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South Balkan Development Initiative - Development of a U.S. Assistance Strategy

Political and Economic Context

In the mid-1990s, the Balkan countries of Albania, the Former Yugoslav Republic of Macedonia (FYROM), and Bulgaria were undergoing a historic transition and were developing more open, privatized, and market driven economies. As has been the experience of many countries in Central Europe , the transition was not without difficulty.

Compounding this transition process was the war in Bosnia and Herzegovina . The three countries were encountering severe economic difficulties stemming directly from the UN sanctions against Serbia , and from the Greek embargo of the Former Yugoslav Republic of Macedonia . Of all the major sectors, these challenges were having the greatest impact upon the countries' transportation infrastructures.

For example, in the case of FYROM, all transportation routes in the North-South direction were closed. The East-West road and rail links between FYROM and its neighbor Albania in the west and Bulgaria in the east, were in disarray and in many cases, there were no rail lines connecting the borders. This resulted in heavy truck traffic on FYROM's key roads. It was not uncommon for trucks carrying perishable cargo to be delayed at border crossings for as long as 24 hours, resulting in irreversible damage to the cargo and high costs for added labor hours. Also, the government was faced with subsidizing the portion of the trucking activity which was being managed by the public sector.

Government economists in FYROM estimated that the economic cost of the UN sanctions against Serbia , combined with the Greek embargo, was in the range of $140 million per month. In the case of Bulgaria , the economic cost was estimated to be approximately $220 million per month, whereas Albania was experiencing monthly costs of approximately $80 million per month. Together, therefore, the total economic cost to these three countries resulting from the sanctions and the embargo was estimated to be approximately $440 million per month.

In January 1994, at a meeting in Prague of the Balkan countries, President Clinton made a commitment to help mobilize international support for regional integration projects in Central Europe . Particular emphasis was placed on regional transportation projects including highways and airports. In response to the President's commitment, the U.S. Trade and Development Agency (USTDA) sponsored numerous activities to promote transportation integration in the region.

Other U.S. Government (USG) resources were dedicated to assisting the Balkan countries in debottlenecking traffic at their border crossings and customs clearing stations. These bottlenecks were essentially a result of the UN sanctions against Serbia which prohibited the North-South movement of goods that subsequently burdened an insufficient East-West transportation route. At of the end of 1994, funding of $4.85 million was provided by the USG to finance projects for the enlargement of border crossings, the improvement of customs clearing stations (both structural and efficiency improvements) and the expansion of parking facilities. These funds were administered by the United Nations Development Program (UNDP).

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CORE's Project Activities

President Clinton and President Zalev of Bulgaria held a meeting in Washington on February 13, 1995 from which a joint statement was issued by the two governments. The statement included an announcement that President Clinton would be seeking $30 million in funding from Congress for a South Balkan Development Initiative (SBDI) Project.

In June, 1995, the U.S. Trade and Development Agency (USTDA), in coordination with the State Department, selected CORE International, Inc.,(CORE) to (i) conduct a desk study, (ii) carry out a field mission, and (iii) develop specific recommendations for U.S. government assistance for the emergency reconstruction of the transportation sectors in Albania, Macedonia, and Bulgaria as part of the U.S. Government's SBDI strategy. During the period June-July, 1995, CORE conducted a desk study, held meetings and discussions with senior U.S. government officials from the USTDA, the U.S. State Department, and the National Security Council, and officials in The World Bank and the European Bank for Reconstruction and Development (EBRD) to gain insight into key transportation sector issues in Albania, the Former Yugoslav Republic of Macedonia (FYROM), and Bulgaria. The study team also collected vast quantities of data, meeting reports, project appraisal reports, issue papers, briefing papers, and other documents relevant to the transportation sector issues, priorities, and constraints in the three Balkan countries. These materials and the discussions with the concerned officials and consultants provided the basis for the study team to conduct the desk study. A field mission was carried out during which the team visited senior transportation sector officials in the three countries and officials at the EBRD.

Based on a review and analysis of over 150 project proposals from the three countries, CORE developed a comprehensive U.S. Government assistance strategy as part of the Administration's South Balkan Development Initiative. The combined investment needed to implement the priority projects identified by the three countries during the mission was estimated at $316 million for Albania , $247 million for Macedonia , and $1.18 billion for Bulgaria . This represented the total investment requirement by all three countries for their priority projects in the range of $1.75 billion.

As the first step toward this assistance strategy, CORE developed an immediate priority project package of $32 million which was approved by the U.S. Congress and The White House. These projects were implemented through a series of grants provided by the USTDA to the three governments.

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Key Accomplishments

The USG assistance was critical in that it opened up critical transport bottlenecks and permitted both passenger and cargo traffic from the coast of Albania eastward to the coast of Bulgaria . Also, a number of critical transport arteries and rail links were established or reconstructed quickly to allow transport of much needed consumer products. The project also reduced customs bottlenecks and illegal commodity trafficking across the countries.

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SUMMARY OF PROPOSED USG ASSISTANCE
SOUTH BALKAN DEVELOPMENT INITIATIVE (SBDI)

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