the information contained herein and will not be responsible for any damage or loss that may be sustained directly or indirectly by any individual, company or Organisation as a result of their reliance in whole or in part on any information contained in the publication.
© IBDE 2011
On the cover: Jean-Marc Peterschmitt sets out EBRD’s strategy and business opportunities in the South Eastern Europe.
Photograph: Besim Gerguri
His Excellency Mr. Otabek Akbarov, Ambassador of Uzbekistan to the UK and Norway discusses the economic success of his country during the 20 years of independence.
Alan Camilleri, Executive Chairman, Malta Enterprise sets out business opportunities in Malta.
Martin Davidson, British Council Chief Executive discusses the potential economic returns of the British Council's international cultural activities.
Advertising and sponsorship enquiries:
+ 44 (0) 20 7193 1485
or email: [email protected]
2 www.ibde.org
Western Balkans Investment Forum 2012 49
South East Europe 16
a d v e r t i s e Advertise in the only magazine dedicated to
International Business and Diplomacy
Who receives it? Exchange is sent to thousands of embassies worldwide including the London Diplomatic Corps as well as multinational businesses, investment agencies and universities/institutes.
Readership profile Ambassadors worldwide, ambassadors and other diplomats posted to London, members of the WTOs, staff from investment agencies and chambers of commerce, politicians, business executives, international business managers, academic researchers worldwide
What is in it? Exchange issues include topics covering the relationship between international business and diplomacy, International trade agreements their impact and implementation, analysis of various international financial/ economic institutions and other international organisations as well as research articles which contribute towards the understanding of the role of international business in areas such as conflict, crisis management, regional security and regional economic cooperation. In addition to our research and analysis papers we interview regularly senior diplomats and corporate executives to share their experiences and insights on business and diplomacy. Exchange also includes country reports ensuring that investment needs and opportunities in various regions are rigorously examined and promoted to the wider international business and diplomatic community.
When is it published? Exchange is published four times a year, in March, June, September and December.
Cost-effective As a not-for-profit organisation IBDE is able to offer our advertisers and sponsors extensive access to the International business and diplomatic market for very competitive rates.
For advertising rates please contact us on [email protected] www.ibde.org
s u b s c r i b e
Subscription is free to anyone with an
interest in international business and diplomacy
To subscribe please email or fax your name, address and affiliation: e-mail: [email protected] fax: + 44 (0) 20 3318 9199
Exchange: The Magazine for International Business and Diplomacy - published by IBDE - is the only magazine in the world dedicated to the fastest-growing community of diplomats, business professionals and academics interested in international business diplomacy, commercial diplomacy and international trade policies. Our mission is to provide our readers with easy access to the whole range of international political and economic issues, political risk, legislation and regulatory as well as trade policies in emerging markets with particular focus on providing useful links for the smaller unrepresented countries. Through Exchange we aim to support international businesses in identifying key investment opportunities and investment strategies within the wider economic and political context in the UK as well as countries represented in London.
Our free quarterly online magazine keeps our readers fully up-to-date with key international business and diplomatic developments, such as events, legislation, business opportunities, regulatory issues and political risk analysis that are likely to effect business investment strategies.
IBDE – enhancing global business and diplomatic partnership www.ibde.org
Rudi Guraziu is Founder and CEO of the
International Business and Diplomatic Ex-change (IBDE) and Editor of Exchange
magazine. Mr Guraziu has worked for a decade in the Balkans. Whilst in Kosovo he was one of the principals in the running of a large pharmaceutical business until the 1999 war. Since the Kosovo war, he has been actively engaged with many members of parliament, business leaders and
diplomats in the UK and the Balkans as a consultant on Southeast European Affairs. His particular expertise covers EU Foreign Policy as well as Western Balkans issues. For much of that time he has worked with different parliaments particularly in the relationship between legislative bodies and economic operators. Prior to establishing IBDE, he initiated the establishment of the Centre for Business and Parliamentary Dialogue (CBPD) and serves as its Founding Director. Mr Guraziu holds an MA in Inter-national Relations (with distinction) from Middlesex University - UK.
Jacques N. Couvas is Associate Editor of
Exchange Magazine, Adjunct Professor of Strategy, Globalization and Entrepreneur-ship at Koç University, Istanbul and Senior Lecturer of Management at Bilkent Uni-versity, Ankara. He has also been a visiting professor at Ozyegin University, Istanbul and the University of Santa Clara School of Law, Ca. He began his career as a
journalist, before serving for 30 years as CEO, executive officer and board director with multinational and global corporations in Europe, the U.S. and Asia. His teaching and research interests are in strategy, leadership, international negotiations, and EU constitutional law. He is President Emeritus of the European Mobile Messaging Association, a member of the European Corporate Governance Institute and of the academic CEMS Strategy Group.
Otabek Akbarov is Ambassador of the Re-
public of Uzbekistan to the United Kingdom of Great Britain and Northern Ireland, and the Kingdom of Norway. Previously, he helped establish his country’s embassy in Brussels and was part of the team that put together the Partnership and Co-operation Agreement between the EU and Uzbek-istan.
Jean-Marc Peterschmitt is a Managing
Director, Central and South Eastern Europe of the European Bank for Reconstruction and Development (EBRD). Mr Peterschmitt is a seasoned banker with extensive sector and country experience who joined the Bank in London HQ in 1992. He was made an Associate Banker in the Municipal team in 1994, promoted to Principal Banker when he joined the then Balkans country team in
1996. As Senior Banker, he took up the role of Head of Office, Bulgaria, in 1998, later rising to Director. Jean-Marc returned to HQ in 2001 as Director, Western Balkans, before joining the Financial Institutions business group in 2004, initially as Director for Bank Relationships and then as Director, EU and Ukraine, where he has worked since 2009. Prior to joining the EBRD he was at the Ministry of Agriculture and Rural Development in France.
Martin Davidson is the Chief Executive of
British Council. Mr Davidson commitment to international relationships has been a con-stant feature of his career, since as a young English graduate he went to Hong Kong as Administrative Officer, taking the high-level decisions on the running of a town of a million people. He joined the British Council as Assistant Representative in Beijing in 1984 when in those days it was illegal for a
Chinese national to speak to a foreigner. He has also held various posts in the British Council’s Geographical Directorate with responsibilities that have included South East Europe, in a particularly troubled time in the region’s history, the Middle East, East Asia and the Americas. He is a Governor of Goodenough College and Board Member of the Great Britain China Council.
Alan Camilleri is the Executive Chairman
of Malta Enterprise, the agency responsible for the promotion of foreign investment and industrial development in Malta. The Agency works closely with Malta Industrial Parks Ltd, responsible for the administration and maintenance of various industrial estates and the factories located within.
Kristian Coates Ulrichsen is Research
Fellow and Deputy Director Kuwait Pro-gramme on Development, Governance and Globalisation in the Gulf States Department of Government London School of Econom-ics and Political Science. His latest book, Insecure Gulf: The End of Certainty and the Transition to the Post-Oil Era (Hurst & Co.) was published in May 2011.
Nasos Mihalakas is an Assistant Professor
of International Trade Law, University of New York, Tirana. He has over ten years of experience with the U.S. government as a trade policy analyst, with extensive experi-ence in Transatlantic and U.S.-China trade relations. He has worked for both a Con-gressional Commission, advising Congress on the impact of trade with China and for the U.S. Department of Commerce,
investigating unfair trade practices. He holds a LLM in Law and Development, University College London, UK, a JD in International Law, University of Pittsburgh School of Law, USA and a B.A. in Economics and Finance, University of Illinois, Urbana, USA. Email: [email protected]
Guoyong Liang is an Economic Affairs
Officer at the Investment and Enterprise Division of United Nations Conference on Trade and Development (UNCTAD). He has been one of main authors of the annual World Investment Report since 2005. He holds a Ph.D. in international business from Rotterdam School of Management, Eras-mus University. He taught at Shanghai University of Finance and Economics during
1998-2001, and had managerial experience in China’s financial and ICT sectors. Dr. Liang has published more than 20 academic papers. He is the author of New Competition: Foreign Direct Investment and Industrial Development in China (published in 2004) and the co-author of a number of other books.
Photo by David Iliff
Contributors
www.ibde.org 5
E X C H A N G E: The Magazine for International Business and Diplomacy Editorial
6 www.ibde.org
or its Autumn issue, Exchange
Magazine heads South and East,
examining diplomatic develop-
ments and looking for new opportunities
for businesses and investors in the emerg-
ing economies of these regions.
World Bank’s recent report “Doing
Business in South East Europe 2011” has
caught the attention of our editorial staff
because it reveals an unprecedented phe-
nomenon: the transition of the Balkans
from the status of Balkanization, a term
that implies fragmentation of states into
smaller states as a consequence of conflict-
ing ethnic groups, to a spirit of regional-
ization and synergies towards creating a
better economic environment and serious
prospects for collective prosperity.
The shift seems, at first look, improb-
able, considering regional history and the
economic crisis that has been consuming
Europe’s competitiveness since 2008.
World Bank’s facts and figures are,
however, quite explicit about the direction
and trends that drive the smaller nations in
the region towards becoming a model of
determination to succeed in spite of all
odds. Certainly, the perseverance and
resolution of the European Commission
and the European Bank for Reconstruction
and Development (EBRD) have provided
the platform for stability and change of
focus from culture and religion-driven
disputes to consideration of common
challenges and opportunities among the
regional constituents. Greece and Turkey
have also played an important role in the
development of their smaller neighbours
through investment in these post-Com-
munist era start-up states. But the suc-
cessful implementation of such policies
and productive use of foreign direct invest-
ment (FDI) can, without doubt, be credited
to local political will and citizen maturity.
Today, it takes three working days and
three administrative procedures only to
register and run a business in Skopje, the
capital of the former Yugoslav republic
(FYR) of Macedonia. This is the third best
performance in this criterion among the
cities measured by the World Bank in 183
countries around the globe! Albania, Bos-
nia and Herzegovina, Macedonia, and
Serbia rank high in this survey, including
in contract enforcement, a criterion which
has in the past deterred foreign companies
interested to invest and start commercial
activities in the Balkans.
The attractiveness of the Western Bal-
kans to FDI is further explained and argued
by Jean-Marc Peterschmitt, Managing
Director, Central and South Eastern
Europe of EBRD. The Bank, formed in
1991 following the end of the Cold War,
has been helping former communist states
in Europe and Central Asia to rebuild
themselves.
In spite of risk of contagion from the
crises of the European economy and the
Euro, South Eastern European (SEE)
perspectives are rather optimistic, accord-
ing to Mr. Peterschmitt, mainly because of
the ongoing implementation of large
infrastructure projects in national and
regional motorways, airports, sea ports,
electricity grids, and telecommunications.
Rapid development of higher quality tour-
ism through hotel and real estate develop-
pment also provide growth drivers.
With a cumulative injection of cash of
more than EUR 8 billion, augmented an-
nually by another EUR 1.4 billion, the
Bank is one of the most important institu-
tional investors in the Western Balkans.
Governments in the region have begun
reforming their respective business legisla-
tions and fiscal policies to attract European
industrial groups and investment funds.
Region-wide networks and Public-Private
Partnerships (“PPP”) are also on the agen-
da, as they can lead to larger-scale projects.
“ We see huge potential for regional co-
operation in the energy sector for example,
where work has taken place on the estab-
lishment of a regional electricity market
and current developments are aiming at
implementing a regionally coordinated
procedure for electricity capacity allocate-
ion and congestion management”, says Mr.
Peterschmitt, who expects the Western
Balkans to become one of the most robust
and competitive economies in Europe, with
potentially high returns to those who will
invest early.
Moving further to the South, Malta
emerges as a little-known, but highly ef-
ficient, paradise for foreign investors.
Malta, a full member of the European
Union and its smallest state, with 400,000
inhabitants, has had a tradition of attracting
strong players from the maritime, telecom-
munications and leisure industries, as well
as wealthy individuals from around the
world, thanks to friendly fiscal packages
and its equitable legal system, which de-
rives from English law.
As the world changes, the country’s
activities also take new shape. In his article
to Exchange, Mr. Allan Camilleri, Execu-
tive Chairman of Malta Enterprise defines
the vision of his organization for Malta to
become a centre of excellence and a
regional hub in strategically important
industries that can tap to the island-state’s
resources and competences. Financial
services, ICT and its niche sectors, such as
call-centres and back office support, as
well as digital gaming and software
development, have been flourishing in the
past years with considerable growth rates,
according to Mr. Camilleri. Life science
technologies is another sector targeted by
the development authorities.
In spite of the morosity in Europe and
the impending economic crisis in neigh-
boring Italy, Malta attracted last year US$
1 billion in FDI, an impressive amount for
a small state as this. Investment from the
Arab Gulf states has been flowing regu-
larly in, and the transformation of Northern
African countries, particularly Libya, into
liberal economies is likely to benefit Malta
in the coming years. “Smart City Malta”, a
US$ 300 million investment by Tecom
Investments, Dubai is a case-in-point.
Money matters, but Culture is not at its
antipode, believes Mr. Martin Davidson,
Chief Executive of the British Council.
The Council’s work focuses on building
bridges between different cultures, which,
in a globalized world, lead to shaping
attitudes and spirit of collaboration and
shared interests among people and
companies. “The economic value of cul-
tural relations mustn’t be underestimated”,
warns Mr. Martin. “For example, our work
in the arts not only broadens cultural
horizons, but helps emerging and estab-
lished artists from the UK to find lucrative
new markets for their work overseas. Our
work supports the UK’s international
Higher Education sector which generates
F
Prosperity through synergies: the new spirit of regionalization
Editorial Exchange: Autumn 2011
www.ibde.org 7
an estimated £8 billion a year for the
economy, through the foreign students who
come here to study”, he says in his inter-
view to Exchange. A good example of soft
diplomacy and business at work.
Twenty years is, by all means, a drop in
the ocean of History, but Uzbekistan,
which celebrates the 20th anniversary of
breaking away from the former Soviet
Union, has succeeded in such a short time
to prove its independence and emanci-
pation in politics, economics and diplo-
macy. H.E. Mr. Otabek Akbarov, Ambas-
sador of the Republic of Uzbekistan to
London and Oslo, explains to Exchange
how his country has become a responsible
partner to the EU, the U.S. Russia, and to
its other neighbours. Drastic reforms in
many state governance areas have been
necessary, but it seems they have been
worthwhile: the country’s GDP grew
during the past two decades 3.5 times,
while per capita ratio increased 2.5 times
and real income of population 3.8 times,
according to official data. World-class
companies in gas, automotive and telecom-
munications industries were early movers
to the young state and now control large
projects and revenues. Commercial, cul-
tural and scientific relations with the UK
and Norway have also impacted positively
on the country’s development. “Cultural
diplomacy is one of the most effective
ways to promote friendship among na-
tions”, believes Ambassador Akbarov. We
certainly concur!
The effects of the Arab Spring are still
under academic review and examination.
Prof. Christian Coates Ulrichsen of the
London School of Economics evaluates the
impact of the rapid succession of the world
economic crisis of 2008-2009 and the
current instability in the Middle East and
Northern Africa (MENA) on the monar-
chies and their treasuries in the Gulf,
particularly Bahrain.
The political tsunami that swept long-
lasting regimes in MENA has not had
equal effects throughout the region. In his
analysis of Egypt, Mr. Guoyong Liang, of
UNCTAD expresses optimism about the
country’s long-term growth perspectives.
Following massive fleeing of capital at the
beginning of this year, Egypt has registered
negative FDI in 2011. Disenchantment of
foreign investors had already begun in the
past couple of years, as the Mubarak re-
gime was proving increasingly ineffective.
Mr. Liang proposes a long-term strategy
for Egypt’s recovery and points to Asia for
inspiration.
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E X C H A N G E: The Magazine for International Business and Diplomacy Doing Business Report
t is a matter of conjecture whether the
economies of South East Europe
constitute a unique region. Certainly, it
is a place which has historically been shap-
ed more by politics and the interests of
foreign powers than economic forces. Yet
it is economic forces, particularly those
associated with transition and integration,
and the deep reforms needed to move from
a planned to a market economy, which
have imposed themselves as the most
formative influences on the direction of the
region’s public policies. While the region
was once the inspiration for the term
“balkanization”— describing the disinter-
gration of a state into smaller antagonistic
parts — the recent past, global economic
crisis notwithstanding, speaks of increasing
cooperation, economic growth, and foreign
direct investment. Over the last decade, the
region has gradually become a more settled
and economically advanced area on the
immediate periphery of the European
Union (EU).
Despite perceptions, the region is quite
diverse and the changes since the 2008
Doing Business in South East Europe
report reflect that fact. Some of the coun-
tries have progressed further in transition
while others have a distance to go. Some
are on the cusp of the European Union
while others have yet to attain “candidate”
status. Croatia, in the final stages of acces-
sion discussions with the European Union,
is no longer included in this regional re-
port. In turn, Moldova, a newly emerged
reformer, has been added. Some economies
face ongoing political conundrums which
remain open challenges. Overall, however,
the political legitimacy which comes from
economic progress has been a lesson
learned by governments across the region.
There is an abiding drive for compet-
itiveness amongst and between all of them.
Competitive economies cannot survive as
islands of growth but must build inter-
dependency with their neighbours and
further afield. As a consequence, economic
forces are asserting their pre-eminence in
the region. Where there was once political
disintegration, markets are encouraging
investment and trading linkages across
state borders. There is no blueprint for how
to grow and prosper but one factor is
creating an investment climate conducive
to starting and running a business, where
complying with regulations brings more
benefits than costs. In an era of tight
budgets and high unemployment, reforms
making it easier to do business make more
sense than ever. They help create jobs and
boost growth without costing governments
much. This report shows that the econo-
mies of South East Europe have continued
to implement micro-economic reforms in
spite of challenges presented by the global
financial crisis. The report also shows that
the results of recent reforms can be seen at
the municipal level across the region.
Coupled with other factors — such as the
availability of a skilled workforce —
improving the business environment in the
region’s secondary cities will continue to
have a positive impact. Doing Business
studies business regulations from the
I
Doing business in South East Europe
A Summary of the World’s Bank ‘Doing Business in South East Europe 2011’ Report
Note: The ranking on each topic is based on the simple average of the percentile rankings on its component indicators. See Data notes for details. *City not benchmarked in Doing Business in South East Europe 2008 report.
Source: Doing Business database.
10 www.ibde.org
Doing Business Report Exchange: Autumn 2011
perspective of a small to medium-size
domestic firm. Capital cities represent the
economies of South East Europe in the
annual Doing Business report, which
compares regulatory practices in 183
economies around the world. Yet, within
each economy, entrepreneurs face local
regulations and practices that vary from
city to city. Doing Business in South East
Europe 2008 was the first report to go
beyond the capital cities for 7 economies in
the region to capture these differences in
15 other cities from Albania, Bosnia and
Herzegovina, Croatia, Kosovo, FYR
Macedonia, Montenegro, and Serbia. This
report updates the information presented in
2008 for 6 economies (all but Croatia) and
tracks their progress in implementation of
business reforms. It also expands the
analysis to 1 more country (Moldova) and
4 new cities: Balti (Moldova), Chisinau
(Moldova), Durres (Albania), and Tetovo
(FYR Macedonia). The results of this new
22-city, 7-economy comparison for 4 Do-
ing Business topics are presented here
(table 1.1).
Across the region, it is easiest to start a
business in Skopje (FYR Macedonia), deal
with construction permits in Niksic (Mon-
tenegro), register property in Balti and
Chisinau (Moldova), and enforce a
contract in Zrenjanin (Serbia). It is most
difficult to start a business in Pristina (Ko-
sovo), register property in Mostar (Bosnia
and Herzegovina), and enforce a contract
in Prizren (Kosovo). Dealing with con-
struction permits is most burdensome in
Belgrade (Serbia), while in Tirana (Al-
bania) no permit has been issued since
2009. Two observations stand out. First, no
single city does well in all 4 areas. For
example, Chisinau (Moldova) ranks at or
near the top on the ease of registering
property and enforcing contracts but lags
behind on the 2 other topics. And while S-
kopje (FYR Macedonia) is a top performer
on the ease of starting a business and
dealing with construction permits, it can
look to Bitola (FYR Macedonia) or to
Moldova’s cities to improve its perfor-
mance on property registration. Second,
there is a rich variation in performance by
indicator even among cities within the
same economy—with the exception of
starting a business, where all 3 Mace-
donian cities take the lead. For example,
within Montenegro, Podgorica and Pljevlja
could look to Niksic to learn to deal with
construction permits more efficiently. In
addition, Zrenjanin could provide a
positive example to other Serbian cities in
the area of contract enforcement. When
comparing cities’ 2011 performance with
the results from 2008, some trends emerge.
First, consistent performers stay at the top.
For example, Bitola (FYR Macedonia)
maintained its position among the best
performers in most of the areas measured.
Other cities, like Krusevac (Serbia), drop-
ped relative to their peers. Some ranking
changes can be attributed to the addition of
4 new cities, some of which have compet-
itive regulatory frameworks. For example,
Balti (Moldova) ranks at the top on the
ease of property registration. Tetovo (FYR
Macedonia) is one of the most efficient
cities for enforcing a contract. On the other
hand, the cities that improved their busi-
ness regulations the most during the past 3
years—such as Skopje (FYR Macedonia)
and Banja Luka (Bosnia and Herzego-
vina)—surpassed their peers.
South East Europe setting a
strong pace of reform
Much has changed in recent years. The
region has been very active in improving
business regulations, often in response to
circumstances—such as the prospect of
joining the EU or facing the global
financial crisis. Some of the regions’
economies, represented by their respective
capital cities, have been recognized as top
10 Doing Business reformers over the past
5 years: FYR Macedonia in 2006/2007,
Albania in 2007/2008, and (again) FYR
Macedonia as well as Moldova in 2008/
2009. Most notably, FYR Macedonia has
implemented 17 Doing Business reforms.
In the most recent Doing Business in 2011
report, FYR Macedonia ranks 38th out of
183 economies—an improvement of 37
positions over 5 years (figure 1.1). Doing
Business in South East Europe 2008 identi-
fied good practices, pointed out bottle-
necks, and provided recommendations for
business reforms beyond the region’s
capital cities. Three years later, this report
tracks progress over time. The results are
impressive. All 19 cities measured for the
second time show improvements in at least
1 of the 4 areas measured (table 1.2). Most
cities benefited from the roll-out of nation-
wide business reforms summarized below
— although implementation results on the
ground vary. Within the region’s eco-
nomies, 2 cities stand out: Skopje (FYR
Macedonia) and Banja Luka (Bosnia and
Herzegovina) improved the most since
2008. Business reforms were implemented
in all 4 areas measured, resulting in signif-
icant benefits in terms of time and cost
savings for entrepreneurs.
The one-stop shop in Skopje (FYR
Macedonia) decreased the time to start a
business from 12 days in 2008 to just 3
days now by eliminating 5 procedures. The
one-stop shop offers entrepreneurs a range
of services—including registering a new
business with tax and statistical authorities,
obtaining a trading license, publishing an
incorporation notice, and registering em-
ployees for health and pension insurance.1
Meanwhile, FYR Macedonia’s new Law
on Construction shifted responsibility for
building supervision and review from
public enforcement agencies to licensed
professionals. As a result, the time to deal
with construction permits in Skopje
dropped by more than 2 months while 6
procedures were eliminated. Furthermore,
after the cadastre staff was increased in
Skopje, the time needed to register a prop-
erty title fell by over 1 month—from 98
days in 2008 to just 58 days in 2011.
Finally, the commercial court in Skopje,
equipped with an electronic case manage-
ment system, became operational in 2008,
facilitating contract enforcement in com-
mercial matters.
www.ibde.org 11
E X C H A N G E: The Magazine for International Business and Diplomacy Doing Business Report
In Banja Luka (Bosnia and Herzegovina), a
utilization permit is no longer necessary
for all businesses and a specialized
commercial court took over business
registration in 2010. As a result, the time to
start a business decreased by more than
one month. Meanwhile, Republika Sr-
pska’s 2010 Law on Construction and
Urban Planning allowed private companies
to prepare certain construction documen-
tation, rendering the process of obtaining
urban planning consent more efficient.
Moreover, more than 80% of cadastre and
90% of land registry records are now
available in digital form. As a result, the
total time to deal with construction permits
decreased from 1 year in 2008 to 8 months
today. At the same time, the time to
register property dropped by 3 months
because 4 procedures—including the
requirement for signatory authorization,
tax clearance, and the on-site evaluation of
property—were abolished. Finally, the
Law on Changes of the Law on Courts,
enacted in May 2010, gave a specialized
court in Banja Luka jurisdiction over
commercial claims, cutting the time requir-
ed to file a claim before the court from 6
months in 2008 to 46 days in 2011. At the
same time, the time to enforce the judicial
decision decreased by more than 200 days.
All 19 cities measured for the second time
made it easier to start a business. The most
popular start-up reform since 2008 was the
establishment or improvement of one-stop
shops—as seen in 10 cities. For example,
in Belgrade (Serbia), the registration with
various agencies has been consolidated
under one roof. Obtaining a business
registration certificate, tax identification
number, pension fund certificate, and
health fund certificate are now all done
with a single visit to the Business Registers
Agency (SBRA). Meanwhile, the other
Serbian cities measured by this report are
still working on the full implementation of
their one-stop shops—specifically, pension
fund and health fund registrations still have
to be obtained separately. Nevertheless, the
time to start a business in all Serbian cities
has fallen significantly—most notably in
Zrenjanin, where the time was cut from 37
days in 2008 to 17 days in 2011. In
Chisinau and Balti (Moldova), unifying
business registration with other procedures
is still underway. Nevertheless, positive
steps have been taken to reduce the overall
start-up time—including setting statutory
time limits and expedited options for
business registration. As a result, the time
to obtain a registration certificate was
reduced from 15 days in 2008 to just 1 day
now. Other popular start-up reforms were
reductions in local licensing requirements
and fees. For example, Albanian cities
eliminated the requirement to register with
the local chambers of commerce. Cities in
Montenegro did away with the municipal
business license. Both Pristina and Prizren
in Kosovo cut their municipal permit fees
in half—from EUR 1,000 to EUR 525 and
to EUR 400, respectively.
In the construction permits area, 9 out
of the 19 cities measured in both 2008 and
2011 have benefited from reforms such as
the digitization of cadastre records, en-
actment of new construction laws, and
streamlined inspections. For example,
Montenegro introduced risk based con-
struction approvals, where low risk, small
scale projects are reviewed and approved
by municipalities rather than the central
government. In Serbia, the 2009 Planning
and Construction Law simplified pro-
cedures for the issuance of construction
permits and made them transferable
between investors during construction. The
impact of the new law varies across cities.
In Vranje, the building permit can now be
obtained in 6 months—3 months faster
than in 2008. On the other hand, in
Belgrade, the same process takes almost a
year—5 months longer than in 2008. The
greatest challenge in the implementation of
this law is the application of provisions
regarding the conversion of “rights of use”
to ownership rights. Meanwhile, in
Albania, the parliament adopted the Law
on Territorial Planning in 2009.
Once implemented, this new law is
expected to professionalize the structure of
the Territorial Adjustment Council (TAC)
— the authority in charge of issuing
building permits in Tirana. However, as of
January 2011, no construction permit had
been issued here since 2009, mainly
because rivalling political parties repres-
ented in the council make consensus
decision making unattainable. The new
Law for Authorizing the Execution of
Construction Works, adopted by the
Moldovan parliament in July 2010, sets
statutory time limits for project approvals
and consolidates project clearances. The
subsequent implementation process is
expected to make dealing with construction
permits more efficient. Property registra-
tion reforms resulted in time and cost
savings for entrepreneurs in 12 out of the
19 cities measured in both 2008 and 2011.
Governments across the region are digitiz-
ing land books and making land registries
more efficient through legislative and
administrative reforms. As a result, the
average time to register property across
cities in South East Europe decreased by
more than a month since 2008. For
example, in Sarajevo (Bosnia and
Herzegovina), where all land registry and
12 www.ibde.org
Doing Business Report Exchange: Autumn 2011
cadastre books are now available in digital
format, the time to register property is just
a tenth of what it used to be. Specifically, it
fell from 331 days in 2008 to just 33 days
in 2011. In Mostar (Bosnia and Herze-
govina), where 95% of cadastre records are
now in digital format, the time to register a
property fell by 1 month—from 145 days
in 2008 to 117 days in 2011. Meanwhile,
Moldova and FYR Macedonia are in the
process of digitizing the land registry
records and cadastre maps, respectively.
Other business reform efforts undertaken
by governments in the past three years
include introducing statutory time limits,
eliminating pre-sale certificates and
clearances, and cutting fees. For example,
Moldova no longer requires the submission
of a cadastral sketch for properties already
registered with the cadastre—decreasing
the total time to register property from 48
days in 2008 to 5 days in 2011. In Albania,
a newly introduced statutory time limit
shortened the delay to register with the
Immovable Property Registration Office
by 9 days in Tirana and by 12 days in
Vlora over the same period. In FYR
Macedonia, the information on land
encumbrances was transferred from first
instance courts to the cadastre, so now both
the title deed and non-encumbrance cer-
tificate can be obtained from the same
institution. Similar efforts are underway in
Serbia. Along with digitization of cadastre
maps, these reform efforts have cut the
time to register property by 30 days in
Zrenjanin, 25 days in Vranje, 20 days in
Belgrade, and 17 days in Uzice. Enforcing
a contract became faster, cheaper, and/or
less cumbersome in 8 out of the 19 cities
measured in both 2008 and 2011. Courts in
these cities implemented administrative or
legal reforms to reduce the time or cost to
resolve a commercial dispute. In Vranje
(Serbia), manually-kept court records and
paper files were replaced by electronic
files that can be accessed online. More-
over, a computerized system randomly
assigns court cases to judges, thereby
eliminating opportunities for neglect or
corruption. As a result, the judgment pe-
riod in Vranje fell from 495 days in 2008
to 135 days in 2011. In Albania, a
presidential decree added to the numbers
of judges in courts. With more staff at
work, filing and judgment times fell by 40
or more days in Shkodra and Vlora. Courts
here now issue a ruling in a little over 4
months. Moreover, bailiff tariffs were
reduced from 7% of claim value to 2%.
Meanwhile, FYR Macedonia made
enforcing contracts easier by setting
deadlines for the payment of court fees,
adjusting monetary thresholds for assign-
ing case jurisdiction, and introducing a
small claims tribunal.
Comparing business regulations across 22 cities in South East Europe starting a business
Skopje (FYR Macedonia) is the world’s
5th top performer in this area. All an
entrepreneur needs to do to set up a
business here is spend 3 days and a little
over US$ 100. In cities like Skopje, where
one-stop shops have been set up and are
fully operational, starting a business can be
done quickly and efficiently. However, the
process is considerably slower in cities
where the entrepreneur needs to register
separately for tax, social contributions,
health insurance, and municipal permits.
This is the case in Pristina (Kosovo),
where it takes almost 2 months to start a
business. In Mostar (Bosnia and Herze-
govina), where the courts are in charge of
business registration and where 8 post-
incorporation requirements are necessary,
it can take as long as 50 days to set up a
business. The cost differences within the
region are also significant. The cost to
open a business varies from 1.5% of
income per capita in Niksic and Plevlja
(Montenegro) — similar to Finland — to
31.4% in Tirana (Albania) — which is 5
times more than the EU average. Varia-
tions stem from different fees levied by the
municipal governments. Some, such as
Pristina and Prizren (Kosovo), charge EUR
525 and EUR 400, respectively, just for the
municipal permit. In 12 out of the 22 cities
measured, entrepreneurs are also required
to set aside a minimum amount of capital
before they start operating. FYR Mace-
donia is the only economy to have
abolished the minimum capital require-
ment all together, while Albania and
Montenegro charge only nominal amounts
(equivalent to US$ 1).
Dealing with construction permits
Dealing with construction permits can be
difficult and expensive in South East
Europe. On average, a construction com-
pany would spend 223 days and more than
1,100% of the income per capita to comply
with all requirements to build a warehouse.
Compare this to the EU, where a con-
struction company spends one month less
and only 77% of income per capita. While
the overall policy setting authority lies
with the national governments, implement-
tation of regulations at the local level
varies significantly. Local governments
have the authority to administer several
procedures and levy the associated taxes
and fees. The number of procedures to deal
with construction permits varies from 15 in
Skopje (FYR Macedonia) and Pljevlja
(Montenegro) to 30 in Chisinau (Mol-
dova). In Chisinau, an entrepreneur has to
go through no less than 18 pre-construction
requirements—such as location clearances
and technical evaluations. As also ob-
served in the 2008 report, dealing with
construction permits is fastest in Bitola
(FYR Macedonia)—just 3 months. It is
slowest in Mostar (Bosnia and
Herzegovina)—a year and a half. The cost
varies from 110% of income per capita
(US$ 1,752) in Balti (Moldova) to a
prohibitive 2,132% of income per capita
(US$ 139,650) in Podgorica (Montenegro).
In most economies, the largest portion of
the overall cost is spent on building permit
fees and associated costs. In the Serbian
cities, obtaining a building permit con-
stitutes, on average, 76% of the overall
cost (the equivalent of US$ 83,278). The
same permit costs significantly less in Balti
(Moldova), where it constitutes 28% of the
overall cost (the equivalent of US$ 439). In
Podgorica (Montenegro), investors must
pay an urban development fee, which
accounts for almost three quarters of the
overall cost (the equivalent of US$
100,221).
Registering property
Across the 22 cities, an entrepreneur would
have to go, on average, through 6
procedures, wait 48 days, and pay 2.85%
of the property value to transfer a property
title. Within the region, the time, cost, and
requirements vary significantly. Register-
ing property is easiest in Balti and
Chisinau (Moldova), where it takes 5
procedures, 5 days and 0.9% of the
property value to transfer a title. By
contrast, the same process takes 8
procedures in Pristina (Kosovo) and almost
4 months in Mostar (Bosnia and Herze-
govina). Differences appear mainly during
the pre-registration phase. For example, in
Mostar and Sarajevo (Bosnia and Herze-
govina), both parties have to obtain a court
extract authorizing the signatory to act on
behalf of the company. In Pristina (Ko-
sovo), in addition to the title deed, parties
have to obtain and submit certified copies
of their companies’ business registrations
and letters from the tax authority certifying
that all property taxes have been paid
before the lawyer can draft the sale and
purchase agreement. Variations in time
www.ibde.org 13
E X C H A N G E: The Magazine for International Business and Diplomacy Doing Business Report
among cities stem mainly from the
efficiency of the land registry in registering
the new owner of the property. This ranges
from 1 day in the Moldovan cities, if using
the expedited option, to 85 days in
Belgrade (Serbia). The amount of property
transfer taxes entrepreneurs have to pay
varies greatly among the 22 cities
measured—from a fixed fee of EUR 150
(US$ 220) in Pristina (Kosovo) to 5% of
the property value in Mostar and Sarajevo
(Bosnia and Herzegovina).
Enforcing contracts
The most efficient court to resolve a
commercial dispute in the region is in
Zrenjanin (Serbia). At just 10 months from
filing through enforcement, the process is
as fast as in the United States. In Zre-
njanin, information technology is used to
assist judges with case registration and
court management. Entrepreneurs can also
choose to go through an alternative dispute
resolution (ADR) system, which has
lowered the number of pending cases in the
commercial courts across Serbia. Mean-
while, in Mostar (Bosnia and Herze-
govina), an entrepreneur has to wait more
than 4 years to enforce a contract in
court—similar to Kabul (Afghanistan), one
of the slowest courts in the world. Delays
are due to case backlog and an insufficient
number of judges. As for expenses, the
average litigation in South East Europe
costs 32% of the claim value—one third
more expensive than the EU average.
Across the region, most litigation costs are
regulated by law and fee schedules. The
cost of enforcing a contract ranges from
21% of the value of the claim in Chisinau
(Moldova)—similar to Australia—to 61%
in Pristina and Prizren (Kosovo).
Learning from each other
While cooperation and the sharing of
reform experiences may not have been a
priority for the region’s economies a
decade ago, now it is the norm. Undoubt-
edly, the initial driver was the prospect of
accession to the EU. While this is still the
case, market realities are increasingly
bringing cooperation to new levels. For
example, as data was being collected for
this study in late 2010, the railway
companies of Croatia, Slovenia, and Serbia
formed a new joint-stock company to
service the European Corridor 10 cargo
route to Istanbul which, following the
opening of the Bosphorus tunnel, will link
Europe across Asia to China. Opportunities
to strengthen the position of national eco-
nomies by improved regional competi-
tiveness lie in many other sectors as well.
This type of economic cooperation may
not attract the same level of media interest
as the events of the 1990s but it bodes well
for a more prosperous and stable future in
South East Europe. An improving business
environment is central to this perspective.
Benchmarking exercises like Doing
Business inspire governments to reform
commercial regulations. They point out
potential challenges and identify where
policy makers can look for good practices.
Comparisons between cities within a single
economy or region are even stronger
drivers, as governments have a hard time
explaining why doing business in their city
may be more burdensome than in neigh-
boring locations. The good news is that
sharing a similar legal framework
facilitates the implementation of existing
good practices within a region. National
governments can also use Doing Business
data to monitor how changes in national
regulations are implemented by local
authorities. In a world where locations
compete against each other to attract
investment, subnational Doing Business
data allow local governments to review the
conditions entrepreneurs face in their cities
from a comparative perspective. Sub-
national data are now available for more
than 300 cities in 38 economies around the
world. Reform-minded governments can
use Doing Business indicators to motivate
and sustain business reform efforts. There
is no need to reinvent the wheel: it is
sufficient to start by introducing business
reforms successfully implemented in other
places. In fact, cities in South East Europe
have a lot to gain from adopting the best
regulations and practices that are working
elsewhere in the region. A hypothetical
city adopting all the best practices identi-
fied in this report would rank 6th among
183 economies globally—similar to Den-
mark or Canada (table 1.3). If the region’s
best practices were adopted, starting a
business would take only 3 days, as it does
in Skopje (FYR Macedonia) and Sweden.
The region’s best practices would mean
that transferring a property title would
require just 5 procedures over 5 days, as
seen in Moldova and Australia. Mean-
while, the region’s best practices for
dealing with construction permits would
require only 96 days—as seen in Bitola
(FYR Macedonia) and the United King-
dom. Finally, resolving a commercial
dispute in this hypothetical “best practice”
14 www.ibde.org
Doing Business Report Exchange: Autumn 2011
city in South East Europe would cost the
same as the EU average, while its duration
would be 100 days faster than it is in
Germany. Payoffs from business reforms
can be large. Saving time and money are
often the immediate benefits for firms. For
example, in Georgia, a 2009 survey found
that its new start-up service centre helped
businesses save an average of 3.25% of
profits—and this is just for registration
services. For all businesses served, the
direct and indirect savings amounted to
US$ 7.2 million.2 In Mexico, local one
stop shops (SARE) cut the time to start a
business from 58 to 13 days. A recent
study reports the payoffs: the number of
registered Mexican businesses rose by 5%,
employment increased by 2.8%, and prices
fell by nearly 1% because of the com-
petition from new entrants. 3 Consistent
reformers follow a long-term agenda and
continually push forward. The top-ranked
economy on the ease of doing business,
Singapore, introduces business reforms
every year. Cumulative business reforms
across a range of topics produce the best
results. Cooperation across different parts
of the bureaucracy, at both local and
national level, is necessary for wide-
ranging reforms. Political will and vision
coming from a reform champion—whether
the prime minister, minister, or mayor—is
central to success. Moreover, consistent
reformers are inclusive—involving all
relevant actors and institutionalizing the
reform effort. They also stay focused by
setting specific goals and regularly moni-
toring progress.
1. The one-stop shop project in FYR Macedonia is
going through a second stage that aims to unify
business registration and employee registration for
social contributions. The second phase is already being
implemented through a pilot project in Skopje and is
expected to cover the entire country by the end of 2011.
2. World Bank 2010. Doing Business 2011: Making a
Difference for Entrepreneurs. Washington, D.C: World
Bank Group.
3. Bruhn, Miriam. 2008. “License to Sell: The Effect of
Business Registration Reform on Entrepreneurial
Activity in Mexico.” Policy Research Working Paper
4538. Washington, D.C.: World Bank
www.ibde.org 15
E X C H A N G E: The Magazine for International Business and Diplomacy Interview
Exchange: South Eastern Europe (SEE) is
steadily transforming itself from a state-
controlled economy into an emerging
market with strong growth potential. But,
as was the case with many other regions
across the globe, the Western Balkans was
also hit by the financial crisis, although the
impact wasn’t as bad as many feared. This
resilience is largely attributed to the
considered reaction of the region itself.
According to your Bank’s (EBRD) Tran-
sition Report 2010, the recovery in most
SEE countries is progressing slowly, with
growth projections in most countries
between 1 and 3 per cent. However, the
expansion of the recent debt crisis from
Greece to Italy, Europe’s fourth-largest
economy, could potentially stall the re-
gion’s recovery. To what extent could this
debt crisis affect the recovery in SEE in
general, and the Western Balkans in
particular? Did the financial crisis have an
impact on the banking sector in SEE?
J-M.P. We expect positive growth rates
for all SEE countries in 2011, between 1.1
and 3.3 per cent, mostly in light of a strong
performance in the external sector.
However, it is important to emphasise up
front that these forecasts are subject to a lot
of uncertainty, with some clear downside
risks. The EBRD’s Office of Chief Eco-
nomist will issue revised forecasts for 2011
and 2012 in mid-October. So far the
feared spill over effects have been largely
contained. However, as the debt crisis con-
tinues to unfold and economic performance
of the Euro zone weakens, negative con-
tagion effects are likely. The SEE region
enjoys close links to the EU, mostly in the
form of trade. Indeed, investments and
remittances, but also through financial in-
termediation, as many banks in the region
are part of larger European groups.
Concerning trade, the EU remains the
main trading partner of the SEE, with an
average of above 60 per cent of exports
from the region going to the EU internal
market. In particular Albania is heavily
dependent on trading with neighbouring
Greece and Italy, whilst much of the
remaining SEE countries are mostly depen-
dent on trade with the core Euro zone
members.
EBRD examines business opportunities
Exclusive interview with Jean-Marc Peterschmitt, Managing Director, Central and
South Eastern Europe, European Bank for Reconstruction and Development
Photo by Besim Gerguri
16 www.ibde.org
in South East Europe
Interview Exchange: Autumn 2011
Despite having remained relatively
constant throughout the global economic
crisis, flows of remittances – a vital chan-
nel for income in some countries – may
also be negatively effected as unemploy-
ment in the EU rises and migrant workers
are forced to return home. This in turn,
might weaken the already only slowly
resuming domestic demand in many SEE
countries.
On the investment front, the region has
seen a sharp drop in foreign direct
investment during the global financial and
economic crisis, and FDI continues to
deteriorate in most countries. This is con-
cerning. It means, we at the EBRD, are
deploying even more efforts towards local
enterprises.
Finally, growth in the banking sector
has remained subdued as banks are adjust-
ing their risk appetite and consolidating
their balance sheets. Subsidiaries of Greek
banks are particularly present in Albania,
Bulgaria, FYR Macedonia, Romania and
Serbia, with market shares of above 15 per
cent. Contagion effects are possible in the
form of higher funding costs for sub-
sidiaries, which could be passed on to end-
consumers. However, the region has not
experienced a deposit run on any bank,
parent banking groups have remained very
committed to their subsidiaries, both with
funding and capital in the region and the
situation seems to remain stable and under
control.
Exchange: Regional transport corridors,
sea routes and overall transportation
policy rank alongside economic integra-
tion as fundamental to the development of
SEE. Further, the exchange of goods and
the expansion of tourism create a need for
better infrastructure such as roads, rail-
ways and air travel. Given the focus of the
EBRD’s lending portfolio in the region,
what are the opportunities for financing
regional infrastructure projects in the
Western Balkans? Could you highlight
some of the projects that are being fi-
nanced or co-financed by the EBRD? What
opportunities lie in this sector for foreign
investors?
J-M.P. The Bank is one of the most
important institutional investors in the
Western Balkans (defined here as all
countries of the former Yugoslav Republic
less Slovenia plus Albania), with a
cumulative business of about EUR 8
billion and an annual flow of new
investments of around EUR 1.4 billion.
Given the state of infrastructure that
critically needs modernisation, the strong
priority of regional integration and the
need to link the region as a whole to the
rest of Europe, it is not surprising to see
that investment in roads, transport lo-
gistics, airports, power and transmission
projects, represent a very high share of the
Bank's activities. About 50% of our annual
business is devoted to support countries in
the region to improve regional intercom-
nections with large, multi-annual invest-
ments plans. The financing of the projects
such as Corridor X in Serbia and FYR
Macedonia, Corridor Vc in Bosnia and
Herzegovina and Croatia, Corridor VIII in
Albania, FYR Macedonia and Bulgaria, the
transmission lines connecting Albania,
FYR Macedonia and Bulgaria are all
examples of our engagement. All these
projects are large, thus requiring a systemic
integration of co-financing among
international financial institutions, as well
as considerable grant resources. This is the
reason why, together with the European
Union and the European Investment Bank,
we have created the Western Balkans
Investment Framework: this is a way to
coordinate and consolidate financial
resources, whether debt or grants at the
European level and to capitalise on our
respective strengths to provide a better and
faster financing service to the countries of
the region.
Foreign investors may of course play a
role in the provision of infrastructure
services on the basis of concessions or
public-private partnerships. These pos-
sibilities are real, the airport in Tirana is a
good example of a recent success. The
EBRD is keen to promote such approaches
Photo credit: Tirana International Airport
www.ibde.org 17
E X C H A N G E: The Magazine for International Business and Diplomacy Interview
but also recognises that they are challeng-
ing: it requires a well-developed regulatory
framework, very careful project prepa-
ration and the ability to mobilise large
financing packages; these are all areas in
which we can assist.
Exchange: How can investment in public
goods, such as telecommunications infra-
structure, foster private sector develo-
pment in the Western Balkans? How
should concessions for the privatization of
natural monopolies (such as broadband
networks) be managed? What is the op-
timal format of public-private partner-
ships in the development or restructuring
of telecommunications networks?
J-M.P. Investments in information and
communications technologies (ICT) and
infrastructure are critical in generating
operating efficiencies for many sectors of
an economy. By allowing knowledge to be
disseminated, markets to connect, or pro-
cessses to become more efficient, ICT is at
the root of private sector development. In
many other regions and countries, for
example Taiwan, Korea, Singapore or
Finland, such investment in telecom
infrastructure has been labelled as the
single largest cause for economic growth
and allows the development of the digital
economy. As noted in the declaration of
the recent Deauville G8 summit, the In-
ternet is “a driver of innovation, improves
efficiency and thus contributes to growth
and employment.” The EU has been very
active in pushing an ambitious digital
agenda recognizing that it is lagging
behind other regions of the world. Fast
broadband coverage for all by 2020 is such
a goal. This is key for the next phase of
economic growth and transformation in the
EBRD’s countries of operation where such
technologies are still in their infancy.
There remain massive challenges to the
creation of adequate telecoms infra-
structure in the Western Balkans. These
challenges stem from a lack of privat-
isation of telecoms operators, a lack of
investment in such networks and also a
lack of liberalisation.
Concessions for the privatisation of
natural monopolies such as broadband
networks have to be managed carefully. In
many cases, existing networks are outdated
and unable to support the massive data
flow requirements from the emergence of
new technologies such as smartphones.
This means selling such networks will
depend on the addition of other compo-
nents such as the use of frequencies.
Broadband wireless networks today can
carry large data streams which one day will
come close to what terrestrial networks do
via regular fibre optic. This means one has
to pay attention to technology much more
than before and a major rethink needs to
occur in trying to understand how to best
design the network of the future. Large
capital outlays may be necessary (e.g. 4G
GSM networks). Certain countries like
Singapore have chosen to build a single so
called “Next Generation Network” which
is then leased out to private operators,
rather than encourage the multiplication of
expensive networks by private operators.
So while Public-private partnerships
(“PPPs”) are definitely on the agenda, with
the usual issues of required regulatory
frameworks, proper contractual arrange-
ments in terms of risk allocation and profit
sharing, there is a question of whether the
state could still play a bigger role in the
set-up of the basic digital infrastructure
itself. The EBRD is certainly very interest-
ed in supporting such investments, which
will be crucial for the development of a
knowledge economy capable of stimulat-
ing growth.
Exchange: Given the recent surge of inter-
est in free economic zones as drivers of
employment and industrialization, do you
think that export processing zones (EPZs)
could be effective drivers of sustainable
economic development? And if so, how can
governments maximize the positive impact
of EPZs? How can foreign investors
maximize the potential of EPZs while
contributing to local development?
J-M.P. The establishment of Economic
Free Zones or Export Processing Zones
(EPZs) aims to attract foreign investors to
the region, based principally on tax breaks
or the elimination of various tariffs. For
instance, in the case of the FYR Ma-
cedonia, this has had some success. Four
foreign companies are currently operating
at the EPZ of Bunardzik, and three more
have recently started investments there.
The attraction of foreign investors to EPZs
can bring wider benefits to the local
economy by bringing new skills, processes
and standards of governance that can be
replicated elsewhere. This kind of positive
impact on the economy is at the heart of
many EBRD investments in the region.
However, governments also have to be
mindful of the possible loss of revenue that
may result from the provision of overly
generous incentives to foreign investors.
Equal treatment of local and foreign
investors is an important principle that
should be observed. Therefore, the
establishments of EPZs alone cannot be a
sustainable long-term solution. Policies
supporting investment and business have to
be aimed at the economy at large. Despite
good progress in recent years, an un-
favourable business climate and lack of
competitiveness continue to negatively
affect the region’s image as an attractive
investment destination, as suggested by the
business surveys such as the EBRD /
World Bank Business Environment and
Enterprise Performance Survey, the World
Bank’s Doing Business reports or the
World Economic Forum Competitiveness
Report. Administrative bottlenecks, a high
level of corruption, a weak judiciary sys-
tem, the lack of high quality infrastructure
and unqualified labour continue to remain
major obstacles for businesses, and au-
thorities across the region should prioritise
reforms in these areas to attract foreign
investors.
Exchange: What further reforms are
necessary to strengthen the regional co-
operation in the areas we have discussed,
that is, infrastructure, telecommunications
and the financial sector?
J-P.M. Regional cooperation is of course a
must, resulting in more impact of
investments, in technical and financial
efficiencies that benefit all in the region.
Much of the efforts of the international
community over the years have been
geared at promoting such cooperation,
through political dialogue and specific
institutions. Some obstacles remain: the
regulatory framework in many countries in
the SEE region hinders comprehensive
cooperation amongst countries. However,
as legislation across the region is gradually
aligned to the EU acquis, new possibilities
for cooperation are expected to emerge.
We see huge potential for regional co-
operation in the energy sector for example,
where work has taken place on the estab-
lishment of a regional electricity market
and current developments are aiming at
implementing a regionally coordinated
procedure for electricity capacity allo-
cation and congestion management. Sim-
ilar coordination is needed in the transport
sector, in order to complete the pan-
European corridors.
The recent financial crisis has prompted
a major increase in cross-border co-
operation in the financial sector. The
“Vienna Initiative” has played a major role
in the SEE countries in staving off a
systemic banking crisis and ensuring
parent banks remain committed to their
subsidiaries both with funding and capital.
18 www.ibde.org
Interview Exchange: Autumn 2011
This has worked very well. It was achieved
through the close dialogue and co-
ordination among the key banks present in
the region (mostly part of international
networks), the supervisors of the home
countries (where groups have their
headquarters) and host countries (the
countries of SEE where the banks are
present), the EC, the ECB and the
international financial institutions. This has
been a unique opportunity to bring together
all relevant parties to work together on
issues related to the financial sector in the
region, a process that continues.
Exchange: The EBRD has played an
important role in fostering the estab-
lishment of market-based, competitive and
sound economies in SEE. What would be
the future role of the EBRD in the Western
Balkans? Would it be more of a lending
institution or an equity investor?
The EBRD has been and intends to remain
a long term investor in the region. This is
what makes us “additional” compared to
other sources of financing (when at all
available). Of course a large part of the
projects of the EBRD consist in long-term
debt, sometimes specifically with the aim
to mobilise other commercial lenders along
side us in the context of syndicated loans,
thus having a catalytic role in bring to the
region lenders that may otherwise not have
considered it. This is very important as it
allows us to leverage our own role.
But in line with its mandate, the Bank
does also provide long-term capital to
companies in the region to support their
expansion plans. This includes taking
equity risk, for which the Bank is fully
equipped. The EBRD has been providing
equity to companies in the region for a
number of years and, despite the economic
crisis, is still very much engaged in
expanding its portfolio of equity positions,
particularly with local companies. This is a
priority of the Bank. We believe that a
number of underdeveloped sectors, espe-
cially in manufacturing, have a strong
growth potential mainly in view of the EU
accession process. There is the possibility
to create value and we believe we can
contribute to such process, not just with
our money but also through our parti-
cipation as a shareholder in the governance
of the investee companies or our support in
the form of technical advice.
Exchange: Why would you recommend
that European investment funds invest in
Western Balkans firms?
The Western Balkans constitute a group of
fairly complex countries, with some re-
maining inter-ethnic issues, some legacies
of the wars of the past decade and certain
pockets of political instability. Yet, the
direction towards greater stability and
prosperity is clear and the prospect of EU
accession is a strong catalyst for change.
The catch up potential is large and there is
a lot of value to be created as the markets
grow, local companies become more com-
petitive and new market needs are being
fulfilled. Using emerging market termino-
logy, one could say that the Western
Balkans are a “frontier” investment area.
It is for those with patient capital and a
long term view, with a very good
knowledge of the situation on the ground
and a readiness to take a hands-on role in
managing investments, a strategy that will
pay-off. This is what we do every day at
the EBRD and we would be more than
happy to share our knowledge and work
together with other investors interested in
the region.
EBRD at 20 Photo by Mike Ellis
www.ibde.org 19
E X C H A N G E: The Magazine for International Business and Diplomacy Country Report
Malta: a stable investment destination
Alan Camilleri, Executive Chairman, Malta Enterprise
nspired by the vision of becoming a
centre of excellence and a regional
hub, the small but ambitious island of
Malta is focusing its strategy on a number
of sectors which the Government has
identified as key pillars of the economy
and which have not only been performing
well but also present numerous oppor-
tunities for further growth.
Through such strategy, Malta was able
to withstand the difficulties it faced during
the international economic crisis and even-
tually also the challenges brought about by
the uncertainty in North Africa.
Indeed, according to the latest report
published by the UNCTAD, investment in
the past year has exceeded $1 billion – a
significant amount considering that Malta
is the smallest member in the European
Union and only has a population of around
400,000 people.
As the conflicts in North Africa and
particularly in Libya approach their reso-
lution, the renewed staibility in the region
will give rise to numerous opportunities.
Strategically located in the middle of
the Mediterranean Sea, Malta - which
maintained its economic, political and so-
cial stability even throughout these chal-
lenging times - is the ideal gateway for
entering the European Union and other
neighbouring markets in North Africa and
the Middle East.
Investors have the opportunity to set up
in Malta to reach nearby markets from an
English-speaking and business-friendly
environment, where a highly-skilled and
flexible workforce is also available.
Thanks to the skills and abilities of its
people, Malta has shifted up the value
chain and moved from a low-cost
manufacturing base to a knowledge-based
economy, with an emphasis on higher
added value as per the Government’s strat-
egy.
Sectors such as the financial services
industry and ICT, with the latter including
niche sectors such as call-centres and back
office support as well as digital gaming
and software development, have been flou-
rishing in the past years with considerable
growth rates.
Projects such as Smart City Malta, with
a $300 million investment from Dubai’s
Tecom Investments, and Corporate Village
Malta – which is envisaged to carry an
investment exceeding €150 million – are
expected to give a further boost to these
growing industries with state-of-the-art in-
frastructure.
Further opportunities will be avialable
in the budding life sciences industry, which
is building up on the success of the phar-
maceutical industry, particularly with the
construction of a new life sciences centre
that will provide a research nexus in col-
laboration with the University of Malta and
the country’s main Hospital.
The capacity building however does not
stop at improving the infrastructure, but
also with a heavy investment in eduacation
and training to ensure that trained workers
are always available to take up the oppor-
tunities being generated.
Other sectors which are also central to
the Government’s strategy - such as inter-
national education and training services,
healthcare, advanced manufacturing, tour-
ism, the aviation and maritime industries,
as well as eco-sustainability and the en-
vironment - shall also benefit from this
capacity building and consequently are
expected to keep growing as well.
Assistance is also available to investors
to encouarge them to do business in Malta,
including tax credits on the amounts in-
vested, access to finance, industrial space
at competitive rates, and other schemes to
encourage R&D, innovation and compet-
itiveness.
Moreover, Malta’s tax system, coupled
with the extensive network of double
taxation treaties, offers significant fiscal
efficiency to Maltese companies, whilst
Malta remains among the most attractive
countries within the EU in terms of taxes
and social contributions paid out by com-
panies.
I
Aviation sector has been identified as one of the key pillars of the economy in Maltese’s Government strategy
20 www.ibde.org
VIP Ambassadorial Luncheons
IBDE's VIP Ambassadorial Luncheons are an excellent opportunity for your clients to identify key investment opportunities and understand investment strategies in the UK as well as the countries represented in London within the wider economic and political context
Forthcoming Luncheons:
EU-Balkans informal Ambassadorial Luncheon - Exclusive Event
• 10 December 2011
Attendance at events in this series is by invitation only. Invitations are being extended to CEOs, CFOs, COOs, senior board members, decision makers and strategists from blue-chip companies interested in, or already investing in South Eastern Europe. Additional senior applicants will be considered for invitation subject to availability of places and meeting the above criteria.
For more information on our regional and country-specific Ambassadorial Luncheons contact us on [email protected]
E X C H A N G E: The Magazine for International Business and Diplomacy Interview
Martin Davidson, British Council Chief Executive Photo Credit: © British Council
Exchange: Culture, with a capital “C”
can be derided by some interest groups as
an “elitist” activity, in its own ivory tower
separated from the cut and thrust of
business and the politics of diplomacy. In
an era of globalism is it short-sighted to
ignore the intrinsic and multi-facetted
value attached to “Culture” as promoted
by British Council activities in the world at
large?
M.D. It’s definitely short-sighted to do so
because everyone in the world is part of a
culture - and interacts with Culture all the
time. Reading, listening to music, watching
TV or noticing the different types of
architecture around us are all cultural
experiences which are universal parts of
everyday life. In an increasingly globalised
world, learning about other cultures builds
vital trust and understanding, and forges
valuable links that transcend politics.
That’s what the British Council’s inter-
national cultural relations work does.
The economic value of cultural re-
lations mustn’t be underestimated. For
example, our work in the arts not only
broadens cultural horizons, but helps
emerging and established artists from the
UK to find lucrative new markets for their
work overseas. Our work supports the
UK’s international Higher Education sec-
tor which generates an estimated £8 billion
a year for the economy, through the for-
eign students who come here to study.
Exchange: Does the British Council, with
its programs tailored to the many areas of
cultural relations in which it operates,
represent the best value for public funding,
offering expertise in the key cultural values
of the diverse locales in which business
and diplomacy must operate?
M.D. Absolutely. We’ve been working for
more than 75 years and we operate in more
than 100 countries. Our networks and
legacy of trust in the places where we
operate is essential in order to reach all
levels of society. For example, we’ve been
in Egypt since the 1930s, and the trust
we’ve built up has proved invaluable
during the Arab Spring.
Only around a quarter of our income
comes from a government grant, and this
will decrease between now and 2015. The
money we earn from our fee-earning
activities such as English teaching and
exams is used to fund our charitable work,
which means even better value for money
for the UK taxpayer.
Exchange: How would you envisage an
effective administrative structure within
which the FCO, DIFID and the British
Council could work together?
M.D. We already work closely with the
Foreign and Commonwealth Office and the
Department for International Development,
both in London and overseas, and our work
complements what they do on behalf of the
UK. We each bring different benefits to
Britain; in our case a focus on building
trust and understanding with the people of
other countries.
We operate at arm’s length from gov-
ernment which is important in building
trust and allows us to operate in situations
where a government department could not.
But we also serve the UK’s long term
international interests. This was recognised
in the government’s review of bodies like
ours after the 2010 election.
Exchange: Science, media and sport are
all areas of interest in furthering inter-
national business and diplomacy. What
British Council activities in these three
areas would you like to highlight for their
potential to enhance both business and
diplomatic links worldwide?
M.D. Science is an integral part of culture
and a key driver of future economic
prosperity in both the UK and overseas.
A global stimulus package: the potential economic returns of the British Council's
international cultural activities
Exchange talks to Martin Davidson
Chief Executive, British Council
,
22 www.ibde.org
Interview Exchange: Autumn 2011
We have a very successful science com-
munication initiative, FameLab - run in
partnership with the Cheltenham Science
Festival - which helps to make science an
exciting and attractive career choice. This
builds up the transferable skills of young
scientists, many of whom have gone on to
be influential characters in their own
countries, often in the national media or
science policy areas. Famelab has been run
in more than 15 countries across Europe,
North Africa and Asia, and the Inter-
national Final in the UK brings together
participants from countries as geograph-
ically and politically diverse as Hong Kong
Libya, Israel and Egypt.
Last year we worked together with the
Royal Society to widen the impact and
reach of the Frontiers of Science event in
Sao Paulo - which brought together 80 of
the most talented young scientists from
Brazil, Chile and the UK to discuss the
new frontiers of research in areas as
diverse as biofuels and quantum entan-
glement.
The unveiling of a statue of Yuri
Gagarin outside our central London offices
in July celebrated the contribution of
science to the world. It generated a real
sense of goodwill and created a great
opportunity for the UK and Russia space
industries to work together.
Our work also harnesses the power of
sport as a global language. We’re involved
in International Inspiration, London 2012’s
international sporting legacy programme –
which, among other things, uses sport to
develop young people’s leadership skills,
particularly in developing countries.
We also work with the Premier League
on a programme called Premier Skills,
which uses the global appeal of British
football to develop communities and
improve English skills worldwide. There’s
a clear long-term economic benefit in all of
this.
Exchange: In Africa’s newest country,
South Sudan, the British Council is
involved in the Rift Valley Institute’s
course on Sudan: “an intense introduction
to the economics, ethnicities, politics,
cultures, histories, petroleum and hydro-
logy, border disputes and secession, civil
wars and peace agreements of this huge,
fascinating and deeply troubled country”,
to quote Tony Calderbank, British Council
Director for South Sudan. Given the
efficacy of such broad-spectrum cultural
work in generating opportunities for
globalized business activity down the line,
underpinned by the dual goals of the
British Council to undertake cultural work
in Africa and support development object-
tives across the continent, might a conver-
gence be found - in effect an income
earning partnership potential - in working
with African nations to reduce the negative
impact of tribalism on overall cultural and
economic progress?
M.D. Our cultural relations work in Africa
contributes to development objectives and,
in the longer term, can support the global
business agenda.
Let me give you a few examples of
what we’ve already achieved in South
Sudan. The legal system there is staffed
with Arabic speaking lawyers and officials,
so we’ve provided English language
training for the Judiciary and the Ministry
of Legal Affairs and Constitutional De-
velopment to assist the transition to-wards
an East African legal model that uses
English. We are currently training police in
South Sudan as part of a DFID Safety and
Access to Justice project. Our hope is that
this will make a contribution to stability in
South Sudan and stronger ties with the rest
of East Africa, the UK and, perhaps in due
course, the Commonwealth. All this is
good for business and security.
Some African countries do indeed see
tribalism as a challenge to development,
and it was probably one of the factors that
contributed to the adoption of English as
Children in Kenya learning English through the British Council. Photograph: © Mat Wright
www.ibde.org 23
E X C H A N G E: The Magazine for International Business and Diplomacy Interview
the official language of South Sudan.
Cultural relations can enable people to
reach across wide cultural or political
divides. In places like the Rift Valley of
Kenya and in former IDP camps in
Khartoum we are providing training and
support to help communities live and work
in greater harmony.
In the same way that English, education
or sport can often provide a unifying
challenge or opportunity, so work through
the arts can cross political and cultural
boundaries. In Sudan we’ve used our work
in developing business skills for young
people in the creative industries as a vehi-
cle for bringing together arts communities
from Juba and Khartoum.
Cultural Relations is invariably a long-
term business, because building trust takes
time – and, because it involves people, it is
rarely linear. For this reason local
knowledge and judgement are invaluable
in ensuring we always work with the
cultural grain rather than across or against
it. That’s why we’ve strengthened our
presence in Juba.
Exchange: The dissolution of the “former
Yugoslavia” into its culturally divergent
national interests could be considered a
classic opportunity for the crucial partner-
ship of diplomacy with the cultural special-
izations of the British Council in moving
the region towards a more cooperative
economic and political future. The Lon-
don-based non-profit International Busi-
ness and Diplomatic Exchange runs an
EU-Balkans Discussion Group the ultimate
goal of which is to strengthen regional
cooperation as well as contribute towards
greater stability and prosperity in South
East Europe, leading eventually to the
region's integration within the European
Union. To what extent is the British
Council engaged in this part of the world,
and what are its core activities in the
region?
M.D. The fall of Yugoslavia [in compar-
ison to some other emerging democracies]
was not brought about by civil society
calling for an open society, but by ethno-
nationalist wars, launched by post Tito-era
leaders in a bid to hold on to power. The
push for more open societies remains a live
issue, along with championing the healing
and reconnecting communities divided by
war. A new generation of citizens seeking
a future in the EU - driven by a desire for a
better life - are now demanding a faster
track to EU accession. Many younger
people, impatient with the slow pace of
change, the quality of education, the skills
training available and the shortage of jobs,
are increasingly disconnected with the
leaders and the accession process.
The British Council’s work in the
region across English, Education and the
Arts – in areas including skills and citi-
zenship - represents a range of responses
tailored to the specific needs of local
communities and institutions. Our network
of offices is a locally-based but globally-
linked source of UK expertise. Our cultural
relations work brings government, employ-
ers and educators together to address the
wide range of needs – and this gives us a
strong understanding of local priorities and
ensures that we can respond in the best
possible way.
And if I may add a final comment, I am
certain that cultural relations work gradu-
ally builds trust and therefore contributes
to a safer and more prosperous world. We
would be delighted to see more countries
focussing on international cultural and
educational cooperation. Business has a
huge role to play too. Many of the best
cultural relations programmes already
involve partnership with international busi-
nesses and there are opportunities for much
more of this.
English National Ballet in front of the UK Pavilion at Shanghai Expo. The British Council led on the design and development of the UK’s Programme of Events at the Expo and programmed entertainment 7 days a week for its duration. Photograph: British Council
24 www.ibde.org
EU-Balkans Discussion Group
Series I
The IBDE’s ‘EU-Balkans Discussion Group’ is designed to support and promote regional cooperation and the socio-economic development of the Western Balkans with the support of EU and Balkans Embassies in the UK for the benefit, in particular, of the countries of the Western Balkans and the EU. This goes in line with the EU’s and its member states’ policies towards the region. In this regard the project aims to focus on regional cooperation, providing a regional approach for trade and/or investment, in order to maximize its common regional appeal to the wider multinational business community.
The meetings are open to Heads of Mission of EU-Western Balkans countries plus Turkey, senior UK/EU officials and business leaders.
For more information contact us on + 44 (0) 20 7193 1485 or [email protected]
EU current members Candidate countries Potential candidate countries
E X C H A N G E: The Magazine for International Business and Diplomacy Interview
Exchange: Your Excellency, Uzbekistan
celebrates 20th Anniversary of its Indepen-
dence this year, congratulations. Having
worked within the Uzbek Foreign Ministry
since Independence, what are your
observations of Uzbekistan’s achievements
in political sphere during this period?
Ambassador Akbarov: First of all, I
would like to note that this is a very special
event for Uzbekistan. Twenty years can be
a short time for history, however
Uzbekistan managed to make significant
progress during this period. This was a
long and not easy way, when we had to
prove our Independence in every field:
politics, economy and international rela-
tions.
Today Uzbekistan has finished the tran-
sition period from the soviet command-
administrative system to a democratic
country with market economy. We have
created the solid foundations of statehood,
established legislative, executive and judi-
cial branches of power, developed various
institutions of civil society, raised our
unique historical heritage and national
identity.
In his program speech on 12 November
2010, HE Mr. Islam Karimov, the Presi-
dent of Uzbekistan, outlined the Concept
of further development of the country,
which prioritized such directions as –
democratization of state power, reforming
the legal system, developing the electoral
legislation, ensuring freedom of speech,
strengthening civil society institutions,
deepening market reforms and liberaliz-
ation of economy.
On the international arena our country
has gained a reputation as a responsible
partner adhering to peace and stability in
the region. Uzbekistan has put forward a
range of important foreign policy initia-
tives which influenced multilateral dy-
namics in the region and internationally.
Among them – initiative on establishing of
the International Counter-Terrorism Centre
within the UN Security Council (1999)
which led to formation of the UN Counter-
Terrorism Committee (2001). Others in-
clude creation of the Central Asian Regi-
onal Information and Coordination Centre
on Combating against Drug Trafficking
(2002) and the Nuclear-Weapon-Free Zone
in Central Asia (2006).
The assistance in normalization of the
situation in neighbouring Afghanistan is
one of Uzbekistan’s foreign policy priori-
ties. Established on our initiative under the
aegis of the UN in the late 1990s, the
“6+2” Contact Group on Afghanistan
(included six bordering countries, Russia
Uzbekistan: 20 Years of Political Stability and Economic Growth
Exchange talks to His Excellency Mr. Otabek Akbarov, Ambassador of the Republic of
Uzbekistan to the United Kingdom of Great Britain and Northern Ireland, and the
Kingdom of Norway
,
26 www.ibde.org
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E X C H A N G E: The Magazine for International Business and Diplomacy Interview
Official logo of Uzbekistan’s 20th Anniversary of Independence
and the US) has proved its effectiveness.
Now, we propose to resume this group in
an enlarged format “6+3” involving NATO.
Exchange: What are your thoughts on
economic development of Uzbekistan, par-
ticular in transition to a market economy?
How did Uzbekistan address the con-
sequences of the global economic crisis?
Ambassador Akbarov: Uzbekistan’s model
of economic development was based on
five principles: (1) de-ideologization of
economy and its priority over politics, (2)
the state – main reformer, (3) rule of law,
(4) strong social policy and (5) gradual
reforms. This approach resulted in con-
siderable achievements, recognized by all
major international financial institutions.
During 20 years, the country’s GDP
grew by 3.5 times, while per capita ratio -
by 2.5 times, real incomes of population -
by 3.8 times, state expenses for social
security - 5 times, child and maternal
mortality rates fell three and two times re-
spectively, life expectancy of men climbed
to 73 from 67 years and for women to 75.
The structure of our trade has radically
changed transforming Uzbekistan from a
country which previously exported raw
materials and imported finished products,
to a country with growing export of value
added products and importing mainly high-
tech equipment. Today Uzbekistan is a
leading industrial country in Central Asia
with modern automobile, airplane and
machine building, textiles, food pro-
cessing, metallurgy, natural oil and gas
processing, chemical and other industries.
In 2008-2009 when a number of other
countries were suffering from the global
economic crisis, Uzbekistan recorded GDP
growth at 8.5-9 percent, in 2010 – 8.1
percent, while in 2011 it is estimated to be
8.5 percent.
Uzbekistan is a member of the IMF,
World Bank, Asian Development Bank,
Islamic Development Bank and Economic
Cooperation Organization. It has observer
status at the World Trade Organization.
Exchange: What is the current investment
climate in your country? Can you provide
some examples of the biggest investment
projects in Uzbekistan?
Ambassador Akbarov: The Government
has created favourable conditions for
foreign investors. The country has gained a
reputation of a reliable business partner
with a qualified workforce, rich mineral
resource base and developed transport
infrastructure.
Nowadays, Uzbekistan enjoys eco-
nomic cooperation with 180 countries. Our
traditional trade partners are the CIS
countries, notably Russia, Ukraine and
Kazakhstan, which in aggregate account
for over 40% of all exports and imports.
Non-CIS partners have been increasing in
importance in recent years, with China,
US, EU, South Korea, and Japan being the
most active.
The value of foreign trade turnover
grew from 805,6 million in 1990 to 21,8
billion USD in 2010. The volume of
investments into our economy reached 100
billion USD, and number of enterprises
with foreign capital – 4200. Our main
partners in implementation of investment
projects are General Motors, Texaco,
MAN, Daimler Benz, Isuzu Motors, Su-
mitomo, Korean Air, Korea Telecom,
Gazprom, Lukoil, Petronas, CNPC and
other world class companies.
Established in Navoi region of Uz-
bekistan, the Free Industrial and Economic
Zone allowed formation of a modern, well-
diversified industrial base by attracting
advanced technologies and resource
efficient equipment. Business entities re-
gistered in the FIEZ are exempt from
practically all types of taxes, customs
duties for imported equipment and raw
materials depending on the volume of
direct investments made. There are 21
ongoing projects in FIEZ now.
Exchange: Uzbekistan is a member of a
number of regional organizations, in-
cluding the Commonwealth of Independent
States and Shanghai Cooperation Org-
anization. How important is regional and
international economic cooperation to
Uzbekistan at this stage?
Ambassador Akbarov: Along with the
aforementioned organizations I would point
out that Uzbekistan is also a member of
UN, OSCE, Collective Security Treaty
Organization, Organization of Islamic
Conference. We take an active part in the
activities of UNESCO, WHO and ILO.
Today, the Commonwealth of Indepen-
dent States (CIS) is on the brink of its 20-
year anniversary. During this period we
have heard different statements, sometimes
diametrically opposite, opinions and
forecasts regarding the effectiveness of the
CIS activity. However, time has demon-
strated that the CIS still remains the only
structure which promotes development of
multilateral cooperation among the major-
ity of post-soviet countries.
Meanwhile, modern realities demand an
improvement of the CIS activity. One of
the most important issues on the CIS
agenda is intensification of economic co-
operation on the basis of the free trade
regime between member-states and further
development of transport communications.
These priorities are secured by the CIS
Concept of further development, signed by
Heads of States on 5 October 2007.
When we talk about the Shanghai Co-
operation Organization (SCO), it is impor-
tant to mention that Uzbekistan, which
signed the Shanghai Declaration in June
2001, was one of the founders of this
Organization. On the basis of the principles
of equality, we together with other mem-
bers formulated and introduced the SCO’s
strategy. Our priorities include ensuring
security and stability in the region,
strengthening investment cooperation,
development of transport networks and
telecommunications, creation of jobs and
solving social problems.
Welcoming the SCO Charter goals on
security and regional stability, Uzbekistan
attaches a great importance to the activity
of the Regional Anti-Terrorist Structure
(RATS) in Tashkent.
We also support the establishment of
links between the SCO and other inter-
national structures. The organization has
contacts with ASEAN, as well as observer
status in the United Nations. The de-
claration on collaboration between the
secretariats of the UN and SCO, signed in
April 2010 in Tashkent, also facilitates the
establishment of constructive relations
between the UN Counterterrorism Com-
mittee and the Executive Committee of
RATS.
Uzbekistan chaired the SCO in 2010
and hosted its summit in Tashkent in June
of that year, when the Head of our State
put forward several important proposals
28 www.ibde.org
Interview Exchange: Autumn 2011
related to development of the decision-
making mechanism within the SCO and
activity of its structures. The summit
resulted in signing of the Declaration of the
Heads of States, the Provision on regu-
lations for admission of new members in
SCO, as well as Agreements on collabo-
ration in the field of agriculture and fight
against crime and number of other impor-
tant documents.
Exchange: The United Kingdom is one of
the main financial centres of the world.
How do you evaluate the level and pros-
pects of cooperation between Uzbekistan
and UK?
Ambassador Akbarov: The diplomatic
relations between Uzbekistan and the
United Kingdom were established in
January 1992. However the historic ties
between European countries and Uz-
bekistan have a long history, when Amir
Temur and King Henry IV exchanged
letters (XV century), Marco Polo and Ruy
Gonzales de Clavijo visited the region with
trade and diplomatic missions (XIII and
XV centuries).
The transit stop of President Islam
Karimov at the London Stansted Airport
on 19 September 2010 (on the way to the
United Nations MDG Summit in New
York) was a symbolic step forward in the
bilateral political dialogue. During the
meeting with British officials, President
Islam Karimov expressed satisfaction with
the development of the Uzbek-British
relations in a number of areas and noted
that our country is open to expanding this
cooperation further. In his welcoming
letter addressed to the Head of our State
the British Prime Minister Rt. Hon. Mr.
David Cameron showed interest in develo-
ping further constructive links in business,
education, parliamentary and regional se-
curity areas.
The United Kingdom is one of the
major trade partners of Uzbekistan in
Europe. About 200 joint ventures with
British investors operate and over 50
British companies have their representative
offices in Uzbekistan.
Moreover, there is a growing interest
from British business towards Uzbekistan.
In particular, it became obvious during the
17th Session of the Uzbek-British Trade
and Industry Council in December 2010 in
Tashkent, which was attended by the big-
gest British business delegation consisting
of 78 representatives from 40 companies.
As result of their direct contacts with
Uzbek partners a multi-million-pound
investment package is being implemented
between two countries. The next UBTIC
forum is planned to be held in late autumn
2011 in London.
Education and science are actively
advancing fields in our relations. The
Westminster International University in
Tashkent delivers a high quality education
for citizens of Uzbekistan. Nowadays,
there are several British universities
interested in establishing such kind of
partnership with Uzbekistan.
The Cambridge Central Asia Forum
headed by Professor S. Saxena implements
a number of projects jointly with Uzbek
researchers and scientists. One of the
outstanding examples of this cooperation
will be the Centre of High Technologies in
Tashkent aimed at boosting innovations in
pharmacy, geology, geophysics, biotech-
nology, sustainable energy, nanotech-
nology, software development and other
areas.
In the framework of the British Coun-
cil’s INSPIRE Program, five universities
of Uzbekistan are implementing inter-
national strategic partnership in research
and education with five universities in
Britain.
Cultural diplomacy is one of the most
effective ways to promote friendship
among nations. British designers and
artists annually visit world-famous his-
torical cities of Uzbekistan – Tashkent,
Samarkand, Bukhara, Khiva and others
during the Style.UZ Art Week, Asrlar
Sadosi (“Echo of Centuries”) Traditional
Cultural Festival as well as other events,
exhibiting their arts and carrying out joint
projects.
Together with the Forum of Culture and
Arts of Uzbekistan large scale of cultural
activities have been carried out in the UK
as well: Suzani embroidery exhibition in
Burrell’s Collection Museum in Glasgow,
photo exhibition “Tashkent: the History of
one City” in London, Cambridge and Bath
are to mention but few.
Exchange: What are the current develo-
pment and prospects of Uzbekistan’s
relations with the Kingdom of Norway?
Ambassador Akbarov: As Ambassador of
Uzbekistan to Norway with residence in
London since May 2010, I am glad to
contribute to the intensification of our
relations with this country. Now, there is a
regular dialogue between our Foreign
Ministries, and similar exchange is planned
in the parliamentary sphere.
There have been several visits of No-
rwegian business community to Uzbe-
kistan last years. Particularly, the dele-
gation led by the State agency Innovation
Norway visited our country in 2009 and
held meetings in number of state depart-
ments, as well as a trip to the Navoi Free
Industrial Economic Zone.
Nowadays Norwegian companies such
as International Development Norway and
the Energy Saving International implement
their projects in Uzbekistan.
The next visit of a delegation from the
business community of Norway to Uzbe-
kistan and a joint business-forum are
scheduled for November 2011. High tech
companies like Statoil, Aker Solutions,
Numerical Rocks, SINTEF multiphase
flow laboratory, as well as representatives
of the Norwegian University of Natural
Science and Technology are expected to
attend this forum and contribute by their
presentations for local business commu-
nity.
Tashkent: the capital of Uzbekistan
www.ibde.org 29
EU-BALKANS AMBASSADORIAL ROUNDTABLE
24 November 2011, 09:30 -15:30
Followed by a drinks reception
Venue: Europe House, London SW1P
Organised in conjunction with the UCL European Institute
European integration stands alongside comprehensive and sustainable growth as the
overarching goals for the Balkans. As all Western Balkan countries plus Turkey aspire
to full EU membership, the domestic challenges they face and the membership criteria
they are expected to fulfil make the pursuance of political reforms as well as sound
economic policies essential to ensure the region’s progress.
Further to a closer cooperation among the Balkan states themselves, necessary in order
to overcome the legacy of the Yugoslav wars, the key regional priorities thus include
socio-economic development, sound public finance, external assistance management,
enhanced consultation among all stakeholders and anti-corruption measures.
The European Union supports governments in addressing these challenges through the
so-called Stabilization and Association Process. It offers key instruments for political
stabilisation, transition to a market economy and regional cooperation, and thus
represents a prime motivational force for reform in the region. However, the EU also
faces challenges of its own with regard to future enlargement, not least the onset of an
“enlargement fatigue” among existing member states.
The “EU-Balkans Ambassadorial Roundtable” aims to create an opportunity to address
these challenges by way of a constructive dialogue of relevant stakeholders - diplomats,
EU officials, business people – with academics specialising in research in this field from
UCL and elsewhere.
To view the full agenda and the list of speakers please go to www.ibde.irg or to register your
interest please email us at [email protected]
Analysis Exchange: Autumn 2011
www.ibde.org 31
he Arab Spring breathed new life
into demands for political reform
in the Gulf Cooperation Council
(GCC) states. Since the beginning of the
popular uprisings in North Africa, a series
of petitions and calls for meaningful
change rattled the conservative Gulf
monarchies. Significant unrest in Bahrain
briefly threatened the ruling Al-Khalifa
family before it was quelled by the
intervention of military forces from Saudi
Arabia and the United Arab Emirates
(UAE). Oman, Kuwait and parts of eastern
Saudi Arabia also saw significant protests,
while the UAE responded to oppositional
activity with a repressive clampdown on
advocates of reform. Although the meas-
ures restored a degree of stability to the
Arabian Peninsula, they indicated that the
oil states, too, were vulnerable to the
fusion of political pressure with socio-
economic discontent that proved so potent
in North Africa.
Policy responses in the GCC states
focused overwhelmingly on short-term
measures as officials acknowledged the
social and economic roots of the political
tensions. These included hand-outs of cash
(Kuwait, Bahrain and the UAE), creating
jobs in already bloated public sectors
(Saudi Arabia, Bahrain, Oman), and
raising workers‟ wages and benefits (Saudi
Arabia, Oman). Together, they represented
„tried and tested‟ measures designed to
pre-empt unrest and secure short-term
stability by throwing money at the prob-
lem.
The scale of the spending is enormous.
Saudi Arabia announced two emergency
welfare packages collectively worth $130
billion. This figure exceeded every annual
government budget until 2007 and
included a provision to employ 60,000
additional Saudis in the Ministry of
Interior alone. It also contained stipulations
for increasing the minimum wage of public
sector employees (but not private sector
workers), offering a one-time bonus of a
month‟s pay to all public officials, and
constructing 500,000 new homes to
combat a crippling shortage of social
housing. In Bahrain, the Ministry of
Interior promised to create an additional
20,000 new jobs in an already-bloated
public sector, while in Oman, Sultan
Qaboos announced 35,000 new public
sector jobs as well as a pay increase, while
leaving the private sector largely un-
touched.
Yet the decision to intensify the politics
of patronage by increasing the flow of
unproductive payoffs to key sectors of
society deliver damaging blows to the
programmes of economic diversification
launched in recent years in every GCC
state. These intended to scale back the role
of the state in the economy and boost the
role of the private sector. Instead of
strengthening the private sector and
weaning citizens off public sector
employment, the new packages expand
government spending and widen an
already-large discrepancy between the
public and private sectors. In addition, they
create hostages to fortune as they lock in
government spending at very high levels
that depend on the price of oil remaining
high.
Indeed the packages are fiscally un-
sustainable in the longer-term. Over the
past decade, the break-even price of oil
that Gulf economies require to balance
their budgets has risen inexorably. In Saudi
Arabia the increase has been from $20 to
nearly $90 per barrel, with the Institute for
International Finance forecasting a break-
even price of $115 by 2015. Bahrain
already faces a break-even price exceeding
$100 per barrel while even oil-rich Kuwait
is approaching $80, well-up on previous
years. These high prices reflect in part the
massive spending commitments made this
year, but political sensitivities mean it is
unlikely that governments will easily be
able (or willing) to roll back the financial
inducements at a later date. In distributive
states that lack a participatory dimension it
is far easier to give something than it is to
take it away.
Reinforcing the political status quo at
best delays meeting the calls for change
and leaves untouched the underlying
challenges of resource depletion and the
transition toward post-oil economies. All
GCC states will face this transition sooner
or later, with greatest urgency in Oman and
Bahrain, which already obtains the
majority of its oil (and resulting revenues)
from an agreement to share Saudi Arabia‟s
Abu Safah field. Preparing for the post-oil
era was the purpose of the ambitious
economic diversification programmes and
national „visions.‟ However, buying
support in the short-term only increases the
challenges of transition in the long-term,
with immediate needs of ensuring regime
survival trumping those of genuine
political and economic reformulation.
This is most evident in Bahrain, where
the government had invested heavily in
diversifying into a regional tourism and
financial hub based on the slogan of
Business-Friendly Bahrain. In turn, it
formed the cornerstone of the Bahrain
Economic Vision 2030 drawn up by the
Economic Development Board, headed by
the reforming Crown Prince, Salman bin
Hamad Al-Khalifa. However, these efforts
were shredded as the regime fought
violently for its political survival in the
face of mass social opposition from
February to June 2011. Political influence
also shifted away from the Crown Prince
toward his hard-line great uncle, Prime
Minister Khalifa bin Salman Al-Khalifa.
As with the wider Gulf region, busi-
nesses in Bahrain were only jus recovering
from the effects of the global financial
crisis in 2008-9. This had impacted its core
real estate, construction, financial and
T
Policy responses to the Arab Spring in the Gulf
Kristian Coates Ulrichsen
E X C H A N G E: The Magazine for International Business and Diplomacy Analysis
2 www.ibde.org
high-end tourism sectors. Following a year
of recovery in 2010, businesses were
expecting an upturn of growth in 2011. Yet
the simmering tensions and continuing
absence of a comprehensive political
settlement are inflicting greater damage
than the initial shock of the uprising itself.
They signal to foreign investors and insti-
tutional partners that governmental claims
of a return to normality rest on a fragile
and transient veneer of stability.
August announcements by Volvo of the
cancellation of its 2012 Golf Champions
Tournament and by Credit Agricole of its
plan to close its Bahrain office and relocate
to Dubai are significant. Contrary to expec-
tation, the majority of regional and
international banks and businesses did not
abandon Bahrain in March. Most investors
adopted a „wait and see‟ approach that now
appears to be wearing thin. An incon-
clusive national dialogue held in July and a
faltering Independent Commission do not
hold out to investors the hope of any
speedy resolution to the roots of unrest.
Thus, the fallout from the impact of the
Arab Spring is both political and eco-
nomic, as contradictory internal pressures
complicate and undermine policy respons-
es to conflicting short - and longer-term
goals of stability and reform.
s developments unfolded in the
Middle East and North Africa
(MENA) during the past eight
months, one thing has become abundantly
clear: the political transformation will not
survive without an economic transforma-
tion. Many analysts have pointed out that
an overwhelming motivation of the people
who took to the streets with the Arab
Spring was the dismal economic and
employ-ment condition on the ground;
high unemployment among the young,
crony capitalism, inefficient welfare state,
and even food shortages.
Therefore, the new regimes emerging
from the Arab Spring will have to tackle
the many economic problems that are
plaguing the region. How do you promote
economic growth in politically transition-
ing nations, like the ones of MENA?
Which economic model should be imple-
mented in pursuit of economic growth,
higher employment, and equal opportu-
nities for all (a major demand of the people
in the streets)?
Three levels of economic activity,
where trade plays a role
Any strategy for instituting political reform
in MENA will have to include a strong
consideration for economic reform, and in
particular integrating the region into the
global economy. The nations emerging
from the Arab Spring need to reenergize
entrepreneurial activities at the local level,
strengthen the regulation of national mar-
kets, and facilitate exports through regional
trade integration.
At the local level, commerce always
existed, especially in the Arab world with
its strong cultural affinity for exchange and
bargaining. What small and medium size
local merchants need to grow and flourish
is the freedom from government regulation
/intervention, and the existence of an
infrastructure system that only the govern-
ment can create and maintain.
In order to jump-start local markets and
promote economic activity at the lowest
level, the central government should trans-
fer the administration and regulation of
local markets to local authorities. This will
allow for the more efficient operation of
these local markets, and free the central
government to tackle bigger issues. Thus,
the collection of taxes and promulgation of
licenses and local regulations should be
performed at the local level, with respect to
these local markets and small/medium size
companies.
For its part, the central government
should concentrate its efforts in providing
the necessary infrastructure (roads and
transportation systems, power grids, tele-
phone, internet), and venues/methods for
adjudication and dispute resolution (courts
and other legal services) – all very neces-
sary for the proper functioning of a local
economy. It is imperative that small entre-
preneurs have the necessary access to
adequate transportation, consistent energy
and upgraded for the 21st century com-
munication systems – something only the
central government can guarantee.
At the national level, what applies for
small companies and local markets should
also apply nationally. However, it will be
very challenging for a young democracy to
both regulate and control large companies.
After all, corruption at the top and exploit-
tation of the public trust by the regimes of
Tunisia and Egypt was in part what broke
the proverbial camel‟s back and sent the
people to the streets. In order for neo-
liberalism to succeed, it will have to apply
to the large national companies and the
national market as well, subjecting them to
the same free market economic rules that
the middle class had to live by during the
past 20 years.
Therefore it is imperative that any libe-
ralization at the national level or any priva-
tization of national companies be done
slowly, methodically and very carefully.
Shock therapy like the one used in post-
A
A trade agenda for the ‘Arab Spring’ Global integration and the dangers of neoliberalism!
Nasos Mihalakas
Analysis Exchange: Autumn 2011
www.ibde.org 31
Closed shops from Arab Spring. Photo credit: Allvoices
soviet Eastern Europe, and WB/IMF „one
size fits all‟ economic policies which
advocate for complete and unconditional
liberalization of the market, will lead to the
perpetuation of cronyism and the further
enrichment of the current elite. For exam-
ple, the government should scrutinize not
only the selling/privatization of large and
inefficient government companies, but also
operation/management of large companies
transitioning from national monopolies to
market economies.
At the international level, there are
two trade-related strategies for growth;
first, regional integration that focuses on
movement of workers, goods, and capital;
and second, preferential access to western
markets through financial assistance from
the WB and the IMF.
Free movement of workers is impe-
rative for a region that has a lot of jobs to
offer in the oil and gas industry, but relies
heavily on migrant workers from sub-
Saharan Africa and Asia. The region needs
a common regulatory system that allows
for preferential working permits of Arab
citizens wishing to move from non-oil
producing countries (like Egypt, Syria,
Tunisia, Morocco, Yemen, Jordan) to oil-
producing countries, but does not extend
citizenship rights. Such movement of
workers could alleviate unemployment in
some countries, grow production in others,
and foster better understanding and co-
operation among the otherwise culturally
and religiously similar people of the
MENA.
Although many analyst hope that the
Arab Spring will usher a new era of peace
and democratic values for the region, some
like Leon Hadar doubt that and argue that
the Middle East should follow the ASEAN
model of regional integration. (see: “The
Middle East Needs an ASEAN”). Mr.
Hadar argues that ASEAN is a mosaic of
various political systems and old and new
civilizations in various stages of economic
development, which were brought together
not by a common ideology, religion, or
culture, but rather by their mutual eco-
nomic and political interests. A free-trade
zone for the MENA region (like ASEAN),
based on the large and educated middle
class of the region, could further grow the
regional economy and provide many new
employment opportunities.
A role for the West
The best thing the west can do for the
people of MENA right now is help them
integrate into the global market… quickly
but sustainably! Western nations should
link democratic development with access
to western markets, and promise to deliver
the benefits of preferential trade access to
the people of those nations that embrace
democratic values and democratic forms of
governance. The promotion and facilitation
of a regional trade agreement should be at
the forefront of any western economic ini-
tiative about the Arab Spring.
The question of how can the Bretton
Woods institutions (WTO, IMF, WB) help
the „Arab Spring‟ is hard to answer, con-
sidering that it was IMF and WB policies
in the first place that led to imbalanced
liberalization of the Tunisian and Egyptian
economies, and the inevitable crony capi-
talism that has followed the application of
neoliberalism in the Middle East. On the
other hand, only the IMF and the WB can
guarantee large-scale economic assistance.
During the most recent G-8 summit (this
past May) the G-8 countries pledged $20
billion of their own money to go along
with $20 billion offered by the IMF and
the WB, to support the Arab Spring.
Although it is unclear whether that re-
presents new money, or the re-branding of
existing aid commitments, the amounts are
quite significant. Debt forgiveness or re-
negotiation of past debts by the post Arab
Spring governments should also be part of
any IMF/WB strategy to help the region.
E X C H A N G E: The Magazine for International Business and Diplomacy Analysis
Foreign direct investment in Egypt after the revolution:
Prospects and policy recommendations
Guoyong Liang
lobal flows of Foreign Direct In-
vestment (FDI) rose 5% to $1.2
trillion in 2010. For the first time,
developing and transition economies as a
whole absorbed more than half of the
world’s FDI. However, various developing
regions showed divergent performance:
East Asia, South-East Asia and Latin Ame-
rica experienced strong growth in inflows,
while those to Africa, South Asia and West
Asia continued to decline. As one of the
leading FDI recipients in its region, Egypt
saw FDI inflows slumped during and after
the revolution. Nevertheless, the long-term
prospects remain positive, and consider-
able opportunities exist both internally in
the post-Mubarak Egypt and externally in
the post-financial crisis global economy.
To seize these opportunities, substantial
policy reforms are needed.
FDI to Egypt: before and after the
revolution
Despite a slight decrease in FDI inflows,
Egypt ranked No.3 among all host coun-
tries in Middle East and North Africa in
2010 (figure 1). The country emerged as an
important FDI recipient in the mid-2000s:
inflows boomed during 2004-2006; and its
share in total inflows to Africa rose from
the annual average of 3% during 2001-
2003 to 22% in 2006 (figure 2). However,
FDI inflows have gradually declined since
then, in both absolute and relative terms.
A sudden shock is inevitable in 2011.
During the revolution, political turmoil
significantly affected foreign investors’
confidence and their motivation to invest
in Egypt; afterwards, instability continued
to deter investment. The high level of
perceived risks had a strong impact on
corporate strategies and practices – new
investments halted and divestments oc-
curred. As a result, FDI inflows to Egypt
turned negative in early 2011. According
to the Central Bank of Egypt, a total of US
$1.97 billion FDI fled out of Egypt during
the first quarter of 2011, leading to ne-
gative net inflows of US$163 million. This
is in sharp contrast to positive inflows of
US$656 million in the last quarter of 2010.
Medium-term prospects in FDI inflows
to Egypt are uncertain, depending on how
long the ongoing political transition will
last and when a functional democratic
institution will be established. Neverthe-
less, long-term prospects are still positive,
as economic fundamentals remain and the
general direction of political changes is
encouraging. More importantly, the revolu-
tion has provided an opportunity for re-
shaping the Egyptian economies system
and establishing a market-based, develop-
pment-oriented policy framework. As long
as the country regains its political stability,
reforms its economic system, and puts an
enabling investment climate in place, FDI
will come back in a big way.
A new approach to FDI is called for
Mubarak regime’s inability to provide
basic services and indifference to wide-
spread unemployment and persistent
poverty have led to the revolution. Today,
the old regime has been thrown away by
Egyptian people, but the economic, social
and political challenges remain intact;
some even become worse due to the short-
term shocks, such as that on the tourism
industry. Currently, there are diverging
views and hot debates on the economic
strategies that a new Egypt should adopt.
What is neglected, but I believe is impor-
tant above all is that Egypt needs a
developmental State, which can design and
implement a development strategy suitable
for the country. For decades, there were
too many internal and external constraints
for Egyptian people to choose such a
strategy. Now it is the time to do so.
G
34 www.ibde.org
Analysis Exchange: Autumn 2011
Figure 1.Top five FDI recipients in Middle East and North Africa, 2010
(Billions of dollars)
- 5 10 15 20 25 30 35
Israel
Qatar
Egypt
Turkey
Saudi Arabia
2010
2009
Source: UNCTAD.
Figure 2. FDI inflows to Egypt, 2001-2010
(Billions of dollars and per cent)
0%
5%
10%
15%
20%
25%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
-
2
4
6
8
10
12
14
FDI inflows to Egypt Share of Egypt in Africa
Source: UNCTAD.
Concerning FDI, the new generation of
Egyptian policy makers should take the
opportunity to make changes happen. First,
they need to emphasize quality rather than
quantity in their future investment pro-
motion efforts, thinking about how to
attract “quality FDI”, leverage resources of
multinationals, and make their investments
create more jobs and contribute to income
growth and poverty reduction. Second,
they need to consider how to invest in
human resources and infrastructure, and
therefore enhance the location advantages
of Egypt to match the ownership advan-
tages of multinationals. Last but not least,
they need to devise a long-term strategy on
FDI in line with the country’s overall
approach to development. This long-term
strategy should be supplemented by short-
term tactics on how to target leading
investors, kick off pilot projects, enter
niche markets and upgrade afterwards.
Some lessons from Asia can be learnt.
Studies on the so-called “East-Asian
Miracle” demonstrates that, despite the
diversities, the economic success of Asian
tigers was largely driven by a develop-
pmental State that put development at the
centre of its policy agenda, collaborated
with the private sector, and supported its
expansion. The Asian experience also
shows that manufacturing is the key and
domestic productive capacities are crucial
for entering into a sustainable path of
inclusive growth and poverty alleviation.
FDI can play an important role in this
regard, as highlighted by the experience of
China and a number of South-East Asian
countries, such as Malaysia and Thailand.
Rebranding Egypt to seize new
opportunities
Against the backdrop of the financial
crisis, global economic landscape is being
reshaped. Massive off-shoring of manu-
facturing to East Asia slows down. Mean-
while, emerging economies have become
important international investors. Asian
countries like China now face rising
production costs and over-capacities in a
range of industries, and are in a process of
rapid industrial upgrading. As a result, the
relocation of productive capacities takes
place both within East Asia and beyond.
This provides opportunities for Egypt. For
example, a contract manufacturing project
run by such Asian companies as Foxconn
and Flextronics may employ tens of
thousands of workers. By attracting such
kind of investments, Egypt will be able to
relieve its pain of youth unemployment.
Large infrastructure projects can play the
same role, and foreign investment can also
be mobilized through various public-pri-
vate-partnership arrangements. For such
useful investments to gain momentum,
rebranding Egypt as an attractive location
and regional hub for FDI is a first step.
As young men on the streets move to
factories and construction fields, a major
demographic challenge to the Egyptian
economy, namely a surge in young un-
employed population, will be turned into
an advantage. Here, what makes difference
between an asset and a liability is a vision-
ary and effective policy. It is my sincere
hope that such a policy will be put in place
and help foster a democratic and prosper-
ous Egypt in the not too distant future.
(The views expressed in this article are
those of the author and do not necessarily
represent the views of, and should not be
attributed to, UNCTAD.)
www.ibde.org 35
E X C H A N G E: The Magazine for International Business and Diplomacy IBDE Events
Financial Markets: A Gateway to Balkans Prosperity
EU-Balkans Discussion Group – 5th Luncheon
Polish Embassy, London, 20 July 2011
The fifth working luncheon of the EU-Balkans Discussion Group
was hosted and chaired by Her Excellency Barbara Tuge –
Erecińska Ambassador of the Republic of Poland at the Polish
Embassy, London, on 20 July 2011, as a follow up of the fourth
meeting of 21 March 2011 hosted and chaired by the Hungarian
Embassy.
Regional economic and political cooperation and sustained foreign
direct investment, as noted by Ambassador Tuge-Erecińska, and
further elaborated by the IBDE Chief Executive, are necessary for
further integration of the local economies of the Western Balkans
into the European economic and political structures. In light of
this, Mr Peter Hayes, Head of Public Affairs of the London Stock
Exchange and Advisory Board member of IBDE was invited to
talk about how financial sector can promote public/private sector
development in South Eastern Europe and the role of Stock
Exchanges in facilitating the process.
The meeting noted that the Polish Presidency has put EU
Integration and the economic growth at the top of their agenda and
in this context Poland - with its vast experience on the subject of
EU integration – could be of great support and benefit to the
countries of the region in their path towards European integration.
The meeting took the opportunity to congratulate Croatia and
Hungary for concluding negotiations on the Accession Treaty for
Croatia.
Dr Peter Hayes, Head of Public Affairs of London Stock Exchange
and IBDE Advisory Board Member, noted that talking about
financial markets in the Balkans is particularly relevant because
the Balkans is a crossroad of cultures, civilizations, and it seems
that after years of struggle now is a time of opportunity for the
Balkans. In terms of foreign investment, equity investment seems
to be the most attractive opportunities from the London Stock
Exchange perspective. Particularly, at a time of turbulent financial
crisis, equity, according to Dr Hayes is more resilient than debt.
Dr Hayes noted that given the strategic location of the region, its
richness in natural resources including the energy potentials in
hydro-power, wind power and solo-power as well as potentials in
investing in infrastructure and tourism, the finance to further
develop such important sectors for the region has to come from
equity investors. According to him international financial markets
could also provide equity to enhance the economic development in
the region considering that there are numerous companies, some in
the public sector that will need to be modernised in order to
strengthen their activities in an ever-increasing competitive envi-
ronment. Therefore the London Stock Exchange perspective is that
the opportunities of using equity as a part of the privatisation
model – which can still allow some degree of control of the
national identity – could be the way forward.
The meeting also noted that some of the companies in the region
might have difficulties with listings on various exchanges. It was
also suggested that smaller family businesses and medium sized
companies from the UK/EU should be encouraged to explore the
opportunities in the region. The potential for investment in pension
funds, inward investment and the high quality of the labour
markets in the Balkans were raised too.
The meeting concluded that the raising of awareness of business
opportunities, visibility and points of perception (one of the
objectives of the EU-Balkans DG) together with the governmental
support in the region in providing a friendly and well regulated
business environment and the highest standards of corporate
behaviour, should allow the Western Balkans in partnership with
the international markets to unlock the potential and enhance the
economic development of the region.
The luncheon was attended by the Ambassadors and other senior
diplomats of EU-Balkans including Turkey, as well as directors
from FCO, UKTI, London Stock Exchange, HSBC, EBRD, DMA
...
The “EU-Balkans Discussion Group” meetings, as an initiative of
the IBDE - an NGO based in London, are designed to support and
promote regional cooperation and the socio-economic develop-
pment of South East Europe with the support of EU and Balkans
Embassies in the UK for the benefit, in particular, of the countries
of the Western Balkans and the EU. In this regard the project aims
to focus on regional cooperation, providing a regional approach for
trade and/or investment, in order to maximize its common regional
appeal to the wider multinational business community.
To register your interest please send your email, name, position
and affiliation at [email protected]
36 www.ibde.org
IBDE Events Exchange: Autumn 2011
EU-Balkans Discussion Group – 5th Luncheon - Polish Embassy – 20 July 2011
www.ibde.org 37
E X C H A N G E: The Magazine for International Business and Diplomacy IBDE Events
38 www.ibde.org
Project Finance considerations for infrastructure financing in
South Eastern Europe
EU-Balkans Discussion Group – 6th Luncheon German Embassy, London, 20 September 2011
Ambassador of the Federal Republic of Germany, His Excellency
Mr Georg Boomgaarden and the Chief Executive of IBDE, Mr
Rudi Guraziu, hosted a luncheon for the EU-Balkans Discussion
Group at the German Embassy on 20 September.
Forty participants from the diplomatic and business com-
munities listened to presentations by Ms Lin O'Grady from the
European Bank of Reconstruction and Development, Mr Carsten
Conrad from Tirana Business Park, and Mr Pierre Kahn from
Deutsche Bank, and engaged in a lively discussion about
opportunities for infrastructure development in South Eastern
Europe. The event was the sixth in a series organised by IBDE in
cooperation with the European Embassies.
The German Ambassador emphasised the strong support for the
European prospects of the region stating that after the horrors of
war witnessed in the Balkans during the 1990s it is encouraging to
see that today’s Balkans is viewed as a region of business op-
portunities and investment potentials. Following the welcoming
remarks by the Ambassador, Rudi Guraziu briefed participants on
the working of the Group noting that the EU-Balkans Discussion
Group luncheons which aim to strengthen regional cooperation as
well as to explore and evaluate the potential for public/private
sector investment in South East Europe, are also useful in
providing potential investors an opportunity to network with
likeminded business leaders from the region who are seeking
foreign capital. In this context, he expressed delight that one of the
speakers was already operating in the region and the meeting was
an excellent opportunity for the speaker to present his project
before participants.
Lin O’Grady - from the Municipal and Transport Team at EBRD
- outlined EBRD goals in supporting the development of the
market economies and democracies. Ms O’Grady noted that most
of the work of EBRD in the Balkans has tended to go to public
sector companies rather than the private sector, although the main
objectives of the bank are to support the growth of the private
sector. She outlined the criteria that the projects need to meet to
qualify for EBRD financing; i.e. a project must support sound
market economies and democracies; it inherently needs to support
the development of private sector (something very important to
EBRD) and it has to strengthen sustainability, because of the banks
environmental mandate. According to her since 1991 EBRD has
financed over 3100 projects - a total volume of 170 billion Euros.
In the transport sector typical projects are road rehabilitation/
reconstruction and railway renewal/refurbishment (bringing rail-
way companies within European norms). The bank on this date of
the meeting (20 September 2011) signed a loan of 100 million for
Macedonia to finance a key section of corridor 10 from Serbia,
Macedonia into Greece. In financing ports, rehabilitation is on-
going in Croatia and Montenegro, as well as the port of Durres in
Albania. Financing is also ongoing at airports in Montenegro and
Zagreb (Croatia). In the municipal sector EBRD works with the
European Union on co-financing, including the rehabilitation of
water and waste water systems. Public-Private-Partnerships come
into bank’s financing of urban transport systems, including
rehabilitation of roads. We also do financing of district heating
systems. In terms of the fund allocation, EBRD commits around
500 million Euros to this region each year, amounting to at least
about 5 significant projects.
Finally, Ms O’Grady added that a small amount of EBRD’s
portfolio is channelled into financing waste fields, including one in
Croatia.
Carsten Conrad - Tirana Business Park General Manager - spoke
about “Bridges between Infrastructure Development and Private
Foreign Direct Investment [PFDI]" and focused on: a)
Infrastructure essentials/necessities in order to attract PFDI (i.e.
road networks, airports, railways, public transport etc) b)
Infrastructure components (or the lack of it) which could be
subject to the PFDI in liaison with authorities (i.e. water treatment
plants, power distribution, IT supply etc) and c) Monetary impacts
on the PFDI and approaches to funding.
IBDE Events Exchange: Autumn 2011
www.ibde.org 39
Mr Conrad noted that the Lindner Group - a family-owned
Bavarian company that he represents had gained substantial
experience in the region through their completed projects in Sofia
when Bulgaria was in the process of EU accession 15 years ago
and their current involvement in Albania. As a serious investment
group, he noted that they are particularly focused in South Eastern
Europe, developing projects related to long term investments, a
belief by the Lindner Group in the positive prospects of the region.
Two years ago Lindner Group acquired 20000 square meters of
land very close to the airport in Tirana where there is an increasing
demand for office space, and where the company plans to deliver
the Tirana Business Park. This, he noted, covers a concept of
work-life balance to deliver office space of western European
standards at stable and competitive prices. As the General
Manager of Tirana Business Park, he emphasised that Albania
offers a young, vibrant and very educated population - a country
eager to attract foreign direct investments. Therefore, according to
him, despite some problems, it is very possible to see great
business possibilities in Albania and the region as a whole.
Pierre Khan - Deutsche Bank - added a keynote on the financing
of infrastructure, covering various sectors and the issues they share
in common: these assets tend to be very important to stabilise key
elements of the economy; money has to come up-front and over a
period of many years, be repaid and pay a dividend to investors.
He stated that heavy infrastructure investments are fundamental to
national economies and often tend to be regulated industries. As
such, they are very important to governments which have a
significant role in creating a supporting framework for those
assets. According to Mr Khan corporate finance is one way to
finance infrastructure projects, but often good assets have the
attractiveness to be financed on the public finance basis. They also
tend to be relatively complex, particularly in the case of large
projects and that means that they require the support structures.
There is also an element of evolving risk over the life of the
project, starting from the construction period, including design,
and technical risks. Once built, a different type of risk emerges:
operating the asset, maintaining that asset, effecting the revenues
you projected to get and the actual amount you get.
Mr Khan further noted that in project finance it is very
important to identify the risks and mitigate them. In terms of
general requirements for project finance, it is crucial to have
transparency in the system with a stable legal framework, contracts
and tax environment. And in the case of taxes, if they change, it
normally has an effect on the cash flow. One also needs func-
tioning and supportive institutions. These projects tend to take a
long time, sometimes over election cycles, and often political
priorities change. Therefore it is important that governments
provide a stable economic environment to get the long term
confidence of investors.
One of the issues raised at the meeting (by James Robin diplomatic
correspondent of BBC News) was the unfolding events in the Arab
Spring and whether this new environment could put the South
Eastern Europe at risk, considering that banks such as EBRD are
looking to explore the new business opportunities in these new
emerging democracies. Oleg Levitin from EBRD noted that while
it is true that EBRD is looking for ways to engage in the Middle
East and North Africa, because the bank feels they can play a
positive role in stabilising such important regions, the bank’s main
attention and focus nonetheless will remain Eastern Europe,
Caucasus and the Balkans. The meeting also noted that other
actors than EBRD play a major role in the overall development of
the region such as European Commission and European
Investment Bank. In this regard, the Western Balkans European
perspective is seen as the only serious incentive for the necessary
political and economic reforms in the region, and this is also the
strongest tool in making investment in the Western Balkans more
attractive to foreign investors with long-term investment strategy.
Finally the meeting discussed the ways that would make the
upcoming Western Balkans Investment Forum a success!
The luncheon was attended by the Ambassadors and other senior
diplomats of the EU-Balkans (including Turkey) Embassies plus,
FCO, EC Representation, City of London Corporation, HSBC,
London Stock Exchange, Visa Europe, EBRD, Ernst & Young,
ICC, BBC, Thomson Reuters, The Economist amongst others.
Attendance at events in this series is by invitation only. VIP
Luncheons are open to the Ambassadors of EU-Balkans (including
Turkey), EC, FCO, UKTI Directors and business leaders.
Invitations are extended to CEOs, CFOs, COOs, EDs, MDs,
DGs, senior board members, decision makers and strategists from
blue-chip companies interested in, or already investing in South
Eastern Europe.
To register your interest please send your name, position and
affiliation to [email protected]
Mr Carsten Conrad
E X C H A N G E: The Magazine for International Business and Diplomacy The Culture Exchange
The Culture Exchange sees in the 2011-12 London arts season a bill of fare to please the most discerning
international palette
Opening on November 4th at the
Theatre Royal Haymarket Robert
Lindsay and Joanna Lumley will
set the audiences roaring as Trevor
Nunn directs “The Lion in Winter”.
A family Christmas becomes a
family at war. Henry II, not so
young as he was, invites his
estranged wife Eleanor of
Aquitane, and his three sons,
Richard, Geoffrey and John, to
spend the festive season with him,
his mistress Princess Alais, and her
brother, the young King Philip of
France. Will Henry name who is to
be his successor as King of England? Their yuletide celebration
turns into a combat zone of deceit, betrayal, bitter power games
and scabrous wit.
"I am excited to be directing the London premiere of a famous
play about a power struggle full of sexual politics and political sex,
with two such brilliant actors as Robert Lindsay and Joanna
Lumley." - Trevor Nunn (www.trh.co.uk).
National Theatre will be staging a
unique event at its Lyttelton Theatre
starting in November - dramatic readings
of the King James Version of the Bible:
the New Testament. While the National
Theatre’s production of “War Horse”
(New London Theatre) continues to be
one of the best shows season after season,
this season’s massive hit “One Man, Two
Guv’nors” (based on the Goldoni
commedia classic) will transfer to the
Adelphi. (www.nationaltheatre. org.uk).
Old Vic Theatre presents one of
Ireland’s greatest playwrights, J.M.
Synge, in his masterpiece,
“Playboy of the Western World”,
until the end of November.
This savagely funny Irish classic
was first produced in 1907 and was
met with rioting and controversy
when it premiered, sending shock
waves across the dramatic world.
Set in a small village in the west coast
of County Mayo, The Playboy of
the Western World is a lyrical
comedy which tells the story of
lonely dreamer Christy Mahon
who wanders into a pub, claiming that he has killed his father.
Captivating the locals with his tale of bravery he becomes an
instant hero but it turns out that there's an unexpected twist in his
tale. (www.oldvictheatre.com)
In December Donmar
Warehouse brings a
Shakespearean blockbuster
to its intimate space:
“Richard II”, starring
Eddie Redmayne, the
young Tony Award winner
(Donmar’s Broadway
transfer of “Red”).
Anyone who was lucky
enough to have seen Sir
Derek Jacobi’s “King
Lear” last season will
know just what amazing
things the Donmar can do
with the immortal bard. (www.atgtickets.com/london)
The Royal Opera House will
wrap up the year with the
uplifting Wagnerian
masterpiece, “Die Meister
Singer von Nurnburg” in
November and December at
the opera. For those who
want a change from the
“Nutcracker” the Royal Ballet
will present a beautifully
balanced triple bill with
Ashton’s “Enigma Variations, Kenneth Macmillan’s wartime
setting of Poulenc’s “Gloria” and “Asphodel Meadows” which
won rising choreographic star Liam Scarlett the Classical
Choreography award 2010 from the Critic’s Circle national Dance
awards. (www.roh.org.uk) One Man, Two Guvnors, Photo credit: Johan Persson
40 www.ibde.org
The Culture Exchange Exchange: Autumn 2011
At the Coliseum the English National Opera will
bring “Der Rosenkavalier” to the festive table with
a giant of British opera, John Tomlinson, as Baron
Ochs. You can brush up your English as all ENO
productions are sung in translation. (www.eno.org)
Back at the Royal Opera House make a
note in the diary for March - a treasure
from Eastern Europe - Dvorak’s “Rusalka”.
And to lift the February gloom, another
icon of the British vocal tradition, Thomas
Allen, will take up one of his signature
roles, Don Alfonso, in Mozart’s “Cosi fan
Tutte”. Get set for lots of fun with those
handsome “Albanians” in this delicious
comedy masterpiece featuring some of
Mozart’s most luscious music.
Up at Sadler’s Wells Theatre
the major venue for cutting
edge dance, November 6-12
will feature the Cloud Gate
Dance Theatre of Taiwan - a
company which builds on the
greatest strengths of traditional
Chinese aesthetics in bringing
their own unique vision of
contemporary dance to the
stage. (www.sadlerswells.com)
On the classical music scene, the Wigmore Hall, one of London’s
architectural treasures, launches a year-long celebration of Ravel’s
creative life in music beginning with the Artemis Quartet on the
3rd of December. February 11th the doyenne of British sopranos,
Felicity Lott, is joined by the Nash ensemble for a program of
Wagner, Mozart and R Strauss. On 26th February the Chilingirian
Quartet presents Hayden, Ravel and Brahms in their 40th
anniversary concert while April brings the Tokyo String Quartet.
Mark your calendars for May 8th: the internationally renowned
pianist, Mitsuko Uchida will join forces with mezzo-soprano
Magdalena Kozena for Debussy and Messiaen.
(www.wigmore-hall.org.uk).
Elizabeth harrod in TheNutCracker Photo ROH, Johan Persson
Photo credit: Liu Chen-Hsiang
www.ibde.org 41
E X C H A N G E: The Magazine for International Business and Diplomacy Society
44 www.ibde.org
The Beravales’ garden party
Diplomats from various continents attended the Beravales’ annual summer champagne garden party at their residence in Woking.
Photographs by Roland Kemp
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the balkans poised for investment
in the energy sector
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