Benefits of “mini Schengen” for businesses in the region

Although there is a lot of talk about mini-Schengen, it seems that the real sector is not fully informed about the potential it brings. The Balkan “mini Schengen” initiative was created with the aim of eliminating obstacles to the free movement of people, goods, services and capital in the region, i.e. with the aim of creating a regional market. It was initiated by the President of Serbia and the Prime Ministers of Albania and North Macedonia by signing a joint declaration on regional cooperation, and it is believed that until all the countries of the Western Balkans are active in this initiative, it will not be possible to see its full effects.

The fact that the Western Balkan region has 18 million inhabitants (similar to the number of inhabitants of the Netherlands) and makes up a territory slightly smaller than Romania also speaks of the potential of this common market.

Although the pandemic has put this initiative on the back burner, it seems that with the challenges that the pandemic brings, this topic is becoming even more important in the region.

Important facts about the Western Balkan region and the potential that this initiative brings:

• Mini Schengen builds on and intensifies the initiatives contained within the CEFTA agreement and the subsequent Berlin process, aimed at the more complete implementation of the Action Plan for the common regional market, which was adopted at last year’s Western Balkans summit in Sofia, in November;
• At regional border crossings, the average transport truck is delayed from 0 to 8 hours. Estimates are that each hour of waiting costs around 50 euros. In addition to the above, due to unpredictability, there are also opportunity costs, such as: the frequent impossibility of “just in time” access to production. Here, the benefits that additional liberalization would provide are more than clear;
• As one of the proposals of the chambers of commerce, the possibility of equalizing the prices of postal services is highlighted, so that the entire region is viewed as domestic traffic (following the example of the Roaming Agreement that was signed in Belgrade in 2019, at the Digital Summit). Although at first glance it seems to reduce the income of postal operators, in the medium and long term it leads to a greater volume of traffic, connecting markets and greater regional trade exchange, especially in the segment of electronic commerce. It would also have a positive impact on the competitiveness of e-commerce companies in the region, thus preparing our companies for the EU market.
• The local educational structure of the population is problematic, and the potentials in the region enable greater mobility of personnel, and thus potentially greater employability, and secondarily less brain drain. It is possible to restructure the region so that certain areas in the region specialize in certain jobs. This is very important from the perspective of demography, which has important economic implications. From the aspect of human capital, a special aspect of this initiative refers to the abolition of work permits in the region, the mutual recognition of licenses and certificates and the completion of the complete administration electronically, that is, greater labor mobility;
• With the decline of unemployment in Serbia, the main motivator for foreign investments will no longer be the benefits provided by the state, but the structure of the available staff. The assumption is that lower unemployment will increase the volume of high-tech investments. Chambers of commerce of the region also see the creation of the regional labor market as a factor that has a positive impact on the development of each individual economy of the Western Balkans.
• The creation of a regional digital space, in order to integrate the Western Balkans into the pan-European digital market, is an important segment of the plan. The agreement signed at the Digital Summit in Belgrade in 2019 reduced the price of roaming in the region, and in July 2021, the price of local and regional calls is expected to equalize. After that, the plan is to work on a model to similarly integrate the Western Balkans into the EU zone where there is no roaming between members. The gradual abolition of roaming for the inhabitants of the Western Balkans would be a clear signal that the European Union sees us as its future part, creating measurable economic benefits, both for citizens and the economy.
• In addition to greater liberalization in the region, further liberalization and easier access to the market for the region’s companies in their business with the EU is also important, because the EU is still by far the largest trade partner of the Western Balkans, accounting for 69.4% of total merchandise trade in 2019 (82, 9% of total exports and 61.8% of total imports).
• The integrated regional market represents a step closer to the EU market, which opens numerous opportunities to each individual country in the region, but also to the region at the level of all countries;

The economic sectors that are expected to benefit the most through this initiative are the food industry and agriculture, the production of parts for the automotive industry, the electrical and metal industry, IT and telecommunications, and tourism. In all these fields, Serbia has considerable potential for improving its economy.

The above indicates that the economy is the most important common denominator for the development of the region, but also better cultural and political cooperation.