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Balkans: Experts Urge West To Invest Wisely

The Balkan nations have a half century of communism and a decade of ethnic war behind them and now are looking forward to integration with Europe. But as RFE/RL's Andrew F. Tully reports, a group of economic experts says this will require financial help from the West.

Washington, 28 January 2000 (RFE/RL) -- A panel of economists is urging the West to seize the opportunity to invest -- but invest wisely -- in Balkan nations to help bring them into the European mainstream.

The task force, sponsored by the Council on Foreign Relations, or CFR, an American think-tank, issued a report on Monday (Jan. 24) that recognizes the challenges for investing in the Balkans.

The report notes that the Balkan states are emerging from 50 years of enduring centrally planned economic systems, and the aftermath of wars brought on by centuries of ethnic hostilities.

The CFR task force report notes that the economic and political instability in the region may make Western governments, businesses and lending institutions reluctant to invest in the Balkans. But the document also stresses that the region is adjacent to important markets for their exports, particularly the countries of the EU and Turkey.

Steven Rattner, deputy chairman of Lazard Freres & Company, an investment banking firm, is chairman of the CFR task force. At a briefing on Monday to mark the release of the report, Rattner stresses the Balkans' unique geographic and economic position.

"While we think of the Balkans as part of Europe, it's very much at the -- a bridge, in effect, between what we think of as Europe and what we think of as the developing world. I say that not only from a geographic standpoint, but really more importantly and more relevantly to what we're here to talk about today, from an economic standpoint: That when you look at the economic statistics of these countries, they constituted 53 million people, which is roughly the size of France or the U.K. But they constitute only about 1 percent of Europe's GDP, while France and the U.K. each constitutes about 14 percent."

Among the report's most noteworthy recommendations is that the U.S. and the EU reconsider the nature of their sanctions against Serbia. Under that embargo, no Western aid would go to Belgrade until the people of Yugoslavia replace President Slobodan Milosevic.

Michael Froman, a former senior official at the U.S. Treasury and a director of the CFR task force, explains it this way:

"The sanctions regime -- we did not make any recommendations with regard to changing the sanctions regime. We do not view that as the mandate of this group. However, we did flag that policy members in the EU and the United States and elsewhere should continue as they always do to take a hard look at the way they are balancing the desire to isolate Milosevic and the pain that they -- that we are inflicting on the Serbian people and on the neighboring countries."

The CFR report also calls for Western nations to base their financial support of Balkan nations on "conditionality" -- a given Balkan country should receive more aid but only on the condition that it continues to pursue economic and political reforms. Froman gave these examples:

"To the degree Bulgaria needs money, Bulgaria should get money because they really are trying very hard to do the right thing. Romania -- it's a little less clear. And places like Bosnia, frankly, are lagging fairly far behind."

The report concludes that the West must act quickly or it may lose a great opportunity to bring the Balkan nations into the European mainstream. Rattner put it this way at Monday's briefing:

"Our greatest fear is not necessarily so much that the clock is ticking in the sense that war will break out again. But more our fear is that the West will lose its focus because that's just the nature of things. Some other crisis will occur somewhere else -- who knows what? -- and we, the West, will get distracted."

Rattner said some members of the task force expressed concern that conditionality might not achieve the desired results. In some cases, for instance, withholding financial aid could destabilize a country economically and politically.

Joshua Muravchik is an analyst of Eastern European affairs with the American Enterprise Institute, a Washington think-tank. He laughed when told of this concern.

"There's no way to say it's unfair. I mean, it's our money. We're giving it to people, we can put whatever conditions we want on it."

Muravchik also was asked if he believes it is possible to ease the sanctions on Serbia while still isolating Milosevic. He told RFE/RL that he believes this would be possible.

"It might be, you know, better to err in the direction of letting some stuff go that we'd rather not, than in the direction of, you know, keeping the embargo air-tight and making it harder for the opposition to operate."

In any case, Muravchik described economic sanctions as little more than "blunt instruments" that should be made more subtle to get desired results.