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Doing Business in the Black Sea Economic Cooperation (BSEC) Region?

Doing Business in the Black Sea Economic Cooperation (BSEC) Region?

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Published by AP
Planning to enter/expand markets in Greece to Albania or Moldova to Armenia? Help is available with a thorough understanding of the region and the contexts, from poitical to social and business practices and legal considerations.
Planning to enter/expand markets in Greece to Albania or Moldova to Armenia? Help is available with a thorough understanding of the region and the contexts, from poitical to social and business practices and legal considerations.

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Published by: AP on Aug 06, 2010
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Evaluation of Convergence in Business Practice in Black Sea Economic Cooperation(BSEC) Member Countries, 2005-2010
Dr. Adrian S. PetrescuBrussels Belgium, April-May 2010Executive Summary
We have been conducting an analysis of progress and evolution in the Black SeaEconomic Cooperation (BSEC) area between 2004 and 2010. The full analysis hasconsidered recent geo-politico-economic and institutional developments in the region,within the BSEC Organization itself, the newly established BSEC-EU relationship andrelations with other BSEC Region centered related International Organizations or Initiatives. In this document herein however we only address in more detail issues pertaining to convergence in business practice in the BSEC member countries, as this isone of the most important goals of the cooperation established in 1991-1992 among theeleven countries.
This interim progress report is the first out of two consecutive progress reports and out of three reports in total, to include the final report. At this stage, this interim progress report presents the scope, background, methodology, primary, secondary and quantitative datasources collected, consulted and being used in the analysis, as well as a sample analysison some dimensions used in the evaluation, with respective interim conclusions. It alsoaddresses further evaluation research plans and deliverables, and includes references onthe variety of sources in use in the analysis.
Established in 1992 and comprising of eleven member states, the Black Sea EconomicCooperation Organization (followed shortly in 1993 by the establishment of itscomplementary BSEC Parliamentary Assembly) represented at the time for many actorsand analysts an ambitious and most welcomed initiative. Its goals and objectives wereimproving or simply maintaining stability and security in the Black Sea area, particularlythrough increased international cooperation in economic affairs between its members.Between 1992 and 2004 many things have changed in the international and regionalarena, and the BSEC region has been in much part at the core of some of these changes.While earlier reports found some significant progress in the establishment of aninstitutional framework, many and very diverse analysts of the region have concludedthat by far not as much functional progress as was hoped for in 1992 has been achieved.
From 2004 onwards, more significant changes have affected the area. Many have been inthe positive, with 2007 bringing new EU memberships for two of the BSEC member states (Bulgaria and Romania), or with some progress on settlement of some of the long-lasting conflicts plaguing the region. New policy cooperation initiatives have beenestablished within the EU towards its neighbours (the European Neighbourhood Policy— ENP), and stronger ties have been built between the EU and BSEC (the Black SeaSynergy of 2007). Attention to the region, both in academic and think-tank circles, has been growing steadily, while foreign investments as well as foreign trade inside and withcountries in the region have also surged somewhat significantly.Many changes have been in the negative nonetheless. To single out a significantexample, in August 2008 two otherwise members of the BSEC, Russia and Georgia, werefor five days at the heart of what became known as the “five days war”. While the crisiswas eventually controlled, and it resulted in an ongoing test for EU newly built strengthin monitoring missions, the case is much telling of the maintained very high instability potential (not just silent, but often erupting) that the region presents. It also speaksvolumes to the clashes of views and interests between BSEC member states that maydwarf in applied practice the formal progress achieved in institutional capacity building between members. While extreme, the non-singularity of the “five day war” case posesthen questions about the actual effectiveness of the BSEC and the broader institutionalcontext surrounding it in achieving its stated goals and objectives of stability and securitythrough intensified economic cooperation.The 2008 world financial crisis, triggered from the United States sub-prime mortgagecrisis but affecting global economic outlooks through investments related interconnectionof world economies, didn’t leave the region unaffected. In fact, having experiencedovervaluation based real estate investments driven “economic booms” right prior to 2008,many of the region’s countries are seeing after 2008 some of the more extreme negativeeffects of the crisis when compared to other countries affected. This massive economicslow down, often neighbouring the fear (or even manifestations) of national insolvency, plaguing even the EU member states in the region, whether old (Greece) or new(Bulgaria, Romania) affects highly the potential for any meaningful sustained economiccooperation in the area. This comes as no surprise at all for the set of 11 weaker BSECeconomies—as different as they actually are--, especially since the EU itself—a muchstronger economic actor—is experiencing the effects of the crisis strongly and manifestssome internal divergences on crisis response strategies and policies. The April 2009legislative elections in Moldova brought a major internal democratic crisis, which hasresulted initially in further straining of already ever so unnaturally tight political relations between Romania and Moldova. The crisis was ultimately resolved, yet its effects andmessage about inherent difficulties with conduct of democratic processes under hard andhardening economic conditions. None of these selected cases only briefly mentionedhere are at all singular. Such developments are rather the norm in the region, thusexamples being much too many to include them comprehensively in this executivesummary.
Many simply neutral (or somewhat positive, albeit by not being directly related to BSECown achievements they can be equally deemed negative) developments occurred as well.The opening in 2005 of the Baku-Tbilisi-Ceykan pipeline finalized project is one suchcase. Maintained “short-circuiting” of any multilateral institutional approach (BSECincluded, but not alone in the category) in resolving differences in views or advancingvarious (complementary or competing) gas pipeline planned investment projectstraversing the region and intended to provide natural gas to Europe from Russia can beconsidered another. These two instances are again not singular, being simply typical of many other similar instances. Such occurrences may however be consideredsymptomatic for the seemingly parallel-style (or disjointed) lack of connection betweenintended and/or declared goals and objectives inside and around the BSEC, and the wayin which different members’ actions and preferences or initiatives are actually pursued in practice.Under these conditions, this report comes at a time seemingly filled with mixed to modestresults of the BSEC when faced with ever more challenging developments in the region,whether on the geo-political side, the economic side, or on the internal democratic rule or international institutional cooperation fronts. This happens in spite of all the laudable yet perhaps overly ambitious internal and connected-regionally institutional efforts to scaleup the capabilities and cooperative framework of BSEC, and several other related bodies.Hence, in this report we attempt at evaluating progress in the face of increasingchallenges (which themselves may contribute to simply making significant progress moreunlikely in spite of best efforts), and at identifying areas of more effective success. Thelatter comes in view of learning some lessons on what areas of cooperation may work  better than others, and thus on how could BSEC, EU, and connected existing frameworksimprove their mutual policy actions for increasing their overall effectiveness.
Working Hypotheses and Methodology
The overarching hypotheses behind the creation of regional economic cooperationmechanisms such as the BSEC stem from the logic of the democratic peace theory, asamended to specify that economically interconnected democracies would not fight eachother. Thus, mechanisms such as BSEC and/or related bodies and initiatives surroundingit or its members would contribute to members’ and partners’ natural efforts to ensureinternal stability and security in the region. Furthermore, in the presence of “high- politics” disagreements, it is deemed that economic cooperation may be the vehicle for mutually mitigating such disagreements through the mutual interest based interest of  participating states in using economic means for mutual trust-building purposes. In turn,such trust-building measures would ensure over time more potential progress onresolving the other disagreements in other fields that may exist. This logic is represented by the following assumed cause-effect links:Economic Cooperation => Higher InterdependenceHigher Interdependence => Avoidance of Conflict, and Mutual Trust BuildingAvoidance of Conflict => Increased Regional StabilityMutual Trust => Increased Potential for Resolving Existing (Frozen) Conflicts

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