WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION Working Group on Investment Policy and Promotion Sarajevo, Bosnia and Herzegovina 21 February 2013 1

FDI in the region Review of Investment Policies and Investment Promotion Ideas for regional co-operation 2

FDI inflows from 2000 to 2010 (EUR mn) 5, 000 4, 500 4, 000 3, 500 3, 000 2, 500 2, 000 1, 500 1, 000 500 0 200 0 Albania 200 1 200 2 200 3 Bosnia and Herzegovina 200 4 Croatia 200 5 200 6 Kosovo* 200 7 200 8 FYR Macedonia Source: World Bank, 2012. The official OECD conversion rate for 2010 of 1. 324 USD/ euro is used. 200 9 201 0 Montenegro 3 Serbia

FDI as a % of GDP (2007 to 2010) Source: World Bank, 2012. The official OECD conversion rate for 2010 of 1. 324 USD/ euro is used. 4

FDI by source in 2007 Source: Vienna Institute for International Economic Studies, based on data from central banks. Update as of May 2012. No data available for Albania and Kosovo*. 5

FDI by source in 2010 Source: Vienna Institute for International Economic Studies, based on data from central banks. Update as of May 2012. No data available for Albania and Kosovo*. 6

Western Balkan FDI by activity (NACE Rev 1) -1000 0 1000 2000 3000 4000 27 65 1 7 A Agriculture, hunting and forestry B Fishing C Mining and quarrying -20 225 D Manufacturing 195 1048 21 44 E Electricity, gas and water supply 252 F Construction -22 G Wholesale, retail trade, repair of motor. . . 376 877 2007 94 12 H Hotels and restaurants I Transport, storage and communication J Financial intermediation 2010 1229 18 3211 305 K Real estate, renting and business activities 563 L Public administration, defence, . . . 0 0 M Education 969 0 1 N Health and social work O Other community, social and personal. . . Other not elsewhere classified activities (A-Q) 0 11 71 28 68 185 Source: Vienna Institute for International Economic Studies, based on data from central banks. Update as of May 2012. No data available for Albania, Montenegro and Kosovo* based on NACE classification. 7

Western Balkan FDI by manufacturing activity -500 -400 -300 -200 -100 0 100 DA Food products, beverages and tobacco 40 5 238 79 17 13 DE Pulp, paper and paper products, publish. & printing 20 DF Coke, refined petroleum products and nuclear fuel 17 82 211 0 DG Chemicals, chemical products and man-made fibres 2007 DH Rubber and plastic products 2010 80 14 43 DI Other non-metallic mineral products -28 244 DJ Basic metals and fabricated metal products DK Machinery and equipment n. e. c. DL Electrical and optical equipment 22 3 -36 45 11 92 DM Transport equipment DN Manufacturing n. e. c. 400 25 DD Wood and wood products -440 300 57 DB Textiles and textile products DC Leather and leather products 200 89 18 Source: Vienna Institute for International Economic Studies, based on data from central banks. Update as of May 2012. No data available for Albania, Montenegro and Kosovo* based on NACE classification. 8 286

FDI in the region Review of Investment Policies and Investment Promotion Ideas for regional co-operation 9

Investment Reform Index (IRI) Dimensions Investment Reform Index 2010 1 - 1. 2. Investment Policy and Promotion 1. 1 Covering priority dimensions related to the Regional Framework for Investment : FDI Policy 1. 2 Investment Policy and Promotion Human Capital Development Investment Promotion and Facilitation Sub-Dimensions 1. 1 Access to Finance 5. Regulatory Reform and Parliamentary Processes 6. Tax Policy Analysis 7. Infrastructure for Investment 8. ACAAs Trade Policy and Facilitation 4. Indicators FDI Policy 5. 3 3. Sub-dimensions SME Policy 1. 1. 8 Intellectual Property Rights Indicators Level of Reform 1 2 Development of IP Laws 1 10 3 4 5

IRI Monitoring framework Investment Policy and Promotion • • • • • National Treatment Admittance of personnel Transfers FDI incentives Performance requirements Land ownership Titling, cadastre and restitution Intellectual Property Rights Expropriation International Investment Agreements International Arbitration • • • Strategy Institutional Support Monitoring and Evaluation FDI-SME linkages One stop shop Client Relationship Management Policy Advocacy ? Aftercare services • • Publication avenues and tools Prior notification and stakeholder consultations Procedural transparency Investment Promotion and Facilitation Transparency FDI Policy 11 Privatisation strategy Privatisa tion consultations Restrictions on foreign investor participation in privatisation PPP units PPP legislation PPP consultations PPP cost benefit analysis PPP monitoring Privatisation and PPPs

IRI assessment methodology – tripartite structure Government selfassessment Private Sector Independent experts 12

Results of Investment Policy and Promotion assessment in IRI 2010 5 4 Score 3 2 1 0 ALB BIH BG HRV XK MK Investment Policy and Promotion FDI policy Transparency MD MNE RO Promotion and Facilitation Privatisation and PPP Policy 13 SRB

Results of Investment Policy and Promotion assessment in IRI 2010 5 4 3 Score Albania • Simplifying administrative procedures related to licenses • Reforming the tax administration and enforcement of tax laws 2 1 0 ALB BIH BG Investment Policy and Promotion HRV XK FDI policy MK MD MNE RO SRB Promotion and Facilitation Transparency Privatisation and PPP Policy Source: Foreign investor council white paper; chambers of commerce, other international organisations monitoring investment climate reforms in the Western Balkans; US State Department Reports. 14

Results of Investment Policy and Promotion assessment in IRI 2010 5 4 Bosnia and Herzegovina • Improving liquidation procedures • Clarify urban planning and construction laws and transfers of construction permits between investors Score 3 2 1 0 ALB BIH BG Investment Policy and Promotion HRV XK FDI policy MK MD MNE RO SRB Promotion and Facilitation Source: Foreign investor council white paper; chambers of commerce, other international organisations monitoring investment climate Transparency Privatisation and PPP Policy reforms in the Western Balkans; US State Department Reports. 15

Results of Investment Policy and Promotion assessment in IRI 2010 5 4 3 Score Croatia • Accelerate approval of business visas 2 1 0 ALB BIH BG Investment Policy and Promotion HRV XK FDI policy MK MD MNE RO SRB Promotion and Facilitation Transparency Privatisation and PPP Policy Source: Foreign investor council white paper; chambers of commerce, other international organisations monitoring investment climate reforms in the Western Balkans; US State Department Reports. 16

Results of Investment Policy and Promotion assessment in IRI 2010 5 4 Score 3 2 1 0 ALB BIH BG Investment Policy and Promotion HRV XK FDI policy Kosovo* • Increase transparency and fairness of public procurement activities • Better organised and transparent tenders SRB MK MD MNE RO Promotion and Facilitation Transparency Privatisation and PPP Policy Source: Foreign investor council white paper; chambers of commerce, other international organisations monitoring investment climate reforms in the Western Balkans; US State Department Reports. 17

Results of Investment Policy and Promotion assessment in IRI 2010 5 4 Score 3 FYR Macedonia 2 • Improving administrative capacity to implement reforms 1 • Removing unnecessary administrative procedures 0 ALB BIH BG Investment Policy and Promotion HRV XK FDI policy MK MD MNE RO SRB Promotion and Facilitation Transparency Privatisation and PPP Policy Source: Foreign investor council white paper; chambers of commerce, other international organisations monitoring investment climate reforms in the Western Balkans; US State Department Reports. 18

Results of Investment Policy and Promotion assessment in IRI 2010 5 4 Score 3 2 1 0 ALB Montenegro • Contract enforcement and easing property registration • Improve the transparency and delivery of construction BIH permits localities BG HRV XK MK MD Investment Policy and Promotion FDI policy MNE RO SRB Promotion and Facilitation Transparency Privatisation and PPP Policy Source: Foreign investor council white paper; chambers of commerce, other international organisations monitoring investment climate reforms in the Western Balkans; US State Department Reports. 19

Results of Investment Policy and Promotion assessment in IRI 2010 5 4 Score 3 2 1 0 ALB BIH BG Investment Policy and Promotion Serbia • Better regulation of monopolies • Encourage bankrupt entrepreneurs to initiate bankruptcy proceedings and enacting amendments to the HRV Insolvency Law. MD XK MK MNE RO FDI policy SRB Promotion and Facilitation Transparency Privatisation and PPP Policy Source: Foreign investor council white paper; chambers of commerce, other international organisations monitoring investment climate reforms in the Western Balkans; US State Department Reports. 20

Results of Investment Policy and Promotion assessment in IRI 2010 5 4 Score 3 2 1 • • • 0 Common points for improvement ALB BIH BG XK MD MNE RO Accurate land title registration. HRV cadastres MK and Transparency in policy design and implementation, especially at sub-national level Investment Policy and Promotion FDI policy Promotion and Facilitation Accelerating administrative procedures Transparency Privatisation and PPP Policy IP enforcement Monitoring and evaluation of investment promotion Expanding role of IPAs to act as one-stop shops 21 SRB

FDI in the region Review of Investment Policies and Investment Promotion Ideas for regional co-operation 22

Investment Policy Peer learning exercises on several topics, for example: • Experiences with investor-state arbitration • Restitution processes and procedures • Digitisation of cadastres and land registers • Experiences with FDI incentive programmes and their evaluation Enhance the transparency of investment policy design. For example, upcoming laws, regulations or administrative procedures could be presented and discussed at the SEEIC or WGIPP. This would allow policy makers to receive comments from investment policy experts from the region prior to enacting legislation. Development of regional best practice guidelines for specific areas of policy, such as updating land registries or even evaluating the costs and benefits of investment attraction programmes. 23

Investment Promotion Regional investment promotion strategy – a tailored regional strategy/approach targeting international investors in sectors or niches who could fit into Western Balkan value chains. A regional exhibition – a touring exhibition which would visit foreign markets and highlight a specific sector or niche area in each of the seven Western Balkan economies. Organisation of visits to Western Balkan – Western Balkan IPAs could organise joint visits of foreign investors to the region , with a stop in each economy. This would save time and money for the foreign investor. Co-location in foreign markets – Western Balkan IPAs could identify cities where they could save money and build on information synergies (e. g. , the Scandinavian Tourist Board in Asia-Pacific has joint offices in Tokyo and Beijing). 24

Thank you for your attention Milan Konopek Project Manager - Regional Competitiveness Initiative OECD Investment Compact for South East Europe Private Sector Development Division Organisation for Economic Co-operation and Development (OECD) Milan. konopek@oecd. org 25

Annex 26

FDI Policy National Treatment – national treatment restrictions on entry and operation of FDI Admittance of personnel – limitations on entry of specialised personnel to support FDI Transfers – restrictions on capital transfers in and outside of host economy FDI incentives – transparent application of incentives with monitoring and evaluation Performance requirements – requirements, such as local-content, on investments Land ownership – ability of investors to own land (urban and rural) Titling, cadastre and restitution – up to date cadastres and land registers, restitution process completed Intellectual Property Rights – enforcement of IP laws Expropriation – clear rules for expropriation and efficient legal process International Investment Agreements – what is contained in bilateral investment treaties International Arbitration – signatories to New York Convention and ICSID Convention 27

Investment Promotion and Facilitation Strategy – contents of an investment promotion strategy Institutional Support – level of support provided by the investment promotion agency Monitoring and Evaluation – whether the investment promotion strategy is evaluated FDI-SME linkages – programmes to support commercial linkages between FDI and local firms One stop shop – whether investors can submit and receive approval for all administrative procedures in one place Client Relationship Management - the degree to which investment promotion agencies keep track and follow up with foreign investors Policy Advocacy - whether the investment promotion agency advocates on behalf of investors Aftercare services – whether investment promotion agencies provide support to foreign investors after their establishment 28

Transparency Publication avenues and tools – whether laws and administrative procedures are codified and published Prior notification and stakeholder consultations - whether investors are notified in advance of changes to laws and procedures Procedural transparency - whether legal procedures are transparent, are their opportunities for appeals 29

Privatisation and Public Private Partnerships Privatisation strategy - existence of a privatisation strategy Privatisation consultations – are stakeholders prior to a privatisation Restrictions on foreign investor participation in privatisation – restrictions on foreign investors PPP units – is there a unit in government to lead PPP development PPP legislation - is there legislation covering PPPs, not just concessions PPP consultations - are stakeholders consulted prior to PPP being launched PPP cost benefit analysis - is there an assessment of a PPP monitoring - is the PPP monitored and evaluated? 30