SOCIOECONOMIC AND ENVIRONMENTAL

ASPECTS OF SUSTAINABLE DEVELOPMENT

DURING THE FOURTH INDUSTRIAL
REVOLUTION

Thematic Compendium

Editors:
Dr. Edita STOJIĆ KARANOVIĆ
Dr. Kristijan RISTIĆ

Belgrade, 2020
 Publisher

International Scientific Forum “Danube – River of Cooperation”

danube-cooperation.com

International Scientific Board of the Thematic Compendium

Academician Prof. Emeritus Dr. Ljubiša ADAMOVIĆ, Belgrade, Serbia

Prof. Dr. Zsuzsa CSÁSZÁR, PhD, University of Pécs, Hungary

Prof. Dr. Silvo DEVETAK, Faculty of Law, University of Maribor, Slovenia

Prof. Dr. Laurent HASSID, PhD, Pléiade Laboratory, University Paris Nord Sorbonne,
France

Prof. Dr. Renata KONGOLI, Agricultural University of Tirana, Albania

Prof. Dr. Bernd KORTSCHAK, Vienna University of Economics, Austria

Prof. Dr. Eldin MEHIĆ, Faculty of Economics, University of Sarajevo, Bosnia-

Herzegovina

Prof. Dr. Mirjana SEKULOVSKA, St. Kliment Ohridski University, N. Macedonia

Prof. Emeritus Dr. Vujo VUKMIRICA, University of Banja Luka, Bosnia-Herzegovina

Prof. Dr. Ivo ŽUPANOVIĆ, Faculty of Tourism and Hotel Industry, Budva,
Montenegro

Editing & design: Enisa IMAMOVIĆ

Cover illustration: Gerd ALTMANN “Global Networking – Networks span the globe”

ISBN-978-86-82825-21-0
Contents

PREFACE.......................................................................................................................6

I - REGIONAL RESEARCHES ON RECENT AND EMERGING PROBLEMS

IS THE SOCIO- ECONOMIC COHESION OF THE DANUBE REGION POSSIBLE?

(Mariela SAVKOVA).....................................................................................................11

RETHINKING JAPAN: POWER RE-CALIBRATION AS A RESPONSE TO THE

CHANGING REGIONAL ORDER (Aleksandra BABOVIĆ).......................................51

YOUTH UNEMPLOYMENT IN THE WESTERN BALKANS AND MIDDLE

DANUBE BASIN IN LIGHT OF THE EUSDR GOALS AND EUROPE 2020
STRATEGY (Darija MARKOVIĆ)...............................................................................73

SOCIO - ECONOMIC IMPACT OF GENDER WAGE GAP ON SUSTAINABLE

DEVELOPMENT (Gordana GAŠMI, Mina ZIROJEVIĆ)..........................................99

II – RECENT AND EMERGING SECURITY ISSUES

ASSESSING THE IMPACT OF CLIMATE CHANGE ON ENVIRONMENTAL

SECURITY (Vera AREŽINA, Nenad SPASOJEVIĆ) ................................................121

THE POLLUTER-PAYS PRINCIPLE IN THE LEGISLATION OF THE WESTERN

BALKANS COUNTRIES AS AN ELEMENT OF ECOLOGICAL SECURITY (Jelena
ŠOGOROV VUČKOVIĆ, Darko M. MARKOVIĆ) ....................................................138

SOCIAL AND FINANCE SECURITY - THEORETICAL ANALYSIS AND

CHALLENGES FOR SERBIA (Kristijan RISTIĆ, Ilija ŽIVOTIĆ, Milan MALIDŽAN)
....................................................................................................................................167

III – SUSTAINABLE DEVELOPMENT, RESEARCHES BY AREAS AND BRANCHES

CIRCULAR ECONOMY FROM THE SOCIO-ECONOMIC AND ENVIRONMENTAL

ASPECT IN THE FOURTH INDUSTRIAL REVOLUTION (Pero PETROVIĆ,
Dragan ŽIVKOVIĆ)....................................................................................................194

ORGANISATIONAL AND SECTORIAL COMMITMENT IN THE DEVELOPMENT

OF INLAND WATERWAYS FREIGHT TRANSPORT: ANALYSIS OF EUSDR
TRANSNATIONAL PROJECTS (Dávid NAGY, András MUNKÁCSY, Melinda
JÁSZBERÉNYI).........................................................................................................220

THE EFFECTS OF TOURISM DEVELOPMENT IN THE DANUBE DELTA

(Cipriana SAVA, Gheorghe PINTEALĂ)...................................................................237
 GASTRONOMY OF BOSNIA AND HERZEGOVINA IN THE FUNCTION OF
REGIONAL TOURISM (Biljana KOZIĆ – RAĐENOVIĆ, Marija KNEZEVIĆ) .....263

INDUSTRIAL REVOLUTION IN AGRICULTURE - PAST, PRESENT, FUTURE

(Edita STOJIĆ KARANOVIĆ)...................................................................................286

Authors in alphabetical order

Vera AREŽINA, Belgrade, Serbia Pero PETROVIĆ, Belgrade, Serbia

Aleksandra BABOVIĆ, Japan Gheorghe PINTEALĂ, Bucharest,

Romania
Gordana GAŠMI, Belgrade, Serbia
Kristijan RISTIĆ, Belgrade, Serbia
Melinda JÁSZBERÉNYI, Budapest,
Hungary Cipriana SAVA, Timişoara, Romania

Marija KNEŽEVIĆ, Banja Luka, Bosnia- Mariela SAVKOVA, Vidin, Bulgaria

Herzegovina
Nenad SPASOJEVIĆ, Belgrade, Serbia
Biljana KOZIĆ - RAĐENOVIĆ, Banja
Edita STOJIĆ KARANOVIĆ, Belgrade,
Luka, Bosnia-Herzegovina
Serbia
Milan MALIDŽAN, Belgrade, Serbia
Jelena ŠOGOROV VUČKOVIĆ, Novi Sad,
Darija MARKOVIĆ, Moscow, Russia Serbia

Darko M. MARKOVIĆ, Novi Sad, Serbia Mina ZIROJEVIĆ, Belgrade, Serbia

András MUNKÁCSY, Budapest, Hungary Dragan ŽIVKOVIĆ, Belgrade, Serbia

Dávid NAGY, Pécs, Hungary Ilija ŽIVOTIĆ, Belgrade, Serbia

 PREFACE
to the Thematic Compendium
SOCIOECONOMIC AND ENVIRONMENTAL ASPECTS OF SUSTAINABLE
DEVELOPMENT DURING THE FOURTH INDUSTRIAL REVOLUTION IN THE
WESTERN BALKANS AND THE MIDDLE DANUBE REGION

Humankind always strives to satisfy needs, both those in personal consumption and
those that come from constant economic development, perfecting means and skills of
production.

The Fourth Industrial Revolution will potentially increase global income levels and
improve the quality of life of populations worldwide. However, so far mostly
consumers with access to the digital world have benefited, as new technologies
brought improved and new products and services which increased efficiency in their
lives. Further changes will fundamentally change our lives, work and attitudes
towards each other. The positive and negative effects of this are still not visible.
However, it is indisputable that the available technical and technological solutions
will be used to reduce the use of manpower, energy and materials. Advances in
artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3D
printing, virtual reality, nanotechnology, biotechnology are blurring traditional
boundaries and creating new business models, emerged in decade as result of the
fourth industrial revolution already changed the way we live, work and communicate.
But it was a long period for changes. Industrial revolution began to take place as far
back as 1870, with the advent of steam engines, which enabled mechanical
production and spurred the first industrial revolution. The second industrial
revolution, between 1870 and 1910 brought mass production with the help of electric
machines. That was a technological revolution. The third industrial revolution, from
1950 on-wards, meant the proliferation of computers, mobile phones, the Internet,
digital devices, the use of electronics, and information technology to upgrade
production automation. It was a digital revolution. Now, in the period of the fourth
industrial revolution, which is characterized by digitization, robotics, smart factories,
and cloud business. The fifth industrial revolution (Industry 5.0) in front of us is
characterized by aim of better connection between automation and the human brain
and emotional intelligence.

6
By positive attitudes toward technical progress (that I supporting strongly), the shift
from the fourth to the fifth industrial revolution will place more emphasis on the
human, bringing together the best of both: people and machinery, and also bring
greater productivity. “Monotonous, repetitive tasks will be ‘in the hands’ of
mechanics, and people will indulge in the creative side of the business. This will give
them more responsibility and increased control over the system, thus giving them the
opportunity to raise the quality of production. Nano fast processing and seemingly
endless memory, robots, drones, autonomous vehicles and other machines will free
us from the boredom of everyday life and work and allow our minds to ascend to new
heights.” (Petra Božič Blagajac, paletaznanj.si/peta-industrijska-revolucija/)

But nobody could deny that there are besides to very desirable effects and
characteristics of the fifth industrial revolution, there are aggravating circumstances.
First of all it will be needed retraining of manpower in many branches of economy, as
well as the additional education of older generation that had over the years placed
emphasis on developing communication and language skills, influencing skills, and
emotional empathy, developed in meetings, commuting to work, socializing after
work. Whereas generations have grown up in front of screens and excel in
technological skills such as the use of applications, the Internet, they have arranged
their lives to be as comfortable as possible. Also in connecting all generations lies a
piece of the fifth industrial revolution, in the magical mix of leadership skills of the
older and technological skills of the younger generations that will enable the
advancement of teams and organizations. We will therefore work more and more
closely with people and machines in the future. And now is the time to think about
this future and how best to prepare for the challenges that are coming and will change
the human race even more than the Fourth Industrial Revolution. We humans may
no longer be able to understand in detail the algorithms that will drive the machines
around us, but our emotional intelligence, ability to connect, experience, and that
human touch of soft skills, will put us in a position where we can, along with the
machines, set the rules of life. It will be necessary to revive the focus on those skills
with which a person will get the most out of technology. Japan, as one of the first
countries to do so, is focusing on creating a company that will support Industry 5.0. It
will be a super smart society where the Internet of things, artificial intelligence and
robots will merge into every industry and into all segments of society. They hope that
this information revolution will be able to solve problems that currently seem

7
unsolvable and make life more comfortable and sustainable. The Japanese Ministry
of Education, Culture, Sports, Science and Technology is thoroughly considering how
to adapt the education system to the needs and values of 5.0, from primary schools
onwards. Together with experts, they discover that the key to preparing young people
for rapid technological change is to focus on human benefits. “In the age of Google,
people no longer remember every piece of information and fact. Many tasks are best
done by computers. Therefore, emphasis needs to be placed on human skills such as
communication, leadership, endurance, curiosity, understanding and reading skills. ”
Organizations that take advantage of new technologies while creating opportunities
for their people will write true success stories. And in a world like this, happiness at
work will be even more important. Happy at work, they will be able to create
personalized products, they will understand people more easily, they will be more
open, creative, they will find meaning in their work, they will also communicate
better, they will be better leaders, flexible and resilient. The future really belongs to
the happy.

People want to stand out, be unique, express themselves and have market support.
This is exactly what Industry 5.0 will offer - the opportunity for people to express
themselves as individuals through personalized products. Everyone, even those with
more modest incomes. Such products can only be made by human involvement.

When we once again give people a central place in industrial production, Industry 5.0
will offer customers the products they really want and that bear the mark of human
concern, of human touch. It will offer employees work that will have more meaning
and significance.

And last but not least, personalization also gives a sense of luxury. Although Industry
5.0 brings a return to the old days, even those before industrialization, when someone
spent months knitting or carving a gift that was made purely and only tailored to the
recipient, as the one who made it knew him personally and therefore knew what
exactly he wants and needs.

Some countries in the Western Balkans also belong to the Danube Basin macro-
region, so the impact of the Fourth Industrial Revolution in these two macro-regions
should be observed, but also some experiences from other regions. All of the above
was the motivation for publishing this international scientific compendium, whose
authors are from six countries. This collection of papers has the character of

8
international scientific thematic compendium, having 12 first time published research
works of 22 authors from seven countries (12 from Serbia and 10 from other
countries, 3 from Hungary, 2 from each Bosnia-Herzegovina and Romania, and 1
from each Bulgaria, Japan and Russia).

Why is this compendium of a broader interest and value? The answer lies exactly in
the multidisciplinary characteristic of the compendium. Namely, the economic
activity of human society in general, or of a narrower territorial unit, can be viewed as
a whole. Based on certain criteria, individual areas of production can be
distinguished, but they are strongly interconnected, and general economic laws apply
equally in all these areas.

Therefore a very wide spectrum of scientific research-works was of interest and their
authors were invited for publishing. So authors from different research-fields and
from different regions were invited to publish their results in this Compendium that
this way has these parts:

I. Regional researches on recent and emerging problems, treating problems not

only from Danube and West Balkans macro-regions, but also an example from
another region of the world,

II. Recent and emerging security issues, mainly regarding environmental and also
financial security,

III.Sustainable development and industrial revolution from the point of view of

different areas and branches of economy.

All those questions were tackled in the compendium in front of you.

Finally, I would like to thank their contribution to this publication to all the authors
for the interesting scientific papers they have given for this collection, whose names
you could find in the contents of the publication, my co-editor, the reviewers who
reviewed the articles, and the technical editor of the collection whose names you
could find on the sub-covers of the compendium.

Belgrade, June 22, 2020

Dr. Edita Stojić Karanović,

Research Professor, President of the
International Scientific Forum
“Danube – River of Cooperation”

9
 I - REGIONAL RESEARCHES
ON RECENT AND EMERGING PROBLEMS
 IS THE SOCIO- ECONOMIC COHESION OF THE
DANUBE REGION POSSIBLE?

Mariela SAVKOVA1

Abstract

The last three enlargements of the European Union have opened a big gap between
the Eastern and Western European Member States (MS). The level of convergence
and cohesion of the European Union dropped dramatically after the accession of
former communist countries. The population of the European Union has increased by
20% and the EU average GDP has grown only with 5%. Due to the poor economic
development and lag of any infrastructure links with the Western MS, the countries
from Central and Eastern Europe (CEE) became eligible for funding from the
cohesion policy's first objective. The cohesion policy gained popularity quickly
because the large-scale funding from the Structural and Cohesion funds (SCF)
influenced every aspect of people’s life. After the implementation of two European
multiannual budgets, few of their NUTS 2 regions have cached up but the majority
still struggle to reach the EU average socio-economic development.

What is the situation in the Danube region? How big are the economic disparities
between the Members states, both internally between the MS and externally with the
non-EU MS (Serbia, Moldova, Montenegro, Bosnia and Herzegovina, and Ukraine)?
What is the European border for cohesion and regional poverty? Why the Structural
funds' impact on regional disparities have to be monitored? Can the cooperation in
trade, investments, and innovations be the instrument for better cohesion of the

1 Mariela Savkova, researcher and author of materials, presentations, and interviews on the
impact of cohesion policy over socioeconomic development of the Northwestern region of
Bulgaria. Manager of the European projects for raising awareness about European cohesion
policy since 1.11.2011. Part of the International Consultant Team who prepared “the Inter-regional
Development Study for the impact of the construction of the Danube Bridge Vidin-Calafat over
the socioeconomic development of three regions of Romania, Bulgaria, and Serbia, 2006.
Currently preparing doctoral research on “ The theory and practice of cohesion policy 2007-2013.
System of monitoring the impact of Structural funds over regional disparities in Bulgaria”, at New
Bulgarian University, Sofia, Bulgaria. E-mail: savkovamariela@gmail.com

11
Danube countries? How the Structural funds and cross- border programs can
contribute to better cohesion between the Danube countries?

Keywords: European Union, regional science, SEE, terms cohesion, cohesion policy,
open regionalism, less developed regions, European border of cohesion, regional
disparities, Danube countries, the impact of European Structural and Cohesion
funds (ESIF) over socio-economic development, business climate, regional
disparities, and governance.

Introduction

Recent analyses of the impact of cohesion policy over the „less developed“ ЕU
countries show evidence that the incorrect transposition of cohesion policy can cause
negative outcomes as expanding regional disparities, expensive economic growth,
centralization of economy, and an expanded role of State above local governance,
media, and political democratic process. After the implementation of two European
budgets for cohesion in SEE countries few regions from the newest Member States
cached up reaching the European “border of poverty” but the larger part still strive to
attain the EU average economic development. What is the situation in the Danube
micro-region? How big disparities are both internally between the MS- Germany,
Austria, and the Slovak Republic, Hungary, Croatia, Romania, and Bulgaria and
externally with the three non-MS (Serbia, Moldova, and Ukraine)? To develop better
cohesion between the fourteen (14) countries, the EC prepared the EU Strategy for
the Danube Region (EUSDR) and allocated funding for its implementation known as
the Danube Program.

The current paper aims to evaluate the socio-economic disparities inside the Danube
region, nine (9) years after the endorsement of the European strategy for the Danube
region (EUSDR). It starts with an overview of the evolution of the theory of cohesion
and the main terms of cohesion, therefore, bridging the theory and practice. In the
second part are selected numerous indicators assessing the regional disparities
between the Danube countries. The Danube region represents 115 million residents
virtually almost 30% of the EU population. It is comprised of the fourteen Danube
countries, nine (9) of which are the EU Member States. They are assessed according
to the European border of poverty of 281 European regions (NUTS 2) and classified
into three categories “less developed”, regions "in transition", and "more developed".

12
The Author agrees that “it is not correct to call less developed a region or a country
only because they do not evolve similarly to the developed ones” (Ghiorghita, E. 2015,
p.105). However, the current analysis uses the term “less developed region” as a
technical term refereeing to the regions NUTS 2 eligible for funding from the
cohesion policy first objective, only.

The analysis starts with theoretical research of the regional science evolution and the
new concept for open regionalism “from state-building to region-building” (Solioz,
Stubbs, 2009, p.6). Majority experts believe that regional science “has promising
prospects for development in the context of the regionalization process in the EU. Its
multidisciplinarity is outlined as an important asset” (Scutariu, 2015, p. 11).

Theory of cohesion policy

Bridging the practice and theory of cohesion policy is the key to better overcoming
regional disparities within the EU. The cohesion policy historic context coincides with
regional science evolving. The first theoretical turning points originate in general
economics in 19 century. Since then the theoretical views are grouped in three
theories “the theories of localization, theories of regional growth and developmental
theories” (Scutariu, 2915, p. 146). The current analysis has its theoretical grounds in
the developmental theory, which states that “the fundamental inequalities between
centre and periphery, leads to a specific dependence of peripheral regions from
central regions”. Thus, the term centre is used with its economic meaning rather than
national.

Cohesion policy evolvement

The disparities between the European regions are subject to political decisions for the
first time in 1955. Back then, the Heads of Governments of the BENELUX countries 2,
Germany, France, and Italy, used the term "less developed region" to justify a large
region in Southern Italy (Mezzogiorno) that experienced serious economic problems
in post-war Europe.

2 BENELUX the founding Member States: Belgium, Netherlands, Luxembourg

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According to Ian Bache “The Treaty for coal and steel between Germany and France
is the earliest instrument that preceded the actual adoption of regional policy in the
EU” (Bache, 1998, p.31).

According to David Boyce, the foundation of regional science originates between 1954
and 1968. Among the pioneers stands dr William Alonso, who obtained the first
Doctorate in regional science. He defined the Location and Land Use in (1964) as the
first two objectives of regional science (Scutariu, 2015, p.147). Another important
year is the Treaty of Rome (1957) when are founded the first financial instruments for
less developed regions. These are the European Investment Bank (EIB) and the
European Social Fund. The same Treaty lays the beginning of the common
agriculture policy with the establishment of both funds for funding the rural areas:
the European Agricultural Fund (EAFRD) and the European Agricultural Guarantee
Fund (EAGF). However, eighteen (18) years later, the first European Commissioner
for regional policy, Sir George Thomson, expressed the opinion that these regional
instruments did not work properly until 1973 “because the regional disparities have
extended” (Becker, Sascha, Egger, Peter, Maximilian, 2016, p. 2). The foundation of
the General Directorate “Regional Policy” in 1968 is another subsequent essential
step for emerging of cohesion policy.

The next years from 1969 to 1989 are called by David Boyce the expansion years of
regional science. The new generation of researchers is led by the distinguished
economist dr Krugman. He founded the new discipline “regional science” that
examines regional disparities in the frame of social sciences. Among the iconic
figures, endured Alan Wilson (England) and the Dutch researcher Peter Nijkamp who
believed that regional science is not a discipline in itself because it is a set of
complementary disciplinary perspectives, centred around the thematic concept of
“region” (Scutariu, 2015, p. 148).

The first three enlargements in 1973 (UK, IRE, DEN), 1981 (Greece), and 1986 (PR,
SP) have doubled the number of citizens living in “less developed”. Six (6) from the
twelve (12) Member States have had at least one “less developed” region for example
the North-Scotland in the UK, the South-Spain, Southern Italy (Mezzogiorno), and all
regions in Ireland, Portugal, and Greece (Manzella, Mendez, 2009, p. 15). The
accession of the UK provided strong support to the creation of a common regional
policy with a focus on the “poorer” regions. With such strong advocacy for the poorer

14
regions in July 1973, the EC proposed the creation of the European Regional
Development Fund (ERDF), launched in March 1975 (Brunazzо, 2009, p. 2).

The birth of “cohesion policy” took place in 1986 with the adoption of the Single
European Act (EEA). The Treaty has defined “social and economic cohesion of the
less developed regions” and set it's objective (Manzella, Mendez, 2009, p.15). From
now on, the cohesion policy endures as a major catalyst for the development of
poorer regions and the establishment of the economic and monetary union. Since
1986, the social and economic cohesion of “less developed regions” has become an
official EU policy, funded by the Structural and Cohesion Funds. The Cohesion fund
does not exist yet. It is found after the fall of the Berlin Wall and before the fourth EU
enlargement in order to build the necessary infrastructure and energy links between
Eastern and Western Europe.

Since 1988, the powers of the Commission for the management of cohesion policy
have expanded significantly. The donor countries demand more efficiency and viewed
the European Commission as a guardian of the European budget. The 1988 reform
marks the beginning of the actual regional policy, transforming it from a budget
transfer to a regional instrument for developing of “less developed regions”. The first
Multiannual Financial Framework (MFF) set up a five (5) year spending perspective.
The selection of projects is conducted after various analyses in order to be reduced
political factors. The first, problems reported from the European Commission are the
lack of complimentary support from the national governments and the insufficient
economic effects from European funds. Therefore, since the 1980s, the cohesion
policy is criticized by donor countries for not being a real regional instrument.

More and more voices are heard that “Community action through the Structural
Funds is only justified if they bring a real additional added value” (Bache, 1998, p.
51). Another unresolved question from the 1980s that continued in the 1990s is how
to combine the advantages and disadvantages of cohesion policy with the single
market and the common monetary union?

The first multiannual financial framework is adopted with the Single European Act
(1986), allocating 20% to Objective 1 of cohesion policy to “the less developed
regions”. Since then the funding is growing reaching 36% of the total MFF (2007-
2013). The regional convergence is discussed most intensively between 1990 and
2003. Many researchers believe that the cohesion policy emerged only after the social

15
and economic cohesion is set as Objective one from the Maastricht Treaty (1993),
signed in February 1992.

The academic dispute over the policy’s year of birth is resolved by the opinion of the
European Commission that the cohesion policy emerges after the regional disparities
are set as the first objective in the EU political agenda with the Maastricht Treaty.
Thus, reducing regional disparities and the “less developed regions” become the
priority of all Member States. The political consensus with the donor countries on the
funding of cohesion policy is done with the common monetary union in exchange
after 2000. Therefore, the cohesion policy becomes a factor for further
Europeanisation of the EU.

The regional science in the 90s has found political support in the quickly evolving
concept of regionalism, known as “Europe of Regions” (ЕoR). Regionalism is a
political ideal that promotes increased participation and development of regions in a
broader context of intergovernmental integration. Later expanded with the view of
"open regionalism” which works for stronger regions and Europe of regions: “from
state-building to region-building”. The Committee of Regions, adopted with the
Maastricht Treaty achieved one of their main goals. The political representatives from
317 European regions received the right to take part in the EU decision-making
process, art 198a (Scott, 2009, page 643). Since then the Committee of Regions
consults all European decisions about socio-economic development and cohesion
policy of regions NUTS 2.

Following the enlargement of the Union in 1995 with Finland, Sweden, and Austria,
the geographical coverage of cohesion policy increased by 10% conversely besides
52% of the EU population. The Treaty of Maastricht established the Cohesion Fund
(CF), whose only objective is to provide financing for building the missing
infrastructure between the poorer regions from Greece, Ireland, Spain, and Portugal
and the bigger markets in Western Europe. The Maastricht Treaty (1993) set a
qualitatively new stage of the European cohesion policy. Reducing the regional
disparities become a top priority and cohesion policy received over one third (1/3)
from the EU budget. The second multiannual financial framework (MFF) provided
168 billion ECU to a new category of regions “less populated” and the “less
developed” regions from the Northern Member States - Finland and Sweden.

16
The following multiannual framework (2000-2006), adopted from the European
Council in Berlin (March 1999), allocated € 213 billion for Objective 1, 39.6 billion
EUR of which for pre-accession assistance to candidate countries and cross – border
cooperation with non-EU MS. The funds supposed to prepare SEE candidates’
countries for the common EU market, for adopting the EU “acquis communautaire”,
and build necessary administrative capacity for the management of Structural funds.

The “1999 reform” has prepared the fifth wave of the EU's Eastern Enlargement
(2004) that defined as unprecedented in the number of Central and Eastern
European (CEE) accession countries. However, the expected levels of wealth of the
SEE negotiating countries are significantly lower than the EU average (Davies, Gross,
Polverari, 2013, p. 22). The forthcoming Eastern enlargement proved to be a much
bigger challenge, not only because of its size but also because the former communist
countries turned out to be twice as poorer as the older MS. The richest country,
Slovenia in 2005, has a GDP per capita of 70% of the EU average, making all SEE
countries automatically eligible for funding from Objective 1. The political consensus
dominant by 2000 that cohesion policy leads automatically to growth has changed
after the adoption of the Euro in 2000 when the economic growth of the EU has
decreased. The most debated dilemma from this period is the efficiency and economic
added value of the Structural funds.

The most important reform of cohesion policy after 2000 is decentralization, which
has transferred the power of management of EU funds from the European
Commission to the Member States. The new term- shared management shifted the
overall jurisdiction about the decision- making and implementation of the EU funded
measures for “less developed regions” by the national authorities of the Member
States. The Program Europe 2000, set the main funding priorities and has increased
the concentration of resources in the less developed regions.

The last three enlargements in 2005, 2007, and 2013 have increased further the
regional disparities. Therefore, one hundred of their territory become automatically
eligible for funding from Structural funds because are below the EU border of
poverty. After the entry into the EU, two problems arose immediately. The first is that
the EU average "cohesion border" is excessively high. The second problem is the lag
of administrative capacity that drove to other negative implications and have changed
every aspect of the economic, public, and political life of these countries.

17
 The concept of “Regionalism” or “Europe of regions”

The political concept of Europe of Regions (ЕoR), in the strict sense, makes a double
emphasis on socio-economic justice within an expanding political community, by
gaining their representation and place in the political process. The concept defines
the term region as “a homogeneous area with people who share a common tradition,
culture, and common historical characteristics different from other regions with their
common characteristics”. Sub -definition of regionalism is the process of establishing
the regional and administrative institutions with different public competences on
sub-national and cross-border topics (Dobreva, 2014, p. 30).

In both cases, the regions are supported by powerful regional organizations such as
NATO, for example, that make the modern political perspective very relevant. The
EoR concept has made an indisputable contribution to the political representation of
the NUTS2 regions in the EU institutions and the transformation of socio-economic
cohesion into Objective 1 of the European Union originates in the concept of
regionalism in the EU. Regionalism is a political ideal that seeks to increase the
participation, influence, and development of regions in a wider context of interstate
integration. (Scott, 2009, p. 643).

From a modern, contemporary perspective, the regional initiatives are defined more
as cooperation, rather than as integration. Not less important it lobbies for the catch
up of the less developed regions. The debate on the “new regionalism” is presented
through the relationship between globalization and regionalism. Regionalism refers
to a trend, the world to be organized regarding regions that share a common
tradition, culture, and common historical characteristics. Few researchers have
characterized “new regionalism” as the more recent wave, emerging from the shift of
a bipolar Cold War world to a multi-polar globalized world (Hettne, 1999, p.12). The
concept of “open regionalism” refers to signify a shift from a territorially bounded
system of geo-economic blocs to more freely chosen, open-ended, and innovative
forms of cooperation across borders (Solioz, 2009, p.3).

The concept of new regionalism is characterized by multidimensionality, complexity,

and fluidity. The European regionalism is constructed on the existence of powerful
organizations, it can be concluded that the former communist countries entry in
NATO have guaranteed their future access in the European Union. In this regard to

18
ensure their membership in the European Union, the Western Balkan countries need
to acquire their entry into NATO before continuing with their national policies and
aspirations to the European Union. The concept includes regionalism of networks
and network power, producing, reconfiguring, and contesting particular
differentiations, orderings, and hierarchies among geographical units worldwide.
Eventually, there is not a clear difference between the old and the new regionalism.
Rather, everything depends on globalization and the political economy that as
institutional and non-institutional factors can take a part in the process of the
regional building.

Last but not less important, the concept “Europe of Regions” has an indisputable
contribution to the political representation of the NUTS2 regions in the EU
institutions and to the transformation of socio-economic cohesion into Objective 1 of
the European Union.

The most debated subjects are how to continue further decentralization and
transferring more regional powers inside the SEE countries from the national state to
regions NUTS 2. After getting a voice and a more active role in shaping the EU's
community policy, the regions can develop their economic competitiveness and
potential, improve the political and democratic process, and protect their own
cultural identity.

General terms

The region is the key element that lies in the centre of the theoretical and practical
matters, in regional science (in general), the regional economy, and EoR concept. The
term "region" has its origins in the Latin word regionem. In most European
languages means “land”, “a geographic area with borders with more or less distinct
characteristics”. This notion is used by geographers in the early 20th century.
Assembly of European Regions (AER), in the Declaration on regionalism in Europe
from 1996, adopted a definition where the region is acknowledged as a territorial
public power one level below the state, controlled by a government with its political
powers. In some of the former communist countries, the regional authorities are not
elected but appointed by the governments, what is the case in Bulgaria. In the first
phase, it considers the differences among regions not due to their particularities, but
to different speeds of economic growth (Scutariu, 2015, p. 145).

19
The other term is the NUTS 2 region. The Eurostat and other Institutions of the
European Union use it for statistical purposes. It is determined in Regulation (EC) No
1059/2003. The aim is to create a common statistical classification of territorial
units, called NUTS, to allow the collection, compilation, and dissemination of
harmonized and comparable regional statistics across the EU. The NUTS
classification is hierarchical and subdivides each MS into NUTS 1 territorial regions,
each of which is divided into NUTS 2 territorial regions, and these into NUTS 3
regions, that is the lowest local governance or municipality. The current assessment is
conducted on the NUTS 1 region coinciding with national territories of the Danube
countries due to a lag of statistics about the NUTS 2 regions for Danube countries.

The term “less developed regions” is used for the first time in the Treaty establishing
the European Economic Community (EEC), known as the Treaty of Rome.

Art. Art. 130, defines the functions of the newly established European Investment
Bank (EIB), stating that it “will provide grants, loans, and guarantees to facilitate
project financing in all sectors of the economy, as a priority in the less developed
regions”.

Another term is the Multiannual financial framework (MFF). The MFF is the long-
term budget of the European Union that allows the consistency and predictability of
expenses and ensures budgetary discipline and smooth functioning of the budget
cycle (Ollikainen, 2017, p. 22). Since the end of the 1970s, the European Parliament
obtained the right to pass the budget. The first European budget as known today is
adopted in 1988.

Term cohesion policy

The term cohesion means connected, together as one whole. It originates from the
Latin words (1670–80) variant of Latin "cohoes", variant stem of "cohaerēre" to
"cohere" (iōn- -ion). Its other meanings are compatible (be consistent/coherent) and
in harmony (be in harmony) .

According to Dictionary.com, the term cohesion is a noun and means “the act or state
of cohering, uniting, or sticking together”. Physics defines "cohesion" as the
molecular force between particles within a body or botanical meaning as a substance

20
that acts to unite them. Compare adhesion. Botany explains "cohesion" as the
congenital union of one part with another of cohering, uniting, or sticking together.

The term "cohesion" from English is translated as: "cohesion", "bonding", "harmony"
and "consistency". Whereby it refers to an act or fact of forming a single whole.

Term cooperation vs cohesion (integration)

The term "cooperation" in strict sense does not aim to unite two different parties. It is
much less strong then cohesion. It originates from the Latin "cooperātiō" and Middle
French (1620–30) "cooperātiōn". According to the Dictionary.com, the term
"cooperation" is a noun and has few meanings:

• an act or instance of working or acting together for a common purpose or

benefit. Other meanings are joint actions, more or less active assistance from a
person, organization, willingness to cooperate: to indicate cooperation.

• Economics defines "cooperation" as a combination of persons for purposes of

production, purchase, or distribution for their joint benefit: producers'
cooperation; consumers' cooperation.

• Sociology and ecology define "cooperation" as an activity shared for mutual

benefit and as mutually advantageous interaction among organisms living in a
limited area.

What is the European border of cohesion?

The European Commission has set the European "border for regional poverty" as 75%
of the EU average gross domestic product (GDP). The first regions with GDP below
this „border " become eligible for funding from the European regional development
fund (ERDF) and soon after the Member States have approved a fifty ( 50% ) percent
rise of its budget. However, neither the EIB nor the European Commission has the
power to propose and implement measures in the „less developed „regions at that
time. The cohesion policy is entirely the competence of the Member States in the
1970s. The cohesion policy is funding projects based on the priory agreed quota
between the MS.

21
The European "border for cohesion" is determined as a tool for the classification of
regions NUTS 2 depending on their economic performance. Therefore eligible for
funding from Structural funds depending on the category, evaluated according to the
following economic scale of regions in the EU:

Classification of European regions NUTS (2011-2018):

“more-developed”, with GDP per capita head above 90%

“regions in transition ”, with GDP per head between 75% and 90

“less developed ”, with GDP below 75% per capita of EU average

Catching up regions:

“low-income” regions, with a GDP per head below 50% of the EU average in
2013

“low-growth” regions that did not converge to the EU average between 2000
and 2013

The category of "less developed regions" draws the "border for cohesion or poverty"
by the European Commission in 80ies. This regional poverty line has determined the
number of NUTS 2 regions eligible for funding from the first EU budget in 1988.
Until then the MS have receiving budget transfers from the European Community
repaying different regional programs implemented in poorer regions by the
governments.

The Lisbon Strategy in 2000 has adopted the new category "regions in transition".
The European Commission introduced this new category to avoid the immediate
suspension of regions no longer eligible for funding from Structural funds. Thus,
Spain, Italy, the German Eastern Province of Länder, Greece, and Portugal continued
to receive funding from Structural Funds until 31.12.2006.

In 2007, the European Commission has adopted additional classification including

two new categories of European regions whose level of socio-economic development
is significantly lower than the EU average called catching up regions. The European
Union distinguishes two types of catching-up regions: "low-growth regions"
experiencing a persistent lack of growth between 2000 and 2013. These might be
"less-developed" or "regions in transition" with a GDP per head (capita) from 75% to
90% of the EU average which don't converge to the EU average growth.

22
The other new category is "low-income regions" that remain far below the EU average
GDP per capita with a GDP per head (capita) below 50% of the EU average in 2013.
In 2015 the Commission launched the Catching Up initiative (also known as the
Lagging Regions initiative) – a pilot initiative to examine the factors that hold back
growth and investment in catching up regions and to provide recommendations and
assistance on how to unlock their growth potential.

According to the next map eligible for funding from Objective 1 in 2018, forty- three
(43) from forty-seven (47) regions NUTS 2 of the MS and five non-EU MS are "less-
developed regions”. Four regions are “in transition" as followed: in Poland, Region
"Mazowisckie", in the Czech Republic, Region of “Praha”, in Hungary, region of
“Közép-Magyarország” and in Romania the region of “Bucharest wider area”. The
four regions “in transition” will continue to receive funding from Objective 1 by 2020
but in lower intensity.

The practice of Cohesion policy

Description of methodology for the assessment of Danube region

The current analysis aims to assess the socio-economic disparities in the Danube
micro-region. It is carried at the national level because of the absence of statistical
data about NUTS 2 regions. The majority of researchers of the Danube countries
indicate the lack of statistical information as a serious obstacle “It is quite obvious for
anyone studying the Danube basin that there are little information and less
knowledge on the subject. This seems to be true not only for the outsiders (in a spatial
sense) but also for those living in the area” (European Commission, 2018, p-15).

Due to the big regional disparities, most of the indicators are assessed per head
(capita). The time range includes the last two European multiannual frameworks:
MFF (2007-2013) and MFF (2014-2020). The used methods in the analysis are open
data research, comparison, estimations of shares, econometrics, graphics, selection,
and comparison of selected indicators and their statistical data.

23
 Map 1: Eligibility of NUTS regions 2014-2020
Source: European Commission

Indicators for assessment of the disparities within the Danube Region

Selected indicators aim to assess different aspects of economic, social, financial, and
infrastructure convergence between Danube counties with the European Union
likewise internally between the MS and non-EU MS. Thus are explored different
economic, social, and infrastructure disparities within the Danube countries. The
assessment of the Danube countries includes the assessment of four groups of
indicators.

The first group evaluates the economic disparities between the Danube countries by
GDP per capita, GDP in PPP, imports, and exports as % in GDP. Part of this group is
three indicators assessing the business climate due to a significant drop in foreign
direct investments. The second group has assessed the social dimensions and
differences of Danube countries concerning monthly labour costs, salary and wages,
household final consumption, real individual consumption, savings of households,

24
and cross-border transfers (CBC) in USD. The third group of indicators evaluates
financial and microeconomic convergence of Danube countries with the EU, known
as Maastricht Criteria: inflation, external debt, budget deficit. The fourth group
includes cohesion indicators, assessing the level of infrastructure convergence and
connectivity between the Danube countries as new broadband subscriptions,
railways, roads, inland waterway freight and passengers carried, and the net share of
investments in research and development in GDP.

Indicator: Population

The population of the Danube Basin consists of 14 countries, nine member states
Germany, Austria, Slovak Republic, Slovenia, Croatia, Czech Republic, Hungary,
Bulgaria, and Romania. The five non-EU-member states are Moldova, Bosnia and
Herzegovina, Serbia, Montenegro, and the four oblasts (districts) from Ukraine –
Odesa Oblast, Chernivetska Oblast, Ivano-Frankivska Oblast, and Zakarpatska Oblast
– occupying 68,100 sq km with a population of 6,160,400 in 2018. The population of
the EU for the evaluated period has grown with 1.79%.

Map 2: Danube region countries

On the contrary, the share of the population of Danube countries declines from
29.03% in 2011 to 28.9% in 2018. The highest decline has Bulgaria and Croatia

25
(4.6%) and Romania(3.4%). The positive net growth is registered in four MS: Austria
(5.5%), Germany (3.2%), Czech Republic (1.2%) and Slovak Republic (0,8%).
Together with the non-EU countries, the share of the Danube countries in the total
number of EU population has increased from 32% in 2011 to 32.9% in 2018. The non-
EU MS with highest decline are Montenegro (10.15%) and Serbia (3.6%). The
conclusion is that close to one third of the European population lives in the Danube
Basin.

Table 1: Population (2011 -2015) Source: World Bank Databank

The next few indicators assess the economic gap between Danube countries according
to the “cohesion border” of the EU.

Indicator: GDP per head and GDP growth (2011- 2018)

Two countries in the Danube Region are classified as “more developed” according to
the European classification of NUTS 2 regions. These are Germany and Austria.
Closest to the "EU cohesion border" is Slovenia with 71% of GDP per head, the Czech
Republic 62%, and the Slovak Republic 55% of the EU average. All other MS is
catching up countries with GDP per capita below 50% of the EU average.

Classification of Danube countries NUTS (2011-2018) based on GDP per capita

26
 • “More-developed”, with GDP per capita above 90% of EU average: Germany,
Austria

• “Regions in transition ”, with GDP per capita between 75% and 90%:

• “Less developed”, with GDP below 75% per capita of EU average: Slovak
Republic,Czech Republic, Slovenia

• Catching up - with GDP below 50% of the EU average in 2013: Croatia,

Bulgaria,Hungary, Romania, Serbia, Bosnia and Herzegovina, Ukraine,
Montenegro, Moldova

With the view of regional science, the Danube countries located closer to the bigger
Western markets have better probabilities for passing over "the EU cohesion border".
On the contrary, those located in Lower Danube have fewer prospects to reach the EU
poverty line by 2027.

Concerning the GDP growth, the analysis has shown that few MS have higher growth
than the EU average (1.83%). These are Romania, Hungary, the Slovak Republic, and
the Czech Republic. Surprisingly, the two most developed countries Germany and
Austria have registered GDP growth below the EU average (1,04%). The country
experiencing a persistent lack of growth from the less developed countries is Ukraine.

Table 2: GDP per capita Source: World Bank Databank

27
 Table 3: GDP per capita growth Source: World Bank Databank

Indicator: Foreign Direct Investments (FDI % GDP) 2011-2018

The countries with the highest shares of FDI in GDP are Montenegro, Serbia, and
Czech Republic from the EU MS. According to the assessed World Bank data, the FDI
in the Danube countries registers an overall decline by 2918. It has dropped from
4.7% in 2011 to 3.09% in 2018 in the GDP of the Danube countries. The country with
the greatest decline is Hungary losing a significant share of investments, from 7.6%
GDP share in 2011 to -49.9% in 2015. The other three countries that register decline
are: Austria from 5.33% to 0.93%, the Slovak Republic from 5.4% to 2.4 %, and
Montenegro from 12.2% to 8.8%. On the other side, four (4) countries have obtained
a better environment for direct foreign investments. These are Germany, Romania,
Slovenia, and the Czech Republic. Nevertheless, foreign investments have dropped in
most Danube countries during the analysed period.

The overall decline of FDI in the Danube countries has raised the question about the
business climate and how the business environment has changed after 2011.
Therefore, are included for evaluation the next few indicators assessing the taxes and
profits, other expenses for making business, losses due to theft and vandalism,
remittances, and gross domestic savings in the Danube countries?

28
 Table 4: FDI, net inflows (% of GDP) Source: World Bank Databank

Indicator: Taxes and other expenses for making business in Danube countries

According to the World Bank current indicator of taxes on income, profits, and
capital gains includes the actual or presumptive net income of individuals, on the
profits of corporations and enterprises, and capital gains, whether realized or not, on
land, securities, and other assets. Intra-governmental payments are eliminated in
consolidation.

The three Danube countries with lower taxes on incomes, profits, and capital gains in
2018 are Croatia, Bosnia and Herzegovina, Moldova, and Ukraine. The highest
growth is registered in Germany (6.39%), Romania (5.39%), and Slovak Republic
(4.54%). The current indicator has shown that solely the business climate worsened
in the Danube countries.

The other expenses as defined by the World Bank definition are the spending on
dividends, rent, and other miscellaneous expenses, including provision for the
consumption of fixed capital. The Danube countries with the most favourable
business climate on both indicators are Croatia, Austria, the Czech Republic, and
from the non-EU MS Serbia and Moldova.

29
 Table 5: Taxes (% of GDP) Source: World Bank Databank

Table 6: Other expenses % total

The next two indicators have proven that due to an uncertain economic environment,
personal remittances and savings have increased significantly.

30
 Indicator: Personal remittances and gross savings (% of GDP)

The definition of the World Bank of personal remittances is comprised of personal

transfers and compensation of employees. Personal transfers consist of all current
transfers in cash or in-kind made or received by resident households to or from non-
resident households. Compensation of employees refers to the income of border,
seasonal, and other short-term workers who are employed in an economy where they
are not residents and of residents employed by non-resident entities. Data are in
current U.S. dollars.

With a GDP average share of personal remittances of 0.75% for the EU, the
assessment has shown that all Danube countries have much higher shares with the
exception of Germany and Austria. All other MS have twice to five times higher
remittances than the EU average share. This finding immediately led to the
conclusion that the GDP growth has not impacted positively the purchasing power of
the majority of households, which is confirmed by the indicator- final consumption.
The highest share of personal remittances in GDP belongs to Croatia (4.7%), Bulgaria
(3.68%), Hungary (2.68%), Romania (2.92%), and Slovak Republic (2%). In the non-
EU MS, the indicator has even higher figures varying from 8% to 16% shares in GDP.
The trend of constant growth has proven that personal remittances for the Danube
countries are not the only factor with social dimensions but with economic impact.

The other indicator assessing the environment for entrepreneurship and business
climate in the newest MS is the gross domestic savings as % of GDP. The indicator's
evaluation shows that the majority of MS have a higher share in GDP than the EU
average. These are Germany (27.8%), Hungary, Slovak Republic, Austria, Slovenia,
and Czech Republic (32.6%). On the contrary, Bulgaria, Romania, and Croatia,
Serbia, Montenegro and Ukraine have a GDP share of savings below the EU average.
The lowest figures belong to Bosnia and Herzegovina, and Moldova (-009). The
assessment of growth has shown that the countries with a decline of savings are:
Romania (-1.35%), Slovak Republic (-0.49%), and Ukraine (-5.66 %).

The last indicator assessing the business climate is losses because of theft, vandalism,
or arson.

31
 Indicator: Losses due to theft and vandalism (% of annual sales of affected firms)

The definition of the World Bank of business losses includes average losses because of
theft, robbery, vandalism, or arson that occurred on the establishment's premises
calculated as a percentage of annual sales. The value represents the average losses for
all firms which reported losses (please see indicator IC.FRM.THEV.ZS). The indicator
is estimated according to the reported cases. The missing data for the majority of
Danube countries is the lack of reported cases.

Table 7: Personal remittances (% of GDP) Source: World Bank Databank

32
 Table 8: Gross savings % of GDP Source: World Bank Databank

Table 9: Losses due to theft (% of sales) Source: World Bank Databank

33
On this indicator, two of the Danube countries register above EU average net losses
(2.15%). These are Bulgaria and Romania. The other MS with reported cases from the
firms is Croatia, Czech R., Hungary. Montenegro, Moldova, and Ukraine have the
highest net losses from theft in 2013. It makes the impression that Bulgaria and
Croatia have doubled their figures from 2007 to 2013. Furthermore, it may be a fact
of concern that both countries with the highest net losses: Romania and Bulgaria
have not reported cases in 2018. Despite the insufficient data, the indicator has to be
monitored especially in transitional economies.

The next indicators access the trade and potential of the export-import sector to
induce greater economic convergence of the Danube country. They have proven that
the majority of Member States from the Danube countries are open and
interconnected with the European market.

Indicator: Imports of goods and services (% of GDP)

The Danube countries with the highest share of imports in GDP (% of GDP) are the
Slovak Republic (94%), Hungary (81%), Slovenia (77%), and the Czech Republic 72%.
The indicator score in the other Danube countries varies from 65% to 54% (% of
GDP). Entirely, the majority of Danube countries have higher shares exports in GDP
than the average of the EU (41.86 %) except Germany (41.25%). These figures
characterize all Danube countries as small open economies highly dependent on
external supplies of goods and services.

Moreover, the Danube countries register higher growth (3.3%) then the EU average
(2%). Five Danube countries have three to five times higher shares of exports in the
GDP than the EU average by 2018. These are Slovenia (8%), Slovak Republic (9.7%),
Bulgaria (5.6%), Croatia (10.5%) and Serbia (13.4%). On the contrary, countries
losing weight of imports in the GDP are Bosnia and Herzegovina (-0.02%), Moldova
(-11%), and Ukraine (2.62%) by 2018. In conclusion, the current indicator has
revealed that the majority of Danube member states are open and highly dependent
on the imports. This is a favourable condition for better cohesion of the Danube
countries that can be supported further.

34
 Indicator: Exports-Imports of Danube countries (2011- 2018)

The Danube countries with the highest share of exports in GDP are Slovak Republic
(96%), followed by Slovenia (85%), Hungary (84.9%), and Czech Republic (78%). The
indicators' assessment according to has shown that all Danube Members States have
higher shares of exports in GDP than the EU average (44.77%), except Romania
(41.6%). The same trend has Serbia (51%), Montenegro (43%), Bosnia, and
Herzegovina (41%). The assessment of the growth of exports shows that as imports
the Danube countries have higher growth (5.9 %) than the EU average (3.7%). Those
with over twice higher growth of exports are Serbia (17.7%), Slovenia (15.13%),
Croatia (11.08%), and Slovak Republic (11.08%) in 2018. Germany and Romania stay
below average and three countries have dropped off of exports as % of GDP: Hungary,
Moldova, and Ukraine. Overly, the Danube Member States have a higher share of
exports in GDP what might be a good precondition for further economic cohesion in
the Danube region.

Table 10: Imports of goods % from GDP

In conclusion, with a level of certainty may be concluded that the majority of Danube
countries have constantly growing exports and are highly dependent on imports of
goods, products, and services.

35
The next indicators assess the financial cohesion of the Danube countries with the
EU. They are also called access keys to the Structural and Cohesion Funds, known as
Maastricht criteria. These are inflation, state depth, and budget deficit. According to
the same Treaty, the indicators must be kept under certain ceilings otherwise; the EU
MS can cut the access of the MS to the Structural funds.

Table 11: Exports of goods % from GDP

Indicator: Inflation 2011-2018

Concerning inflation, four (4) countries do not meet the criteria of 3% inflation index
ceiling. These are Bulgaria, Hungary, Romania, and Moldova. Ukraine is the country
with the highest figures after 2015. However, three years in a row has a positive trend
of decline from 48% in 2015 to 10.9% in 2018. Serbia also has a positive development
with a constant decline in inflation from 11.14% in 2011 to 1.85% by 2018. Thus, it is
concluded that all Danube countries have economic coherence with the EU, except
Ukraine. This economic indicator is in correlation with indicators measuring the
purchasing power and real consumption of households. The next few indicators
evaluate the main social dimensions assessing exactly how the economic growth has
influenced the wages and employment of labour force, purchasing power of
households, and their savings and cross-border transfers.

36
 Table 12: Inflation Danube countries Source: World Bank Databank

Indicator: Short-term debt 2011-2018

The second Maastricht indicator is short-term debt. According to the World Bank
definition, it includes entire debt having an original maturity of one year or less and
an interest in areas of long-term debt. The total reserves of gold also are included.
The EU ceiling is 60% both for the short and long-term depth. The higher depth in
2018 register Germany, Croatia, Austria, and Slovenia. They also face the possibility
of warnings and ultimately sanctions, such as fines that can reach 0.2% of their GDP
(European Commission). From the non-EU MS Moldova and Ukraine, are above the
ceiling of the EU. Another finding is the lack of statistical data.

Indicator: Government deficit to GDP

According to the Eurostat definition, the public deficit/surplus is general government

net borrowing/lending according to the European System of Accounts. The general
government sector comprises the central government, state government, local
government, and social security funds. The relevant definitions are provided in
Council Regulation 479/2009 and its part of the Maastricht Treaty.

37
The assessment has shown that Romania does not fulfil the criteria about the ceiling
of a 3% budget deficit. Of 2018 the country's deficit is -4.3%. The rest of the Danube
countries are under the ceiling as set by the current Maastricht criteria. The lack of
data for the non-EU MS is an obstacle for the assessment of their financial cohesion
with the EU.

Table 13: General government deficit (-) and surplus (+) - annual data [TEINA200] Source: Eurostat

The next two groups of indicators evaluate the social impact that have also economic
and infrastructure dimensions. The first group of indicators is measuring the
dynamics of households well off namely the GDP purchasing power parity, labour
costs, and unemployment of labour force.

Indicator: GDP per capita in PPP in USD 2011-2018

The GDP per capita in purchasing power parity (PPP) according to the definition of
the World Bank is the gross domestic product converted to international dollars using
purchasing power parity rates of food products from the basic basket.

Despite the growth of personal remittances majority of Danube countries have higher
growth than the EU average (8.82%) of GDP per capita using purchasing power
parity rates of food products. The highest growth is registered in: Hungary 19.57%,
Bulgaria 18.86%, Slovak Republic 16.58%, Czech Republic 13.48% and Slovenia
11.60%. Two countries with growth below the EU average are Germany and Austria.
The sole Danube country that registers decline is Ukraine -0.91%.

38
The non-EU countries performing well on this indicator are Montenegro with 16%
growth of GDP per capita in PPP followed by Moldova 22% and Bosnia and
Herzegovina 21.52%. Finally is concluded that the GDP per capita purchasing power
parity of households has grown significantly although the final consumption has
declined what showed the next indicator.

Table 14: Growth of GDP per capita in PPP in USD 2011-2018 Source: World Bank

Indicator: Households and NPISHs final consumption expenditure (% of GDP)

Household final consumption expenditure (formerly private consumption) is the

market value of all goods and services, including durable products (such as cars,
washing machines, and home computers), purchased by households. NPISHs stands
for households and non-profit institutions serving households (NPISH).

Notwithstanding the respective period, all Danube countries have registered a decline
in the level of consumption of purchased goods, services, and durable products except
Ukraine (2%) and Slovak Republic (0.2%) that have insignificant growth. The
assessment has shown that all Danube countries have registered consumption
decline. Only Romania has an average decline below the EU average (-1.18%) as % of
GDP. The countries with the highest drop are Montenegro (-8%), Moldova (-7.6%),
Hungary (-4%) and Croatia (-3%).

The general conclusion is that in most of the EU MS despite the significant economic
growth the final consumption of households from the Danube countries declines.

39
 Table 15: Households and NPOSH s final consumption (% of GDP) Source: World Bank

Indicator: Labour cost, wages, and salaries, direct remuneration (2012- 2016)

The Eurostat definition includes the labour cost, wages and salaries, direct
remuneration (excluding apprentices) from the industry, construction and services
(except public administration, defence, compulsory social security) per employee in
full-time equivalents, per year.

According to the most recent data published by Eurostat, two countries register
higher monthly salary then the EU average (3 715 EUR). These are Austria (4 826
EUR) and Germany (4 726 EUR). The other Danube countries report between two
and four times less expensive labour costs in 2016, therefore with higher wages are
Slovenia (2 298 EUR), Czech Republic (1 518 EUR), Croatia (1 417 ЕUR), and Hungary
(1 190 ЕUR) and Bulgaria, Romania with the lowest labour costs in the EU. The
monthly wages in the non-EU MS are varying from 350 EUR in Serbia, Montenegro,
and Bosnia and Herzegovina to 173 EUR in Ukraine and Moldova (221 EUR).

Concerning the average salary growth, the highest rise is registered in Bulgaria and
Romania (22.4%) and above the EU average in: Slovakia (11.65%) Hungary (7.98%),
Austria (7.18%) and Germany (8,.%). Moreover, three (3) countries have a decline in
wages in 2018 compared to 2011: Montenegro (-14.7%), Ukraine (-38.2 %) and Serbia
(-3.55%). The wages in the newest MS overly have a trend of constant growth after
2011.

40
Subsequently, the comparison of the growth of wages and GDP signifies that the
labour costs are five times higher then the economic growth for example: 6.14% and
1.04% in 2018 respectively. This fact led to the assumption that the purchasing power
of households has grown. Nonetheless, the previous indicator has proven that the
final consumption of households has deteriorated.

Table 16: Monthly average salary Danube countries (2012-2018) Source: Eurostat

Table 17: Unemployment, total (% of total labour force) (modelled ILO estimate) Source: World Bank

Indicator: Unemployment, total (% of total labour force) (modelled ILO estimate)

During the analysed period the EU average unemployment rate is varying from 10.8%
to 6.7 % in 2019. Five (5) countries remain above average in 2019: Serbia,
Montenegro, Croatia, Ukraine, Bosnia and Herzegovina. On average comprise the
Slovak Republic and Moldova with rates between 5% and 6.3% and below EU average

41
unemployment: Bulgaria, Germany, Hungary, Romania, Austria, Slovenia and the
Czech Republic. The majority of the in-depth analyses of the "less developed" regions
register unemployment rates up to 50%. Therefore is important the indicator of being
assessed at regional level NUTS 2 or lowest because the aggregated figures do not
represent the actual on-site picture.

The last group of indicators assess the weight of different types of transport and new
broadband subscriptions in the Danube region hence how effective are the
investments from the Structural and Cohesion Funds in connecting the Eastern and
Western MS.

Indicator: Railways, goods and passengers transported in km/tons

According to the World Bank definition, goods transported by railway are the volume
of goods transported by railway, measured in metric tons times kilometres travelled
The railway transportation of goods has a serious decline in the European Union
during the evaluated period. The Danube countries have an even higher loss of
weight of railways transport in the transport sector overall. The only Danube country
registering growth is Montenegro.

In regard to the passengers carried by railways, the European Union designates

serious drop as well as the Danube countries. The Member States that designate the
growth of passengers by railways is Germany, Slovak Republic, and the Czech
Republic. According to the Definition of Eurostat, the collection is based on the
Regulation (EC) 91/2003 of the European Parliament and of the Council of 16
December 2002 on Rail transport statistics.

In conclusion, the assessment of the last two indicators led to the conclusion that
railway transport is losing significance for the economic development of Danube
countries therefore the effectiveness of investments from the Cohesion Fund,
analysed further.

42
 Table 18: Railways passengers in km Source: World Bank

Table 19: Railways Goods Transported Source: World Bank

Indicator: Goods transported by roads (2011- 2018)

Data displayed in the table below cover the annual carriage of goods by road using
goods road transport vehicles registered in the reporting countries in thousands of
tons. The collection is based on the Council Regulation (EC) No 1172/98 of 25 May
1998. The reporting countries may exclude from the scope of these statistics the
goods road transport vehicles whose load capacity is lower than 3.5 t or the maximum
permissible laden weight is lower than 6t.

43
Comparable to railway transport the average of goods transported by road in the EU
has the same negative trend declining with -2.3% during the evaluated period. On the
contrary, the majority of Danube countries have growth of goods transported by
roads besides Croatia. Furthermore, the Danube countries MS with the highest
growth are the Czech Republic (28%), Slovakia (25%), and Romania (23%). With the
view of the Cohesion fund investments for the construction of new motorways part of
the pan – European road network TEN – T between the newest MS and the Western
countries may be concluded that they have intensified the road transport in "less
developed" countries. Concerning the non- EU MS the indicator must be subject to
specific study due to missing statistical data.

Table 20: Goods transport by road 2011-2018 Source: Eurostat

Indicator: Inland waterway transport

According to the Eurostat, the inland waterway transport progressed by only 17% in
nearly three decades. It should however be noted that the efficiency of this transport
mode made a big step forward since the transport performance was done with a
considerably reduced vessel fleet. For some countries, like the Netherlands, it is the
second mode of transport after road, and for other countries, it still has a major share
of the market.

44
 Table 21: Inland waterway transport 2011-2018

The current indicator displays interesting results. While the European Union
illustrates growth with 1.2% of goods transported by waterways although the majority
of Danube Member States have shown a decline. An exception is Romania (1.2%) that
barely indicates growth and Bulgaria with a more significant rise in goods
transported by waterway (6.5%). The highest drop of Danube countries has the Czech
Republic with more than -133%, Slovakia -47% and Austria -38.06%. Intensifying the
transport can, thus, be a vital potential for development in Middle and Lower Danube
MS or non-EU countries.

Indicator: Fixed broadband subscriptions

According to the definition of World Bank, the fixed broadband subscriptions refers
to fixed subscriptions to high-speed access to the public Internet (a TCP/IP
connection), at downstream speeds equal to, or greater than, 256 kbit/s. This
includes cable modem, DSL, optical fibre “to the home”/building, other fixed (wired)
broadband subscriptions, satellite broadband and terrestrial fixed wireless
broadband. It includes both residential subscriptions and subscriptions for
organizations.

The European Union designates significant growth of new fixed broadband

subscriptions (21.4%) and the Danube countries have even higher net rise. Majority
of the newest MS register above the EU average increase, from 22% of the Czech

45
Republic to 35.4% in Romania and 33% in Bulgaria. Germany (20%), Austria (16%),
Slovenia (19%) and Croatia displayed below EU average growth although with a
significant increase.

A positive fact concerning the informational convergence with the EU is that they all,
have twice higher growth of new broadband subscriptions for example Moldova
(42.8%), Ukraine(41.3%), and Montenegro (59%). Thus is concluded that the Danube
countries especially non-EU MS have a good level of convergence on the broadband
subscriptions what is a good precondition for their further economic integration into
the EU.

Table 22: Broadband subscriptions

Indicator: Research and development as % of GDP

This is the final indicator for the assessment of cohesion of the Danube countries with
the European Union. The Europe 2020 Program set the objective of the EU to achieve
a ceiling of 1% from the GDP by 2020. Both countries with above EU average share of
research and development in GDP are Germany (3%) and Austria (3.%). Hungary
also has above reached the ceiling with a 1.4% share of investments in research from
GDP.

After the assessment is concluded the majority of Danube countries have not reached
yet the average level of investments in research and development from GDP. By 2018,
the EU average is twice higher as 2%. However, it is a positive trend that all MS
register growth varying from 1.4% in Hungary to 0.5 % Romania. In regard to the

46
non-EU member states, the indicator is varying from 0.9% in Serbia to 0.4% in
Ukraine.

Table 23: Research & development as % of GDP

Conclusions and recommendations

The analysis of the population has unveiled that the share of the population of
Danube countries is 29%, not 22% as stated in some other analyses. Nonetheless, a
negative trend transpires with the highest decline in Bosnia and Herzegovina (–10%)
during with no statistical data for Ukraine. Four countries display net growth of the
population: Austria (5.5%), Germany (3.2%) Czech Republic (1.2%) and Slovak
Republic (0.8%).

The economic assessment according to the classification of the EU has shown that
"the most developed" Danube countries are Germany and Austria, on "the EU
average" is the Slovak Republic, the Czech Republic and Slovenia and all others are
"catching up" countries with GDP below 50% from EU average. Despite the higher
economic growth of most Danube countries, catching up MS started from a very low
base and could not overpass the EU "border of poverty". Nonetheless, the fact that all
countries from the Middle and Lower Danube are small and open and highly
dependent on imports and exports can be a favourable condition for their further
economic integration into the common European market.

47
With the inflow of large scale, EU funds in the newest MS after 2005, 2007, and 2013
they lost a significant share of foreign investments, and the business climate has
worsened. Furthermore, the other expenses for making business have raised and in
addition, the final consumption of households has declined despite the growth of
wages and remuneration after 2011. The evidence that the personal remittances and
gross domestic savings have risen in all Danube countries shows fear of spending of
households due to the uncertain business environment except in Germany and
Austria. Accordingly, it may be concluded that the "catching-up" countries are losing
the perspective to reach the EU border for cohesion any time soon. It is highly
recommended the European Commission to launch the special programs in order to
built on their regional potential.

Concerning the economic convergence, it is highly praised, if the two economic

engines Germany and Austria take a leading role in the entire Danube Basin.
Together with the national governments, the European Commission can initiate
legislation to remove the barriers for trade and implementation of various economic
policies for catching up MS. Therefore, it may initiate a high-level political dialogue
for implementing regional programs in peripheral regions and areas in industrial
decline which may include specially designed regional instruments combining
structural, national, and private investments. It is very important the National states
be encouraged to designate the regional approach in the least developed regions
NUTS 2, in order to stop their further marginalization thus tackling the quickly
expanding regional disparities between the big urban conglomerates and smaller
cities and rural areas. The big economic gaps between more developed and catching
up regions NUTS 2, may be considered as are a real treat not exclusively for the
individual Member States but likewise for the entire European Union.

In relation to the non-EU MS, they may be supported to implement further economic
reforms improving the business climate, removing the obstacles to the foreign
investors, and using pre-accession assistance in a manner that brings more added
economic value. The four districts of Ukraine may work for continuing economic
integration with the Danube countries.

Concerning the social dimensions, the analysis has shown that the biggest gap
remains in the labour costs between MS from Upper and Lower Danube. The
situation of unemployment is different. The majority of MS have an unemployment

48
rate below the EU and five (5) above it but most of the in-depth analyses register
much higher unemployment rates in "less developed" regions. Therefore is important
such social indicators to be evaluated at the regional level NUTS, because the
nationally aggregated figures do not represent the real situation on the ground.

Regarding the financial convergence, four (4) countries do not meet the criteria of 3%
inflation index ceiling as set by the EU. These are Hungary, Romania, and proximate
Bulgaria and two non-EU MS Moldova, and Ukraine in 2019. Regarding the second
Maastricht criteria Germany, Austria, Croatia, and Slovenia have short-term debt
above the EU ceiling of 60% for 2018. Concerning the third Maastricht criteria
Romania, Moldova and Ukraine have budget deficit above 3% ceiling from GDP.

On the cohesion indicators, the Danube countries have a good level of convergence on
the new broadband subscriptions, goods transported by road, and investments in
R&D. On the contrary, the railway transportation of goods has a serious decline in the
European Union during the evaluated period. The Danube countries have an even
higher loss of weight of railways in the transport sector overall. The same declining
trend of goods transported by waterways has the majority of Danube Member States
while the European Union illustrates growth with 1,2%.

In conclusion, despite significant economic and social disparities of the Danube

countries they have significant unexplored economic potential. Countries located in
the Middle and Lower Danube can access the bigger Western markets through the
countries from Upper Danube where Germany and Austria can play a more
prominent economic role.

Last but not less important is highly urged the European Commission to enforce a
special system for monitoring the regional disparities not only of the Danube
countries but in the entire European Union, prioritizing the investments from the
Cohesion and Structural funds in the "catching-up" and "less developed" regions from
the next multiannual financial framework (2021- 2027). In relation to the absence of
unified statistical data toward regions NUTS 2, it is necessary the EC to obtain a
solution because the efficiency of measures very much depends on that.

References

Bache, I. (1998). Politics of European Union Regional Policy. University of Sheffield.

49
Becker, S., Egger, P. & Maximilian, E. (2016). Effects of EU Regional Policy: 1989-
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Brunazzо, M. (2009) The history and evolution of Cohesion policy. Edward Elgar
Publishing.
Davies, S., Gross, F. & Polverari, L. (n.d.). The Financial Management, Control and
Audit of EU Cohesion Policy.
Dobreva, М. (2014). Cohesion policy and public-private partnership 2007-2013.
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coordination/eu-economic-governance-monitoring-prevention-correction/how-
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European Commission. (n.d.) Map : Structural Funds 2014-2020 (ERDF and ESF)
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020.pdf
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with cohesion policy. Directorate-General for Regional and Urban Policy, 15.
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Ghiorghita, Е. (2015). The illusion of catching up the socio- economic regional gaps.
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Hettne, B. (1999). Globalization and the New Regionalism: The Second Great
Transformation. Department of Peace and Development. Göteborg University.
Manzella, G.P., & Mendez, C. (2009). The turning points of EU cohesion policy.
University of Strathclyde.
Ollikainen, M. (2017). Mid-term Revision of MFF 2014-2020. Policy Department
Budgetary Affairs Report.
Scott, J. W. (2009). Europe of Regions. University of Joensuu.
Scutariu, A. (2015). Landmarks in the evolution of regional science. The USV Annals
of Economics and Public Administration, Volume 15, Issue 1 (21).
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towards 'open regionalism'?. Southeast European and Black Sea Studies, 9:1-2,
1-16. https://doi.org/10.1080/14683850902723355
Treaty establishing the European Economic Community. EUR-Lex, Document
11957E/TXT. https://eur-lex.europa.eu/eli/treaty/teec/sign
World Bank. (n.d.). World Development Indicators.
https://databank.worldbank.org/source/world-development-
indicators/preview/on

50
 RETHINKING JAPAN: POWER RE-CALIBRATION AS
A RESPONSE TO THE CHANGING REGIONAL ORDER

Aleksandra BABOVIĆ , PhD1

Abstract

The ongoing geo-political reconfiguration in Asia-Pacific region, centred around US-

China rivalry, reflected in a dynamic web of, often incoherent and overlapping,
institutional and conceptual security frameworks makes Japan’s immediate security
environment fluid and dangerous. The main pillar of Japan’s security in the postwar
period has been axed on US-Japan Alliance with gradual and rather silent creation of
its own sophisticated military use of which has remained limited due to constitutional
restraints. The low levels of trust in Trump administration’s commitment to Japan’s
defences came as a gift to the revisionist Abe administration as it created an urgent
need for the country to finally rethink and diversify its security infrastructure.
Security, not only in purely military terms, but also related to human, economic, and
technological aspects of it. This, in turn, added more complexity and ambiguity to the
highly controversial debates surrounding the meaning and future of Japan’s defence
policy or, more bluntly put, its military power. Pondering about the military
component of its power — its legal and identity basis consolidation and security
narrative creation — becomes even more pressing in the post-COVID 19 context. The
present paper aims at discussing contradictory narrative and ambiguities around the
military organization in Japan which have been reflected into its foreign and security
choices that go in direction of Japan fitting in, but not being feared. Japan’s colonial
legacy and its postwar peaceful identity that have been acting as inhibitors to
formulation of a bolder and more robust defence policy have to be articulated within
the present day international and regional order. It will be argued that Japan needs to
clearly integrate military component to its power parameters by primarily
consolidating domestic support and laying out a legal framework that would allow for
an official recognition of its already sophisticated military arsenal and subsequently
create new security roles within constraints of international law and current regional
alliance politics. Only then could Japanese elites be more skilful in presenting a

1 Assistant Professor, Osaka University; Email: aleksandrababovic@gmail.com

51
unified narrative and roles for Japan as a regional power that are less contradictory
and aggravating to its security environment.

Keywords: military power, security, Indo-Pacific region, US-China rivalry, Japan,

alliance politics, post-Covid 19 world

Reopening the old wounds:

Japan as a state with military power

“[As Prime Minister], my grandfather amended the Japan–U.S. Security Treaty. He

faced severe criticism. He passed the treaty and resigned as Prime Minister at the
same time. Those who were against [revamping the treaty] are now overwhelmingly
for [it]. Unfortunately, politicians don’t get applause.” Abe Shinzo, the incumbent
Japanese prime minister, has become the longest serving leader in the postwar
Japanese history standing out for his determination to embark upon revamping the
Constitution, and more precisely, its Article 9 that bans Japan’s sovereign right to
possess military potential and use force as means of resolving disputes with other
countries.2

Article 9 is a reflection of immediate postwar circumstances of defeat and the country

being occupied by the US3—to be demilitarized, democratized, and liberalized—and
the basic strategic miscalculation that Chiang-Kai Sheik’s China would be the next US

2Excerpt from Shinzo Abe’s interview to Time Magazine from April 2014 “The Patriot: Abe Shinzo
speaks to Time.” Abe comes from a prominent political family which is almost a given in Japan
where politics is having a hereditary character. His maternal grandfather, Kishi Nobusuke was a
prominent Japanese bureaucrat who went from being war criminal suspect to one of the most
praised Japanese politicians by the US for which he was called a ‘political chameleon.’ In interwar
period, he was heavily involved in industrial planning, railway business, and opium trade in
Manchuria (at the time Japanese colony); during WWII, he assumed the post of minister of
munitions in the Tojo’s Cabinet. During the occupation, he spent few years in prison as Crime A
war criminal suspect (aggressive war charge) awaiting his trial in the Tokyo Tribunal which never
took place. After his release, he came back to postwar Japanese politics, and later on, became
prime minister (1957-1960). He was one of few postwar politicians who considered Japan should
bear more burden in its defences for which the US officials, who pressed Japan to rearm,
appreciated him (mostly Japanese post-occupation politicians were against rearmament). He was
the one under which US-Japan Security Treaty was revised to offer somewhat more equal relation
between the US and Japan.

52
ally in Asia. In the context of increasing US–USSR rivalry and Chinese Communists’
advance over the nationalist government—which ended in them taking over power in
1949—George F. Kennan4 was correctly observing that the US should turn to, its
former foe, Japan. From the Cold War onwards, by the virtue of US-Japan Security
Treaty, Japan become a key component of the US security infrastructure in Asia. This
came with price as Japan had been placed under mounting pressures to re-militarize
and contribute to both its own defence and collective security. In the absence of
constitutional reform, gradual evolution of Japan’s Self-Defence Forces (JSDF), in
both its military capabilities and scope of responsibilities, was made possible by
series of political and legal measures. At this stage, it is important to point out that,
until recently, Japanese foreign policy had been marked by constancy in form of the
so-called Yoshida doctrine that guided its leaders— to focus on building and
developing Japan’s economic power and security whereas its military spending was to
be kept at a bare minimum and defence outsourced through its Alliance with the US.

Beyond the above-mentioned constitutional impediments and Yoshida-line in its

foreign policy, Japan’s colonial past has been haunting its military organization,
which was dismantled in 1945 and placed under civilian control. Japan’s postwar
pacifist identity—formed in response to disastrous war for which the military carried
the exclusive blame— was nurtured by both its government and public opinion and
played an inhibiting role when it came to the idea of constitutional reform. At the
regional level, countries that were formerly colonized by Japan have used, for
different purposes, historical controversies and Japan’s ambivalent stance towards
them to argue against its greater military role out of what they framed as wariness to
Japan’s reversion into militarism and its disruptive effect upon regional stability.
Japan was recognized as an important player in the regional order, an economic
developmental model, Asian democracy, provider of economic aid and assistance,
especially for countries that have been late bloomers to industrial development and
3 Japan was occupied by the Allied Powers (United Kingdom, France, USSR, China, Australia,
New Zealand, India), but contrary to the European Theatre where Germany was divided, the US
was the power to exclusively assume occupation on behalf of the Allies (economically drained by
war) via General Headquarters (GHQ) that received policy recommendations from Far Eastern
Commission (Allied Powers) that were subsequently rewritten by State Department and given to
GHQ in form of policy directives.

4 At that time, Kennan was American diplomat in USSR who was extremely vocal about the Soviet
expansionist policies and critical of the US for its late response to it.

53
democratization, with its strong cultural outreach through history, food, manga and
anime. Its military organization kept its activities and image in line with soft power
rationale by focusing on operations other than war (OOTW) which have consisted of
disaster relief and humanitarian assistance within the UN peacekeeping efforts.
Despite the still existent domestic opposition—running among politicians, epistemic
communities, and its population—to flexing its military muscle, Japan can no longer
afford itself postwar status given that East Asia became the most incendiary region in
the world.

The Nye’s concept of soft power came to contrast coercive or command power in a
way to stress one country’s ability to articulate attractive ideas and shape other actors’
preferences, expectations, and agendas (Nye, 2013). However, this does not imply
that hard power became redundant, on the contrary, it is an indicator that it has to be
recalibrated as to reflect its soft power projection dimension while simultaneously
preserving the ability to use “coercion and kinetic punishment” (Chong, 2015).
Existence of both soft and hard power components matter and state ability to
effectively exploit them is what Nye further coined as “smart power” (Nye, 2013).
International law, diplomatic reputation, economic interdependence, increasingly
powerful public opinion in the age of social media networks (SMNs) help restrain
states’ choices when it comes to use of hard power. In that sense, smart power is “a
strategic concession by hard power towards its softer counterpart” (Gallarotti, 2015)

This paper argues that Japan needs to unequivocally incorporate hard power facet to
its existing foreign policy strategy, not only for the purpose of responding to its
unstable and fluid security environment, but also in order to articulate a coherent and
forward looking foreign policy that would allow for its greater relevance and influence
in larger Indo-Pacific regional order. In order to demonstrate the argument, first, an
analysis of adverse regional order and its multiple actors and their power ambitions
will be offered. Second, the JSDF will be shown as a military organization interested
in power projection that is out of sync with its current capabilities. Third, shifts and
constants in Japan’s security trajectory will be discussed together with the specific
role of the Abe administration in evolving security ambitions. Finally, in light of
recent pandemic and tension escalations in Indo-Pacific region, concrete strategies
that Japan should implement will be offered.

54
 International liberal order and regional security orders in
flux: adverse security environment

The US-led international liberal order based on international rules, norms, and
institutions governing collective security, free and open trade, and respect for human
rights is in crisis. Shifts in power distribution—relative decline of the US, ascendance
of China to great power status, and emergence of India as a major power—challenge
the dominant ideological framework that has been exclusively protective of Western
interests and contested by states that did not take part in its creation (Funabashi,
2020, 2). Moreover, the resistance equally originated from within the liberal states.
Domestic political forces and public opinions became unsupportive of and divided
over expansionist and interventionist liberal policies which have worked against their
interests. This created a fertile ground to the rise of conservative and illiberal policies
as can be illustrated by the Trump administration—in addition to similar trends of
far-right governments taking power across Europe—whose America-first policies and
retraction from international institutions and regimes came as a sort of US abdication
from its leadership position and discredited its reputation of being a trusted ally
(Funabashi, 2020, 4).

Moving to the regional level, the post-Cold War US supremacy in the Asia-Pacific has
been threatened by growingly assertive China. Asia-Pacific as a geographical concept
connected Northeast and Southeast Asia to Oceania and Americas (Medcalf, 2017,
16). Given the vast space and countries’ diversity—political systems, level of
development, culture, history—the institutional landscape of the region has been
structured around loose and overlapping regional political organizations starting with
Association of Southeast Asian Nations (ASEAN), various trade and security blocks
and frameworks such as ASEAN Free Trade Area (AFTA), Asia-Pacific Economic
Community (APEC), East Asian Summit (EAS), ASEAN Regional Forum (ARF), and
web of bilateral security alliances. Asian regionalism is distinguishable for its
informal and non-legalistic character that rests upon consensus requirement,
prominence of process over results in decision-making, and strict adherence to the
principle of non-interference in other countries’ internal affairs (Karns et al., 2015,
162).

Regions are more of a political and social construct than anything else, dynamic and
responsive to changes such as power politics, identity, domestic politics, leadership,

55
economy, security that drive regionalization process (Karns et al., 2015, 164). In that
manner, Indo-Pacific as a concept 5 organically emerged through cross-fertilization
process and was officially endorsed by major regional powers in their political,
economic, and security discourses from the 2010s. It accommodated rise of India and
China to a status of major economic and military powers with outward power
projection ambitions and vital energy and resource routes connecting East Asia and
the Indian Ocean. (Medcalf, 2017, 16). Indo-Pacific region (counting in Australia,
New Zealand, South Korea, and Southeast Asian countries) became “a single strategic
system,” “a maritime ‘super region’” having Southeast Asia as its centre of strategic
and economic gravity (Medcalf, 2017, 11). It represents an intersection point between
great (the US and China) and middle powers (Japan, India, South Korea, and
Australia) thus opening up space for regional order dominated by multiple poles.

China as “illiberal innovator” (Funabashi and Ikenberry, 2020, 5) and revisionist

superpower is seen as a main disruptor and destroyer of both liberal international
order and US-led, Japan-backed Asia-Pacific order. It assumes its part in global
governance by contributing to UN peacekeeping operations, by leading free-trade and
development through offering infrastructure to the developing world, and by
becoming tech and military giant. Simultaneously, it remains involved in unfair
market practices, protectionism, and human rights violations. That being said, it
would be fair to point out at the overall crisis of liberal values, especially under the
Trump administration, where the US suffered from protectionist, non-democratic
policies, human rights violations, and domestic unrest. China also started to structure
and divide Southeast Asian countries and beyond as being a proactive leader behind
initiatives such as Asian Infrastructure Investment Bank (AIIB), Belt and Road
Initiative (BRI), and other bilateral initiatives thus moving away from ASEAN
framework. Financial rationale is what primarily underpins these frameworks, not
rules or norms. China’s building of artificial islands on the disputed Paracel and
Spratly island—thus antagonizing Vietnam and Philippines as parties to the dispute—
in contravention to the UN Convention on the Law of the Sea (UNCLOS) and in
ignorance of 2016 ruling by the International Tribunal for the Law of the Sea (ITLOS)
sends a clear signal of its growing aggressiveness. In the same vein, regular incursions
of Chinese military boats, disguised as fisherman boats, into Japanese territorial

5 Alfred Thayer Mahan, Halford Mackinder, Karl Haushofer referred to analogous ideas to the
Indo-Pacific in the late nineteenth century (Medcalf, 2017, 15).

56
waters surrounding Senkaku islands are another aspect that is increasingly
problematic for Japan as these incidents could potentially escalate into a military
clash. More so, as the Chinese navy has pretensions to maritime supremacy, the
incursions are not strictly confined to its immediate neighbourhoods. Its nuclear
submarines presence and activities in Indian Ocean are worrisome to India (Medcalf,
2017, 20).

North Korea as de facto nuclear power has remained a direct threat to Japan’s
national security which has long benefited from the extended US nuclear umbrella.
However, the North Korean strategy based on dismantling the production of its
intercontinental ballistic missiles (ICBM) as to disengage the US whereas still
exposing Japan and South Korea to its missiles became ever more concerning during
the Trump presidency. Trump–Kim summits that took place in 2018 and 2019 did
not result in any substantial change regarding North Korea reducing its nuclear
capabilities despite its promises to do so. What further caused anxiety in Tokyo is
Trump’s dismissal of its alliance with South-Korea which removed the US role as a
nexus between Japan and South Korea and basis for policy coordination. Japan’s
relations with South Korea turned sour in 2019 over the issue of compensation to
comfort women, a historical issue that has been plaguing their bilateral relations for
years. President Trump’s transactional and linkage based approach to its allies—
security and economic policies being intertwined—further exacerbated Japan’s fear of
abandonment (Funabashi and Ikenberry, 2020, 9) and sparked national debate
around the taboo topic of Japan acquiring nuclear weapons. These policies would be
in direct contravention of non-nuclear Japan principle and its peaceful identity, but
in line with current dilemmas surrounding the constitutional revision and its security
diversification policies that will be later discussed.

Japan has remained to be an indispensable regional player, however as a country

suffering from economic stagnation, demographic challenges, lack of its own
resources, and uncertainty over whether its main ally would cherish its security
commitments, its clearly defined future role will depend on its ability to catch up with
globalization process, technological innovation (Funabashi and Ikenberry, 2020, 9)
and gather consensus for its domestic reforms. Economic decline brought by ageing
society, high public debt, labour shortage, lack of technological innovation and
competitiveness due to rigid corporate structure disadvantaged the country. Japan
had followed developmental state model to build its economic might in the 1970s

57
which implied a sort of planned economy with heavy involvement of state in setting
industrial policies and goals, national consensus when it comes to keeping wages low,
accent upon effectiveness, and prominence of bureaucrats in the coordination with
big business6 (Johnson, 1982). Implementing needed reforms would hurt ageing
voters who constitute vital electorate for Japanese politicians and require an
extensive social welfare spending. By the way of its experience however, Japan still
represents an important model of developmental and democratic state for late
comers to international economy (Tonami, 2018, 3). Through exercising its economic
diplomacy via tools such as Official Development Assistance (ODAs) that assist
countries in capacity building while promoting good governance, transparency, and
accountability together with its foreign direct investments makes it a reference point
for development of countries in the region (Funabashi and Ikenberry, 2020, 13)

JSDF as de facto power projection organization out of sync

with constitutional and national identity

JSDF is not de jure recognized as a regular military in sense of Article 9 of the

Constitution. In popular perception, Japan is not thought of as possessing a military
comparable to the US, in part due to the dominant narrative surrounding the
organization itself that stresses its missions in the soft power realm, hence compliant
with Japan’s pacifist national identity. This illusion quickly fades away before the
evidence of JSDF’s military and power projection capabilities which have been out of
tune with Japan being denominated as ‘security pigmy’(Pekkanen and Umezu, 2010)
and being legally circumscribed.

Japan’s tight defence budget, capping its expenditures at 1% of its GNP 7, did not
preclude its military modernization in terms of qualitative expansion of military
capabilities that would allow it to address increasingly demanding regional and global
security challenges. A highly sophisticated and functional military arsenal caters to
more than purely defensive capabilities and in its certain aspects includes offensive

6 As alternative, there is regulatory state model that is based on light state intervention in terms of
legislation, free market forces that decide which industries will be developed; accent is on
efficiency and maximization of profits.

7 This percentage excludes military pensions and Japan Coast Guard (JCG) budget.

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power projection capabilities.8 Its Ground Self-Defence Forces (GSDF) exhibit high
mobility, Air Self-Defence Forces (ASDF) are axed upon military technology allowing
for regional and global outreach, and its Maritime Self-Defence Forces (MSDF) are
built upon amphibious, carrier, anti-submarine, and ballistic missile defence (BMD) 9
technologies (Hughes, 2008, 12).

The lifting of self-imposed arms export ban in 2014 by which Japanese defence
contractors such as Mitsubishi Heavy Industries (MHI), Kawasaki Heavy Industries
(KHI), Toshiba, NEC, Mitsubishi Electric Company (MELCO) would be able to jointly
develop and export military equipment is another sign that Japan is readily moving
away from its past restraints. Although arms exports are limited to partners that
contribute to international peace and security (UN-led missions) and adhere to the
principle that the Japanese equipment should not be passed on to third parties 10
without Japan’s prior consent, their actual implementation remains hard to
implement. The Japanese Ministry of Defence has been involved in various
procurement scandals which point at dense links between bureaucrats, politicians,

8 In August 2019, Japanese Ministry of Defence (JMOD) purchased Lockhead Martin’s F35B
stealth, multi-role fighters with short take-off/vertical landing capability (STOVL) to be used on
fitted Izumo-class carriers (destroyers) in its intention to curb China’s maritime assertiveness.
These stealth fighters technically exceed Japan’s purely defence-oriented technology. China has
developed its own variant of fifth-generation aircraft such as Su-57 and J-20. JMOD Technical
Research and Development Institute (TRDI) has developed the Mitsubishi X-2 Shinshin, stealth
fighter made domestically by Mitsubishi Heavy Industries (MHI) was aimed to replace F-15 and
F-16 fighters. This remains work in progress, technology demonstration, rather than a real
achievement. Ultimately, acquiring existing technologies from abroad proved to be less risky as
developing new technology implies financial and delay risks.

9 Japan participates in and heavily depends on the US BMD system that consists of space satellite
radars and missiles. This allows the US to detect any potential launches whereas Japan only
possesses ground based radars that are relevant once the missiles have been launched. In June
2020, Japan announced it would not purchase Aegis Ashore missile defence system from the US
as has been previously planned which puts its defence in the difficult situation given the North
Korean threat and might potentially damage its cooperation with the US.

10 1967 limited arms export ban imposed by Prime Minister Eisaku Sato was excluding
communist countries, UN arms embargo struck countries, conflict prone countries. In 1976 Prime
Minister Takeo Miki introduced a blanket ban. Since 2011, the government has been amending
these rules to allow for minimal exports and participation in joint development and weapon
production (mostly limited to the US).

59
and defence industry (Hughes, 2008, 70). Moreover, MOD has been using the
Japanese trading companies—often acting as exclusive agents for foreign arms
manufacturing companies—to negotiate and conclude import procurement contracts,
in place of directly negotiating with them, thus being unable to avoid pressures to buy
from specific producers and have better grasp of cost-effectiveness in the process.

Before discussing consequential changes in Japan’s overall security trajectory under

the two terms of the Abe Cabinet that came as a knee-jerk reaction to the above-
mentioned security environment, this section will look at the incremental
enlargement in JSDF missions and abilities that had already started under Prime
Minister Koizumi’s term (2001-2006) together with institutional reforms that
rendered this feasible. Gulf Crisis in 1991 propelled Japan to start contributing in a
more responsible way to international peace operations. Reacting to outside
pressures rather than being proactive in its security, Japanese government adopted
series of special measures law and security legislation in order to assume its
responsibility in maintaining international peace and security in accordance with the
UN Charter. 1992 PKO Law established a legal basis for JSDF to be dispatched
abroad under strict conditions of humanitarian assistance and relief to Cambodia in
1992.11 In the security developments of post-9/11, Japan had to respond to security
threats that took form of international terrorism at global level and North Korean
ballistic missiles and nuclear program that took place in its backyard. Special
Measures Legislation enabled JMSDF to perform oil and water replenishment to
naval ships engaging in anti-terrorist activities in the Indian Ocean; and provide
humanitarian assistance and post-war reconstruction. More boldly, in 2004, Japan
introduced ballistic missile defence system (BMD) in cooperation with the US which
was one of the first steps in recognizing the need to build ‘multifunctional, flexible,
effective defence force’ (Akimoto, 2018, 182).

Prime Minister Abe’s ambitious touch in shaping the security came in form of ten
laws12 that addressed threats to peace and security of Japan and proactive

11 International Peace Cooperation Law Keeping (PKO Law) in 1992;

12 Self-Defences Forces Law (SDF Law), PKO Law, Law Considering Measures to Ensure Peace
and Security of Japan in Situations in Areas Surrounding Japan, Shop Inspection Operations
Law, Legislation for Responses to Armed Attack Situations, Act on Measures Conducted by the
Government in Line with US Military Actions in Armed Attack Situations, Law Concerning the

60
contribution at international level that focused on strengthening the US-Japan
Alliance. Prior to this legislation, the JSDF could only exercise right to self-defence in
the sense of Article 51, in the occurrence of a direct military attack against Japan.
According to the new interpretation, Japan might exercise individual right to self-
defence in situations when an attack against a foreign country in itself puts Japan’s
survival at stake. This precludes, however, JSDF ability to participate in exercise of
collective self-defence where it would come to assist any foreign country being under
military attack. SDF personnel could now be dispatched to PKOs outside of the UN
framework with permission to use weapons not only in self-defence, but also to
protect civilians at demand. However, in case of ceasefire being violated, they would
need to evacuate so that five principles 13 of PKO participation could be upheld
(Akimoto, 2018, 72). SDF peace support activities (ship inspections, logistical
support, search-and-rescue operations) are not geographically limited to conflict
areas surrounding Japan, but also include ‘situations that have an important
influence on Japan’ which means that it is not only reserved for the US forces, but
also countries that participate in Japan’s defence (Akimoto, 2018, 72). Finally, as for
the peacetime activities, the SDF can participate with the US forces, and other forces
contributing to its defences, in intelligence, surveillance, and reconnaissance (ISR)
activities, training and exercises, and asset protection—thus enhancing
interoperability and readiness (Akimoto, 2018, 135).

Japan’s SDF engineering unit was dispatched to UN Mission in South Sudan

(UNMSS) where it remained for almost five and half years during which its personnel
faced dilemmas related to violations of ceasefire and deteriorating security situation
in which the UN required peacekeepers to perform protection of civilians (POC) in
order to ensure mandate execution. These operations only became possible after the
enactment of 2015 revised legislation and Japanese government decided to partially
implement these requirements by adding POC missions to its SDF in South Sudan.
This showed the lack of proper military and psychological training for the SDF
peacekeepers and the ongoing controversy when it comes to relation between these

Use of Specific Public Facilities, Marine Transport Restriction Act, Prisoner Treatment Act,
National Security Council (NSC) Establishment Act.

13 These conditions include the existence of a ceasefire, consent of parties in conflict, principle of
neutrality, withdrawal in case previous conditions are not met, use of weapons at necessary
minimum.

61
instances and the Article 9 (Akimoto, 2018, 160). Defence Minister Tomomi Inada
resigned in 2017 under allegations of cover up of GSDF’s mission logs. In 2018,
Defence Minister Itsunori Onodera came under harsh scrutiny as for another cover
up and unreported SDF mission logs from its mission Iraq (2004-2006) potentially
involving combat activities. Beyond the apparent issue of public data management,
this is problematic from the aspect of civilian control over the military in Japan that
has been crucial from preventing the supremacy of the military in decision-making,
in response to its history and constitutional constraints.

JSDF remains a non-formal, constitutionally constrained, and peaceful narrative

infused military organization. The shift from defensive to power projection rationale
supported by incremental changes through law, but short of constitutional reform, by
which JSDF missions and capabilities were expanded have remained out of sync with
the non-military norms and pacifist mentality that is polarizing members of
opposition parties, legal and political science scholars, 14 and population in general.
JSDF, in the eyes of the population, exudes soft power only as an agency intervening
in case of natural disaster relief and humanitarian assistance. Oddly enough, the
public have turned a blind eye to SDF military might and legal increments in its
missions and capabilities, mostly stressing its benign character. Even in its dispatches
abroad, JSDF took extra care to make sure to sell its mandate to local people by
focusing on winning their hearts and minds. For instance, during JMSDF’s dispatch
to assist countries in countering piracy in Gulf of Aden, its warships were used to
secure critical maritime lanes for the purpose of uninterrupted trade against pirate
attacks. At that time, JMSDF’ ships were assisting the Japan’s Coast Guard (JCG) 15
that has power to use arms or sharing intelligence with other naval forces (Heng,

14 The Constitutionality of SDF, as explained by the government, was grounded in Supreme Court
1959 Sunagawa ruling which overturned the Tokyo District Court’s decision contending that
stationing the US bases in Sunagawa city and use of the US forces for defence of Japan was
unconstitutional. The Supreme Court stated that Japan had a right to self-defence, but used the
doctrine of political question to argue for the lack of its power to review the constitutionality of
the Treaty. The argument by the ruling Liberal Democratic Party (LDP) that this reasoning
implies not only right to self-defence, but also individual collective self-defence (not the case of
direct armed attack, but armed attack upon country that would put Japan’s survival at stake)
represents the legal stretching by analogy of the Supreme Court judgement; whereas the
judgement illustrates the weakness of this institution in Japan that questions its ability to
precisely do its job.

62
2015, 290). Another illustration of this is the above-mentioned GSDF dispatch to Iraq
where the understanding of local context helped the mission to, in coordination with
other Japanese agencies, tailor products that displayed Japanese cartoon characters
(water tanks with Captain Tsubasa stickers) and use sport activities (football matches
with locals). This allowed GSDF to engage with local population and project ‘non-
aggressive image’ amidst its reconstruction and humanitarian assistance efforts
(Heng, 2015, 294).

Military organization in Japan carries heavy a burden of responsibility, both legal and
political related to its decision of leading Japan into disastrous for expansion motives.
In the aftermath of war, the Japanese population faced occupation, poverty, and
social issues related to military families that lost their men to war or imprisonment
due to criminal prosecution16 Judicial narrative created at the International Military
Tribunal for the Far East (IMTFE or the Tokyo Tribunal) primarily stigmatized Japan
for conspiring and waging an aggressive war against the Allied Powers’ countries and
was used as an instrument of achieving larger legal, political, and strategic objectives
at both international and legal level (Babovic, 2019). The Tribunal was problematic in
various aspects, most importantly for creating and applying law retroactively and
selectively. Japanese military and civilian brass was singled out as criminally
responsible for the war in the eyes of the winners in war. However, for the Japanese
people, the Tokyo Judgement was foreign judgement and in their eyes these
individuals made political miscalculations that made them at least politically, if not
also morally, responsible for their strife. As part of reforms introduced by GHQ,
Japanese military was dismantled and its bureaucracy purged from the office in 1946.
Although political bureaucracy made their comeback into the government structure
that was dominated by economic bureaucracy, chance was not given to the military
that was stripped of its pre-war prestige. Even after the occupation ended with the

15 In this specific case, JCG in coordination with JMSDF patrols and Japan International
Cooperation Agency (JICA) aid offered training and capacity building and training to Coast
Guards from Djibouti, Oman, and Yemen.

16 Not only were top military and civilian leaders prosecuted at the Tokyo Tribunal, but many
among these prominent politicians were just incarcerated awaiting their trial (Class A war
criminals based on aggressive war charge or major war criminals). Throughout Japan and its
former colonies, at the end of the war soldiers and lower rank military were prosecuted by courts
martial for crimes against humanity and war crimes (Class B and C criminals or lesser war
criminals).

63
San Francisco Peace Treaty taking effect in 1952, prisons were full of former military
who waited until 1958 to be released. Due to pacifist constitution and stigma placed
upon the military, enrolling into the military service has not been attractive, as much
as, highly desirable and prestigious bureaucratic careers in Japan tend to be located
in Ministry of Finance (MOF) or MOFA, not MOD. More so, Japanese youth is not
incentivized to be part of the organization which makes military recruitment process
rather challenging.

Japanese government has never taken time to discuss its colonial past whereas
population showed apathy and ignorance towards it. War is a nasty business and an
enterprise that does not only pertain to political and military top, but also other
sectors of society, including businesses, civil society, and population. A more complex
historical narrative of the war could help add new layers to the much-needed national
dialogue related to Japan’s colonial past.

Does Yoshida Doctrine potentially have new successor?:

security shifts on Japan’s evolutional trajectory

Prime Minister Abe has not only been the longest serving (2006-2007, 2012-), but
also one of the most consequential Japanese leaders in the postwar history with vast
political expertise in area of foreign policy and security. 17 However, the changes he
has implemented in Japan’s security policies (introduction of security legislation,
formulation of national security strategy and related institutions) are only in part
product of his pragmatism and opportune political moment whereas other aspects
(institutional reforms, evolving security terrain) have been set prior into motion.
Given that the Abe Cabinet’s policies ought to be contextualized within historical
security trajectory, it appears that these shifts are not as radical as they stay within
general restraints when it comes to deployment of military. However, his larger
ideological stance could in some ways represent embryonic form of Abe Doctrine that
would orient and create long lasting changes his successors. Doctrine for this purpose
will be defined as “a system of normative and empirical beliefs about the

17 Prime Minister Abe assumed post of chief Cabinet secretary and security advisor in Koizumi
cabinet time during which the US pressed Japan as its main ally to contribute more in post 9/11
security landscape.

64
international system and the role of one’s own country in that system, as declared in
public by the official decision-makers of that country” (Brodin, 1972, 104).

Domestic institutional reforms that Abe finalized have already started as an effort of
past ministers (from Nakasone to Koizumi) to centralize and implement top-down
decision making process around the Prime Minister and its Cabinet, curb the
traditional dominance of Japanese bureaucracy, and allow for better coordination of
national policies across relevant ministries. In 2013, National Security Council (NSC)
was established as a venue for PM, chief Cabinet secretary, ministers of foreign affairs
and defence to consult and decide national security policies to be implemented by the
executive (Liff, 2018, 19). This was not the case before as concerned ministries were
bickering around contentious topics, each trying to assert its ministry’s interest. In
the same line, bureaucratic appointments became political as Abe started appointed
like-minded people to crucial positions which allowed for intervention of politicians
in the work of bureaucrats which has been unprecedented in Japanese postwar
history and further compromises the already blurred separation of powers.

National Security Strategies (NSS) from 2013 brought about strengthening of Japan’s
deterrence capabilities, situation awareness improvement, expeditionary forces
creation, and missile defence. In that vein, JCG and JSDF’s abilities were bolstered
(creation of Amphibious Rapid Deployment Brigade) to deter and effectively respond
to an eventual attack on the remote islands (Senkaku Islands) by their readiness,
mobility, and versatility (Goldman, 2013, 1). In surprise situations, having all three
forces of JSDF combined (sea-lifting and air assets) is indispensable (Goldman, 2013,
2). Creation of US–Japan Alliance civilian and military coordination body
strengthened their interoperability, joint activities, decision-making, intelligence
sharing in peacetime, grey zone, and armed attack situations exposure to which
allows Japan fast access to the US military expertise, cutting edge technology, and
knowledge indispensable on Japan’s trajectory towards military modernization. In
the spirit of Indo-Pacific region previously discussed, Abe coined Free and Open
Indo-Pacific strategy (FOIP) based on trade (economic pillar), freedom of navigation
and rule-based order (legal pillar), and maintenance of peace and security (security
pillar). This was an explicit invitation to other nations in the region such as India,
Australia, Vietnam to join as regional players in shaping and protecting the regional
order against China’s assertiveness, although some authors suggest that the disguised
goal remains preventing formation of US-China “G2 superpower club” (Funabashi

65
and Ikenberry, 2020, 16). In 2018, Japan undertook leadership in creating free trade
agreement Comprehensive Progressive Trans-Pacific Partnership (CPTT) from which
the US withdrew giving a major blow to their greater security strategy for the region
(Funabashi and Ikenberry, 2020, 16).

The above discussed institutional and legal incremental shifts, adhering to the overall
postwar military self-restraint, introduced during second stint of post-2012 Abe
administration, are underpinned by “ideological drivers” (Hughes, 2015). These
drivers attract criticism within and outside of Japan for their considerable variation
from Yoshida Doctrine and their controversial character which give meaning and
context to his concrete political achievements. However, given that foreign policy
doctrine is based on leader’s beliefs about international system and his country’s
place within it which shape the perceived reality, these beliefs ought to be analysed.
“Ending the post-war regime” and “restoring great power status” in international
order brings autonomy and recognition of its national strength (Hughes, 2015, 9)
both in military and economic sense. Analysis in relation to Japan’s power suggest
that it could not attain status of great power, but under the condition that it abides by
international law and norms and abstain from pursuing its national interest strictly
speaking, it could play an important role as a strategic leader in preserving liberal
values in region order (Dobson, 2016) Historical revisionism and patriotic education
aim at getting rid of masochistic narratives of Japan’s colonial past and fostering
sense of pride among youth. This particular aspect is problematic from the point of
view that although it refutes legal responsibility of Japan for aggressive war (the
Tokyo Trial), it also distorts historical facts and thus refutes moral and political
responsibility which should not be conflated with the latter. In turn, his ambiguous
stance towards Japan’s wartime responsibility—contradictory to previous official
apologies offered to its neighbours (1993 Kono Statement)—have only disturbed its
bilateral relations with South Korea and China. To nuance this point, these countries
have also instrumentalized historical issues and unresolved problems (compensation
to comfort women) with Japan for domestic political purposes, gathering votes
and/or legitimizing policies. Under the condition that Japan adheres to international
legal framework in place and takes cooperative states towards its allies and strategic
partners in the region, it could come to play a strategic role, relying on its military
power—in terms of hard and soft power balancing— and regional partners to
participate in redefinition of the Indo-Pacific regional order. As the existence of a

66
doctrine is only feasible in retrospect, what could qualify to appear as a successor to
Yoshida Doctrine would have to wait for at least a decade before its becomes
recognized as such. One thing is more certain and that is that changes introduced by
the Abe Cabinet will be irreversible and will serve as basis for upcoming substantial
security changes in terms of constitutional revision, before further military
modernization, which asks for a more generous defence budget, can be pursued.

Japan in turbulent times: Quo Vadis?

COVID-19 pandemic demonstrated the high levels of interconnectedness and

interdependence between states, not as exclusive, but primary actors that ‘retain their
sovereignty and still exercise their coercive power’ in the current international system
(Mingst et al, 2015, 3). Equally, it showed that global governance rests on ‘other basis
of authority’—international organizations, civil society, epistemic communities,
transnational corporations that are guided by formal and informal ideas, norms,
procedures, institutions, [and technologies] to identify and address trans-national
problems (Mingst et al, 2015, 3). Global governance is hence diffused between
various actors and “the decoupling of coercive force and legitimate rule is the most
striking feature of contemporary global governance” (Mingst et al, 2015, 3). Economic
recession, high unemployment rates, exhausted medical systems, surveilled
populations are the immediate consequences of the still ongoing pandemic. However,
the crisis of international liberal order, democratic decline, popular contestations,
and changes in global distribution of power have been exacerbated by the crisis.
These are first tectonic changes to the bigger ones that will follow to redefine the
international system, its actors’ salience and interaction, underlying values and
norms, and ultimately functioning.

The US-China rivalry has become pronounced. Both countries are suffering blows to
their international reputation and prestige, China for being stigmatized as country
that intentionally produced the pandemic and for its ever more aggressive behaviour
in the Southeast Asian region; the US for not taking lead during this crisis and
abandoning the World Health Organization (WHO) and current nationwide black
lives matter (BLM) protests that erode its authority as human rights enforcer abroad.
In Asia, academics, experts, and newspapers are talking about new cold war, only the

67
Cold War in the region was not cold, but hot. In 2020, sixty years after the US-Japan
Security Treaty was concluded, geopolitical terrain is extremely unstable.

In June 2020, the North Korea demolished South-Korean paid liaison office in what
appears to be provocative move followed by threats to move the military into
demilitarized zone. This development was likely fabricated to bring the North Korea
in the spotlight and potentially obtain some economic concessions from the South as
the country is economically struck by the pandemic effects and economic sanctions.
The DPRK has already acquired nuclear weapons and it is difficult to obtain
complete, verifiable, and irreversible (CVID).

Almost simultaneously, region is witnessing China’s assertiveness as the lethal border

clash occurred resulting in deaths on both sides in the disputed Indo-Chinese border.
China gained the part of the disputed territory which demonstrated that China was
militarily superior to India. Another evidence of India understanding its posture vis-
à-vis China is its Prime Minister Modi’s rather appeasing stance towards China
although it soon might be forced to turn to the US, Australia, and Japan or the Quad
for help with military deterrence. Further militarization of the South China Sea
amidst the pandemic has also recently seen new instances of escalation. In April
2020, Chinese maritime surveillance ship rammed and sunk Vietnamese finishing
boat near disputed Paracel islands in order to assert its claims and deny access to
maritime resources in disputed waters. China continues to frequently intrude
Japanese territorial waters near Senkaku islands claiming that they are inherent part
of the Chinese territory. At the end of March 2020, Japanese navy ship JS Shimakaze
collided with Chinese fishing vessel causing damage to the ship. The series of hostile
encounters between China and Southeast Asian countries (Vietnam, Philippines),
India is to be read as another warning to Japan and signal that Japan should be able
to more effectively deal with these incursions on its own, but also within the
framework of the US-Japan Alliance. However, the Trump administration ambiguous
stance towards its allies has not been encouraging. Taiwan has been another potential
military flashpoint in the area. Chinese aircraft carriers escorted by ships held
military drills in Taiwan Straight waters during April and May 2020. The election of
Tsai Ing-wen in Taiwan who is strengthening its relations with the US made China
engage in provocative actions in order to put pressure upon Taiwan. By the end of
August, People’s Liberation Army has planned to conduct military landing exercise

68
staging takeover of Taiwan Dongsha/Pratas Islands which risks a further escalation
as both the US and China engage in provocative measures in the area.

The United Nations Convention on the Law of the Sea (UNCLOS) and its Tribunal
regulating jurisdiction of coastal states, maritime safety, and use and management of
marine sources and ocean environment proved to be of limited utility. China ignored
the Tribunals 2016 South China Sea Award (Philippines vs. China) that found that
China violated maritime safety rules preventing collisions at sea and violated its
obligations to stop aggravating the dispute pending the settlement process. Similarly,
China’s unilateral development of natural resources and structures in East China Sea
could potentially violates territorial waters to which Japan could have entitlement
which comes as another confirmation of China’s attitude towards the international
law (UNCLOS).

Japan’s post-war foreign policy is not proactive, it is reactive to exogenous pressures.

Prime Minister Abe’s proactive contribution to international peace and security is not
proactive as it is coming quite late given the structural changes in international
system that accelerated in the last decade. As it has been pointed out earlier, strong
legal, political, and popular impediments contributed to that. This article argued that
Japan needs to integrate hard power military component into its foreign policy tools
for its purposes of defence and deterrence. As previously shown, Chinese maritime
supremacy is a threat to free and open Indo-Pacific as it ignores international law and
code of conduct (COC) in South China Sea, but it also uses coercion to bully weaker
states. As the Trump administration fostered fears of abandonment among the
Japanese elite, it would be prudent to first revise the Article 9 of the Constitution as
to allow for Japan to further upgrade its military power projection. Japan’s
constitutional identity revision does not have to be in conflict with its peaceful
national identity as they are not mutually exclusive. The current international order is
rule based, the UN Charter prohibits states to unilaterally the use force for resolving
its disputes, the case of self-defence being an exception. In addition, the case of
collective self-defence is another exception as coalition of willing states can
multilaterally and under the UN Security Council (UNSC) authorization use force
against a third country that is violating the status quo. This is a rather complex topic
as over the time state practice stretched these basic rules to include humanitarian
interventions and peremptory self-defence, but these categories currently have status
of norms. In line with Japan’s extensive engagement within international

69
organizations,’ it is difficult to conceive of Japan misusing its sovereign right to have
standing military and exercise collective self-defence. Constitutional revision needs to
come first as mentality shift will come as a consequence. Mentality shift primarily
refers to the awareness of the existence of military organization in Japan, its
acceptance as a legitimate part of Japan’s executive apparatus and whose activities
would depend on the Diet approval.

Another necessary step is further military modernization, acquiring of technology

and know-how from its US ally as well as further cooperation with other strategic
partners in the region. Greater integration of its forces is necessary for deterrent
purposes. For instance, in the case of Senkaku islands which represent grey zone area
activities, JCG is the first line of defence which prompted bolstering of their
capabilities. It only cooperates with JMSDF, but it is not part of the Navy. China’s
incursions around the islands are exploiting the legal and political constraints placed
upon both JMSDF and JCG (Funabashi and Ikenberry, 2020). Japan has to rethink
how it can reconcile the use of kinetic force when situations call for it. When it comes
to its strategic partners and national survival, there is a question surrounding the
escalation of hostilities in Taiwan over the US and China, as well, how would Japan
position itself towards it. Under its security legislation, it could exercise its right to
individual defence if it qualifies annexation of Taiwan as related to its survival. This
episode would endanger Japan’s immediate surroundings and allow Xi Jinping to
finally consolidate all the territories under PRC, a task that that Mao Zedong left
unfinished.

Finally, Japan has to engage into national debate over its colonial past and offer a
more accurate argument on why Japan should reform its constitution, acknowledge
its army, as well as, clearly integrate them within existing civilian institutions. As far
as neighbouring countries are concerned, Japan has already established himself as
crucial regional actor due to its level of development and contribution to Southeast
Asian countries’ development. Its interests are intrinsically connected with theirs
through regional public goods that is maritime safety, free and open seas, and rule of
law. In 2020, Japan revising its Constitution would come as a natural response to the
Chinese revisionist actions that are concerning to the regional lesser powers. Until
recently, those countries were trying to position themselves as to benefit from both
China and Japan, but given the recent turn of events, a clear restructuring of
countries around the Quad or China will ensue.

70
The road towards Japan embracing its military power has been long and is not over
yet. However, Japan is on its path into becoming a regional power that will be able to
share the burden and contribute the process of shaping the Indo-Pacific regional
order. The Abe Cabinet is ambitious in its goals when it comes to Constitutional
revision, but at the same time cautious in accommodating its coalition partner
Komeito that is of pacifist orientation and its public opinion that has become
polarized over the issue. Japan should use this push to formulate a more coherent,
unified, and bold narrative when it comes to its national security and regional
security at large.

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72
 YOUTH UNEMPLOYMENT IN THE WESTERN
BALKANS AND MIDDLE DANUBE BASIN IN LIGHT
OF THE EUSDR GOALS AND EUROPE 2020
STRATEGY

Darija MARKOVIĆ , LLB (Hons)1

Abstract

Equal opportunities play an important, if not paramount role in the labour market.
However, an increasing trend of employment discrimination and a rise in the number
of young people not in education, employment or training (NEETs) has left its mark
on the social and economic growth of countries in the Danube Region. Realizing this
as a stumbling block to social and economic development, ten years ago the European
Union Strategy for the Danube Region (EUSDR) was adopted, including 12 priority
areas. Priority Area 9, named “To invest in people and skills”, states that one of its
targets is contribution to higher employment rate in the Danube Region with a
special focus on youth unemployment. Likewise, ten years ago, the European Union
(EU) adopted a strategy “Europe 2020”. Calling it a strategy for smart, sustainable
and inclusive growth, the EU set employment as its first target, hoping to achieve 75%
of the population aged 20-64 to be employed. Firstly, the author of this paper shortly
presents the problems and obstacles young people face on the road to, at the entrance
and in the labour market itself. After identifying the factors that contribute to the
increase in the rate of youth unemployment, the paper goes on to take a look at the
progress that has been made in battle against this issue within countries of the
Western Balkans and Middle Danube Basin. Finally, with both of these strategies
reaching their ten-year milestones, it is the aim of this paper to see whether there has
been progress on the topic of youth unemployment and how regional cooperation has
helped with this issue.

1 Master’s student at Peoples’ Friendship University of Russia (RUDN), Moscow; E-mail:

darija.dm.markovic@gmail.com

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Key words: youth unemployment, Danube Region, EUSDR, Europe 2020

Introduction

The COVID-19 pandemic in the first half of the 2020 has warned the world that,
among other things, it is necessary to have good interconnection and cooperation in
extraordinary circumstances. It has also indicated the certainty of an economic crisis
we would be facing after the medical world takes control over the pandemic. Not so
long ago, at the end of the first and beginning of the second decade of this
millennium, the world was caught in a multi-stage economic crisis. The financial
crisis, which began in the banking sector in the USA in 2007, quickly spread to the
rest of the world. In 2009 it was joined by the European (sovereign) debt crisis.
Pressed by the challenges of these crises, and with the goal to consolidate its ranks
and systematically take measures to eliminate negative effects of the crisis, the
European Union reacted by adopting a strategy – the Europe 2020 strategy for
smart, sustainable and inclusive growth. The Strategy was created as a framework
for a 10-year period for a reason – it was adopted at the time of the great economic
crisis, one that cannot be overcome overnight, and in order for its positive effects to
be seen, economy and society need to be stabilized first. Considering the fact that
before adopting this Strategy there was already a growing trend in the unemployment
rate, this issue gained a significant place in it. Aside from unqualified people and
those with temporary employment, such trend particularly jeopardized the young
population (ages 15-24). With an alarming trend of demographic ageing in the EU,
resolving this issue received prominent place in the Strategy. European Commission
set a goal – by 2020 the employment rate in working population (ages 20-64) should
be increased to 75%.

At the same time as the Europe 2020 strategy, the European Union Strategy for the
Danube Region was adopted. Since its inception, the EU has been developing
adhering to the concept of regional politics, so it came across as a quite logical course
of action to adopt a special strategy for the most international region in the world.
The Danube Region is characterized by an enormous economic potential, but also
political complexity since not all countries in the region are members to the EU, and
some of them are still burdened by the unsolved political and economic problems.
The countries in question are the Western Balkans countries, which have expressed

74
their intentions to join the EU. On their road to accession, they are obliged to fulfil
specifically defined preconditions relating to balancing out all areas of public life,
with the focus on normative harmonization and complete adoption of democratic
achievements and human rights standards. The purpose of the EUSDR is to balance
and equalize the development of the Danube Region. Bearing in mind the Europe
2020 strategy, equalizing economic development is practically impossible without
improving young population’s possibilities on the labour market. Equal opportunities
play an important role, if not the most significant, in youth employment. For stable
social protection system, the number of employed young people needs to be much
higher than the number of retirees. At the same time, we ought not disregard the
significant number of population younger than 15 years of age, as well as other
dependant persons. Since the presence of discrimination in employment and an
increase in number of young persons not in education, employment or training
(NEET) has been noted, it is easy to see the negative effects this has had on the social
development of the countries of the region, which is why the EUSDR gives special
attention to this problem. Among 12 priority areas, there is a priority area 9, named
“To invest in people and skills”. The aim of this priority is precisely contributing to a
higher employment rate in the Danube Region, with special focus on youth
unemployment.

After identifying all the above-mentioned factors, the paper goes on to take a look at
the progress that has been made in battle against this issue within countries of the
Western Balkans and Middle Danube Basin. Given that the strategies mentioned
above are reaching their ten-year milestone, it is the aim of this paper to shortly
present the problems and obstacles young people face on the road to, at the entrance
and in the labour market itself.

Youth’s problems in employment

Although we are living in a time where people finish higher education, and do not
stop at bachelor, but study at a master and doctoral level, we have been witnesses to
the rising phenomena of youth unemployment. Of course, youth unemployment is an
indelible part of the overall global problem with (un)employment, but for more than a
decade it has been identified as a specific problem recognized on a global level by ILO
(International Labour Organization). ILO even adopted Resolution concerning youth

75
employment in 2005.2 Nevertheless, it is almost impossible to tackle such a problem
on a global level, which is why regional and national organizations and strategies play
a key role. As a result, the author of this paper looks at two regional strategies, the
Europe 2020 strategy and the Europe Union Strategy for the Danube Region
(EUSDR), both adopted in 2010.

However, recognizing the problem is important, but it still does not solve the issues in
practice. Let us make a short overview of the issues youth face while searching for
employment. As mentioned above, modern youth is very educated. The development
of information technologies, namely the Internet, has enabled people to obtain
necessary information much faster, and hence the education system, having adapted
to the new circumstances, can now offer people even more than before. Regardless of
that, we find ourselves in a conundrum – if knowledge is so accessible, why do we still
have a problem with youth finding proper employment? On one side of this problem
we have young people, be it highly educated or not but willing and able to work, and
on the other side we have the employers who apparently desire a younger workforce,
but do not actually employ young people.

It could be stated that most of the problems young population faces in employment
are discrimination on various bases, such as lack of practical knowledge, gender,
colour, nationality, religion, etc. Young people are eager to start their “adult lives”,
finish education, find a job and start an independent life. However, the “adult life”
seems to be starting later with modern generations. For many positions one ought to
have obtained a postgraduate higher education (master’s degree or other equivalent),
which is one of the reasons they start searching for a job later. Another problem is
that, though it may be of high quality, the education they receive is mostly theoretical,
which is why they face problems once they begin working. They do not receive proper
practical training during school/university. As mentioned, employer do wish to find
fresh and young employees, but when faced with choice of young professionals, they
rarely give the opportunity to inexperienced candidates. It is a paradoxical
occurrence, because if the person does not start working, how is one supposed to
obtain experience? In connection to their education, young people who finished
university usually expect to find a high-paid job/position straight away, even though
they are only beginning their careers. Although it is good to have high goals, such
imaginations often lead to disillusion after failing at a job interview, or even getting

2For more information see: https://www.ilo.org/youthmakingithappen/PDF/resolutions_en.pdf

76
the job, but realizing that it is completely different from what you had expected it to
be.

Further, when applying for a job, young female candidates face discrimination solely
based on their gender. In this author’s opinion, they represent a particularly sensitive
group in youth unemployment. During job interviews, it is not a rare occurrence for
young women to be asked about their private lives and plans for the future, namely
raising a family. Relationships, marriage and maternity have been increasingly
frowned upon and seen as undesirable in female employees.

Globalization, the freedom of movement, with both economic and irregular

migrations, has changed ethnic images of individual countries to a certain degree.
Many young professionals migrate to countries with better and more stable
economies. However, equal opportunities on the labour market do not seem to exist,
as young people still face discrimination based on their skin colour,
ethnicity/nationality and similar.

Besides these issues, other more objective circumstances also influence the youth
employment rate – the status of the overall market. Political and economic relations
between countries and their individual markets leave a mark on the labour market as
well. With a market’s stability and positive development, it is only reasonable to
expect more opportunities for young people. However, if the economy is struggling,
then it is difficult to even discuss measures of improving youth employment rates
before stabilizing the economy.

Europe 2020 Strategy

Employment Problem Background

In the Europe 2020 strategy, the European Union (EU) paid special attention to the
issue of youth unemployment. Besides the fact that including young population into
the working world is a part of the EU’s everyday policy, we can notice that in the
background of the increased attention over this issue there is a concern due to the
warning trends that have been obvious already at the beginning of this millennium,
especially at the moment when this strategy was adopted. Two trends could be seen
as key ones – the changes in population’s average age and disturbances on the
market, including the influence of the World financial crisis.

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 Unfavourable trend of demographic ageing

When talking about changes in the population’s average age in the context of
employment rate, then it primarily relates to the so-called dependence ratio of the
elderly population. It is the relation between the elderly and work-active population,
counted as the number of persons older than 64 for every 100 citizens aged between
15 and 64. In other words, it the ratio between the number of residents of pension age
and the number of residents of working age. A higher number indicates additional
strain on the social protection system. However, this does not give us a precise image
of the ratio between dependent persons and those who actively work and make
income to support both themselves and the work-passive population, not only
because children up to 15 years of age are taken into consideration, but also because
there is a possibility that persons considered able to work actually do not work, but
are in education or searching for employment. Even besides this, the ratio of elder
population’s dependence calculated this way is considered sufficiently reliable for
making statistical prognoses of population’s living standard in a given community. A
complete picture of the population’s age is achieved by comparing percentage of the
total population younger than 15 and population older than 65. At the time the
Strategy was created, it was stated that the process of demographic ageing in the EU
is accelerating to the extent that “the number of people aged over 60 is now
increasing twice as fast as it did before 2007 – by about two million every year
compared to one million previously” (European Commission, 2010a, p. 7). In the
2009 Ageing Report the Directorate-General for Economic and Financial Affairs of
the European Commission did a projection of the expected ratio of elder population’s
dependence in the world, showing a devastating forecast for the EU (Directorate-
General, 2009, p. 49):

Such prediction of the population’s ageing is sufficient enough for us to draw a

conclusion about the importance of the youth employment growth rate. If we
disregard the importance of employing young working force (15-24), with such a
trend in population’s ageing, by 2050 the ratio of the elder population’s dependence
in the EU would reach value 1, which makes the system of social protection
unsustainable. The European Commission has recognized this risk to its system and,
hence, through the Europe 2020 strategy it has expressed its intention to cut off this

78
unfavourable trend and reach the optimal maximum employment rate of 75% 30
years earlier.

Figure 1: People aged 65 or above relative to the working-age population

Global challenges and competition impact on the labour market

Strengthening of the global challenges and competition due to the fast development
of new economies, primarily China and India (Eurostat, 2019, p. 22), has been
estimated as a latent threat even for the labour market in the EU, on a chain reaction
basis. Namely, the EU’s market is the biggest and most organized in the world, which
is very attractive to new economies in development, first of all China. Chinese
investments in strategic sectors, especially in the technological sector, are practically
inevitable regardless of the precaution measures the EU has been taking or could
take. The capital constantly strives to increase, and in order to achieve this, it ought
to quickly change into either real property or financial capital 3 (Jednjak, n.d., slides
3-4). Unlike real capital, which is mostly kept on a local level, the financial capital is
not limited to one owner, but can it at any moment (Scharmer and Kaufer, 2013, pp.
91-93). With globalization in the background, it is particularly difficult to limit
financial capital’s movement because there are real individual needs of large
companies. When it comes to the EU companies, in case of restrictions towards
Chinese investments, they ought to then be satisfied with financial investments with
the EU itself. If the EU companies need Chinese investments, then it is completely
certain that the European market also has the need for goods from China. On the

3 Real property: Means of production – plants, machines, buildings, equipment, reproduction

materials, stocks of semi-finished products and finished (unsold) goods; Financial capital: In
different financial instruments that bring an income, such as cash loans, savings, stocks,
commercial papers, as well as some forms of means of payment that provide a certain interest at
the same time.

79
other hand, due to the specific political and economic system, the Chinese market is
largely limited to products from foreign companies. Because of that, there has been a
large foreign trade deficit of the EU with China, and this trend has not been changing
for years now, which can be seen in the following graphic display:

Figure 2: EU trade in goods with China 2009-2019 (EUR billion)

Source: Eurostat (online data code: ext_st_eu27_2019sitc and DS-018995)

How does this reflect on the labour market, i.e. on the population’s employment in
the EU? Foreign investments are sort of an internationalization of the EU’s economy,
so the effects on the population’s employment can be viewed through a prism of the
effects of the globalization. Due to competition’s strengthening as a consequence of
globalization, there is a real risk of closing some companies or moving them to other
countries with cheaper workforce (European Parliament News, 2019, August 20). In
both cases, lay-offs are an inevitable result, which, logically, increases the
unemployment rate. Additionally, because of the restrictiveness of the Chinese
market for placement of EU-made goods, simultaneously with the increase in the
volume of similar products made in China on the EU market, the European producers
decrease the production volume of such products for their own market. This could
also lead to a decrease in the number of employed persons in the EU. It is further
complicated by the poor access to the large Russian market, due to economic
sanctions imposed on Russia on the USA’s initiative.

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Creators of the strategy have definitely taken into consideration the World financial
crisis 2007-2008, which began and caused most damage in the USA. Since it related
to a banking crisis in connection with securities, it quickly spread over the rest of the
world, resulting in the European (sovereign) debt crisis at the end of 2009. In the
2008 and 2009, about four million workers in the Eurozone were left jobless, which
annulled the positive results on the labour market achieved in the ten years preceding
the crisis (Ad hoc team, 2015, p. 5). After a short reprieve in 2010, the World financial
crisis entered the second stage, from the last quarter of 2011 to the first quarter of
2013. During this time there was a significant increase in the unemployment rate and
an additional loss of 1,8 million job positions (Ad hoc team, 2015, p. 5). Only two
thirds of the EU work-able population were employed, so the employment rate was
lower than the ones in Japan and the USA at the time (over 70%). The youth
unemployment rate, which was higher than 21%, also showed to be a negative
consequence of the World financial crisis.

The rising unemployment trend was especially characteristic during 2009, when the
Strategy was in being developed, so, logically, this issue came to the forefront.

Changes in the unemployment rates have unequally manifested among the countries,
in accordance with the measures each of them had taken. In that manner, the highest
increase in unemployment was noted in Greece, Spain, Cyprus, Ireland, Latvia and
Portugal (Ad hoc team, 2015, p. 6). Taking into consideration the workers
characteristics, besides the unqualified and temporarily employed, the most sensitive
group turned out to be young workers aged 15-24, mostly because the majority had
temporary contracts. Taking into consideration that there was an increase in the
NEETs (Not in Education, Employment or Training) rate, we may come to a
conclusion that ’despite the reduced prospects, however, young people who are not in
education, employment or training (NEET) nevertheless remain attached to the
labour market’ (Ad hoc team, 2015, p. 6).

Bearing in mind the alarming trend of population’s ageing, as well as the above-
mentioned negative effects the World financial crisis has had on the young working
population, it is clear to see why the European Commission included ’Inclusive
growth – fostering a high-employment economy delivering economic, social and
territorial cohesion’ (European Commission, 2010a, p. 10) among the three mutually

81
strengthening priorities of the Europe 2020 strategy for smart, sustainable and
inclusive growth.

Employment rate growth prediction

Since the Strategy was made at the time of the World financial crisis and a sharp
increase in unemployment, predicting the employment rate growth for a period of ten
years was a challenging task, especially if we have in mind that the global recession
was assessed as devastating and unpredictable (Blanchard, 2009, p. 8), and even
before there is an increase in employment rates, economy needed to stabilize and go
on a positive. This means that at the very beginning of financial recuperation of an
economy, a sudden jump in the employment rate cannot be expected. What duration
of the initial period could be taken as a parameter depends on a number of
circumstances. Those circumstances were also difficult to predict, precisely because
of the recession’s unpredictability, which is why they relied upon analyses of past
experiences and trends with similar circumstances.

Employment growth rate was rising between 2005 and the beginning of the crisis in
2008. The annual employment growth rates before the beginning of the crisis was
above 1%, whereby it slowed down because a large number of people gave up on the
job search (Ad hoc team, 2015, p. 31). It is another aggravating factor for the
estimation because an unknown number of unemployed persons is not included in
the calculation due to them leaving the labour market. When those people, after
renewing their trust into economic recovery, return to the labour market a problem
arises, which is why the image of employment rate in relation to the GDP cannot be
completely correct for a certain period – it would turn out to be less than it really is.

Facing possible scenarios of crisis’ development, creators of the Strategy found

themselves facing the options for the road directing the Community – “sustainable
recovery”, “sluggish recovery” or “lost decade”. The first one signifies that they would
need to “face up collectively to the immediate challenge of the recovery and to long-
term challenges – globalisation, pressure on resources, ageing, – so as to make up for
the recent losses, regain competitiveness, boost productivity and put the EU on an
upward path of prosperity”; the second would mean “a slow and largely
uncoordinated pace of reforms”, and the risk of “ending up with a permanent loss in
wealth, a sluggish growth rate”, which could further lead to the third scenario – “high

82
levels of unemployment and social distress, and a relative decline on the world scene”
(Figure 3) (European Commission, 2010a, pp. 8-9).

Figure 3: Three scenarios for Europe by 2020

The graphic view of all three scenarios clearly shows the benefits of the first one, as
well as the necessity for facing up to negative consequences of the crisis in any of the
suggested approaches. By enumerating all of the trumps in Europe’s hands, the
strategy points out that “the best chance for Europe to succeed is if it acts collectively
– as a Union” (2010a, p. 9). Obviously, that would be choosing the first scenario and
the set goal of the strategy is “to turn the EU into a smart, sustainable and inclusive
economy delivering high levels of employment, productivity and social cohesion”
(2010a, p. 10).

Reaching 75% employment rate in work-able population was set as a goal in the
Strategy, but at the same time the goals were set for a better position of women and

83
older workers and including migrants into the workforce. In relation to that, it was
clearly denoted that achieving this goal is not possible separately because its
achievement is interdependent on the achievement of other goals. Practically,
achieving any of the goals could be brought into connection with employment –
better education, levels, innovation across all sectors of the economy, fight against
climate change… Just as achieving higher employment rate helps reach the other
goals, for example decreasing poverty (2010a, p.11). As already mentioned, for the
social protection system to be sustainable there ought to be a higher youth
employment rate (persons aged 15-24), so the Strategy gave the Commission an
obligation to create a framework for “young people’s entry into the labour market
through apprenticeships, stages or other work experience, including a scheme (‘Your
first EURES job’) aimed at increasing job opportunities for young people by favouring
mobility across the EU”, and that such framework should be implemented by
member-states on a national level (2010a, p. 13). When it comes to measures of the
third priority, i.e. those that directly concern employment policies, guidelines on the
EU level are as follows (2010a, pp. 18-19):

• recognizing the manner for better economic transitions’ management,

• harmonizing the legal framework so as to create optimal condition for rational

working hours and functional assignment of workers, and removing new risks
for health and safety at work,

• developing workforce mobility within the EU, with the support of the
European Social Fund and other structural funds, per labour market
necessities,

• developing social dialogue on all levels and tighter connection between

member-states’ employment services,

• offering strong support to inclusion of all parties interested in the strategical

framework for cooperation in education and training,

• developing mutual language and operative tools for education/training and

work – a European Skills, Competences and Occupations framework (ESCO).

On a national level, the member-states are required to (2010a, p. 19):

84
 Figure 4: Unemployment rates EU-27, EA-19, seasonally adjusted, January 2005 – April
2020 Taken from: Eurostat (online data code: une_rt_m)

• decrease market segmentation, so as to ease the transition and harmonize

work and family life,

• constantly monitor the tax system, with the specific aim to eliminate measures
discouraging to self-employment,

• develop new forms of balance between work and private life and active ageing,
as well as increasing gender equality,

• establish national frameworks of qualifications in order to give a strong

stimulus to the implementation of the European Qualifications Framework,

85
 • ensure harmonization of competences for further education and the labour
market with educational programs on all levels,

• include social partners into planning education and training.

Even though these are guidelines for creating a positive ambience that would
contribute to the increase in employment rate for all, it is obvious that most of them
were given a role to stimulate employment of young persons. For these guidelines to
be realized, numerous problems need to be faced, especially during the crisis. In that
manner, during the second stage of the crisis a strong trend in youth’s lay-offs was
recorded, which also further created the atmosphere of insecurity in young persons
who were mostly given temporary contracts, easily terminated during a crisis.
However, it is interesting to note that employment of young persons with higher
education was more resistant to loss of jobs (Ad hoc team, 2015, p. 6; 22).

Nevertheless, the graphic image of the unemployment rate’s fluctuation within the
EU confirms that the Strategy has given more than good results, at least in the area of
employment (Figure 4).

The number of unemployed young persons in the EU is still large – more than 3,3
million people aged 15-24 in 2019, whereby in the year before, more than 5,5 million
young persons of the same age were not in employed or fell into the NEET category
(European Commission, 2020). Still, in the past decade a great progress has been
made in the field of youth employment. Since the beginning of the global financial
crisis the unemployment rate had been rising, reaching its peak in 2013 – 24,10%.
From that moment until today, this rate has been in a rapid fall, reaching a minimum
in December 2019 - 14,10% (Figure 5).

European Union Strategy for the Danube Region

Danube Region and regional politics

The Danube region is considered the most international river basin in the world. This
region encompasses 14 countries, and owing to the EU’s expansions in 2004, 2007
and 2013, some of those countries changed their status, and therefore the region
gained a new form. Today, 9 out of 14 countries in the Danube region are EU
members. The remaining five countries are not members, but are in various stages of

86
the accession process, which means that they need to fulfil numerous prerequisites in
accordance with chapters of the acquis before finally being accepted into the union.
Different statuses of the countries within it geographically make the Danube region a
complex and true challenge for the EU in its endeavour to help candidate-states in
fulfilling their obligations from chapters of the acquis. A particular specificity of this
region, especially in its middle part, is the territorial, traffic and ecological connection
between the Western Balkans countries with the EU member-states. The so-called
Middle Danube consists of Slovakia, Hungary, Croatia and Serbia, all of which lie on
its riverside. This list is further composed of Bosnia and Herzegovina, which is near
the river (it borders Croatia and Serbia) and the river Sava, its natural border with
Croatia, flows into the Danube in Belgrade. Because of the before stated, and in the
spirit of this paper, further in the text more attention shall be given to effects of the
EU’s regional politics in the Middle Danube basin in light of the Europe 2020
strategy and the European Union Strategy for the Danube Region (EUSDR).

Figure 5: European Union Youth Unemployment Rate, 2010 – 2020.

Source: https://tradingeconomics.com/european-union/youth-unemployment-rate

Regional politics concept is a platform upon which the EU has been developing since
its establishment, and although this concept was created out of need to equalize
economic development, it quickly became recognized as a means to reduce tensions
between some countries, especially in the Western Balkans (Marković, 2017, p. 228).
It is in the spirit of the Lisbon Agreement to strengthen territorial cohesion, but it is
the macro-regional approach that relies upon stimulating geographical, economic

87
and cultural connections, which could then suppress differences leading to a conflict
(Stojović et al., 2012, p. 9). In accordance with this, the EU started several initiatives
to equalize development of the Danube region, the EUSDR being one of particular
significance, adopted the same year as the Europe 2020 strategy.

Figure 6: Danube Basin map.

Source: https://inland-navigation-market.org/chapitre/operating-conditions/?lang=en

EUSDR background and objectives

The European Commission adopted the EUSDR in December 2010, and the
European Council endorsed it six month later, in June 2011. Created at the same time
by the same organ and in the same process of globalization, the Europe 2020 strategy
and the EUSDR share an unbreakable bond, especially having in mind that the
Europe 2020 strategy guidelines encompass issues that the EUSDR guidelines do not
cover or do so only partially. Hence, not only because of the difference in population
and the size of geographical territory they cover are these two strategies in a relation
of general to special. This can be observed specifically when it comes to employment
growth rate, particularly among young people.

In light of the global financial crisis, the creation of the EUSDR has also faced some
difficulties. Even though the Europe 2020 strategy was created, it was obvious that
more of a micro-regional approach is necessary in resolving the existing issues. In

88
2008, Commissioner Hübner stated that “The importance of the Danube Basin for
the EU cannot be underestimated. Our policies and the investments we are making in
the Basin through the EU’s cohesion policy in particular have an impact on the
livelihoods of 20 million citizens. The Danube needs a specific strategy comparable to
the strategy we are developing for the Baltic Sea Region. A one-size-fits-all approach
doesn’t work in an EU of 27 Member States and 271 regions. We need a targeted
policy for the Danube that meets its ecological, transport and socio-economic needs”
(About EUSDR, n.d.). Hence, the Strategy was finally adopted in 2010, with a task to
deal with 12 priority areas divided into four pillars. The area of interest for this paper
is the Priority area 9 “To Invest in People and Skills” of the pillar “Building
Prosperity” (Danube Region Strategy, n.d.). Coordinating countries for this priority
area are Austria and the Republic of Moldova.

Figure 7: Pillars and Priority Areas Source: danube-region.eu

The Action Plan attached to the EUSDR pointed out the advantages of the Danube
Region in comparison to the EU 27 (without Croatia at the time), upon which human
potential could be maximally used (European Commission, 2010b, p. 70):

• the Danube Region population is younger than the average age in the EU 27

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 • there are much better indicators for children who quit education early, even
though the share of population with higher education is lower

• unemployment is less pronounced, but at the same less people are employed.

Guidelines for improving conditions for the employees were also given:

• attention should be given to workers’ mobility on the labour market so they

could work closer to their homes/residences and make decisions about
mobility,

• better possibilities for life and work close to family and birthplace require
better local business offers,

• the Region ought to stop the brain drain, which entails loss of earnings from
investing in skills,

• in connection with social insurance and recognition of qualifications, legal and

administrative factors should be improved,

• indirect obstacles relating to accommodation, language and spouse’s

employment should be eliminated,

• “psychological” obstacles, particularly the issue of return to home country and

unacceptance of mobility, should also be eliminated,

• inclusiveness on the labour market should be ensured.

Youth unemployment in the Middle Danube Region

Both EU member-states and non-member countries from the Middle Danube micro-
region have a common feature, which is demographic ageing. It is precisely because
of this that youth employment holds great significance. Taking into consideration
that among the non-EU countries of Middle Danube region Serbia is the biggest, we
shall take it as a parameter for the region. In 2018, about one-fifth of the EU
population was older than 65, which is an increase of 2.6% in comparison to 2008.
During the same period in Serbia, the number of persons older than 65 rose up by
2.7%. When it comes to the Middle Danube region, Hungary is still slightly above
Croatia, but still behind Slovakia (3.4%). Bearing in mind that in comparison to the
mentioned countries Serbia is not an EU member and is behind these countries in

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terms of economic power, the demographic ageing trend in Serbia puts forward a
need for higher employment rate for young people. Overall, in 2019 the average
number of employed persons rose by 2% in comparison to 2018, while at the same
time the number of retirees decreased by 0.4%, which means that the number of
employed persons in 2019 was higher than the number of retirees by 27.2%
(Zdravković, 2020, May 8). However, even though the number of employed persons
has improved, dependence ratio of the elderly population is about 1:1.5, and a system
where the number of workers is almost the same as the number of retirees is simply
not sustainable. According to the Statistical Office of the Republic of Serbia (2020,
pp. 8-11), the employment rate in population of working age (15-64 years old) in 2019
was 60.7%, which is a slight increase in comparison to 2018. When it comes to young
people, aged 15-24 years, the employment rate in 2019 was 21.5%, while NEETs
amounted to 15.3%. The youth unemployment rate in Serbia in 2019 was 27.5%,
which is almost double the percentages in the EU. Compared to 2018, the
unemployment rate decreased by 2.2%. According to the Economist, in 2018 Bosnia
and Herzegovina was the second in the world in youth unemployment (Figure 8), an
unemployment rate three times higher than the EU. Coming right behind it is North
Macedonia, yet another country from the Western Balkans.

Figure 8: Top ten countries with the highest rate of youth (15-24) unemployment
Source: worldinfigures.com/rankings/index

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What are the main causes of such high unemployment rate in the Middle Danube
region? In case of Serbia, according to the Zero report on youth rights in Serbia
published by Belgrade Centre for Human Rights (Nikolić, 2019, pp. 19-21), although
the overall unemployment rate in the country has been decreasing in past several
years, it does not change for young people when compared with other age groups. To
make matters worse, in 2015 Serbia adopted National Strategy for Youth, but
measures provided by it have obviously not been consistently implemented or have
not been well envisaged, because it lacks positive effects. Based on research results
about young people’s transition from education to labour market, the same report
states the following as reasons for high unemployment rate: 4

• an inadequate qualification structure that does not correspond with labour

market needs, wherein low level of economic activity is disregarded,

• low job demand,

• high overall unemployment rate,

• high underemployment rate,

• rationalization of and ban on employment in the public sector,

• low wages,

• violation of labour rights,

• high poverty and social exclusion rates.

Under such circumstances, even when young people do manage to find a job, it is
below their qualifications, without permanent employment, which further entails
lower wages.5

In Bosnia and Herzegovina, similar causes exist, with additional problems due to the
imbalance of offered programs for the youth. On its entire territory, what is being
implemented or realized in one entity, or even a canton within the Federation of
Bosnia and Herzegovina, is not being implemented or realized in the other entity or
different canton.

4More information in: Marjanović, 2016.

5 More information in: Bradaš, 2018.

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For such reasons, young people from the Middle Danube region lose their trust in
countries they live in and strive to build their working future by going abroad.

Action Plan 2020 and COVID-19

In June 2019 Final Report, i.e. Evaluation of the Effectiveness, Communication and
Stakeholder Involvement in EUSDR was published. In regard to strategic dimension,
it is interesting to mention several finds. Overall, the internal actors mostly agree that
the momentum of the EUSDR has waned, however the results achieve in some of the
priority areas show success. It was also pointed out that more work needs to be done
on communication between institutions and with the public, particularly regarding
the results. Finally, the issue of budget and funding has been recognized as an
important point, since it could raise political interest. (European Commission, 2019,
p. 58)

On governance dimensions, the conclusions were not so positive as for the strategic
dimension. The practice has shown that there are many issues with stakeholders’
involvement in the implementation of actions provided by the EUSDR. The
evaluation stresses the need for strengthening the governance structure and giving
more importance to annual forums. There were various opinions on the overall
effectiveness in this dimension. (2019, p. 59)

In April 2020, European Commission adopted a new Action Plan that is to replace
the one from 2010. European Commission remains faithful to its original Action Plan
from 2010, reiterating the fact that the Danube Region is an important cohesive
factor for the EU integrations process, and that the EUSDR represents a framework
for strengthening the cooperation between nations. Bearing in mind that entire idea
behind the EUSDR is further the already existing bilateral and multilateral dialogue
and cooperation, the new Action Plan keeps to that frame of mind. However, certain
adjustments have been made to actions concerning each of the priority areas. When it
comes to Priority Area 9, new actions have been defined as follows (European
Commission, 2020b, p. 12):

• Intensify Cooperation in Labour Market

• Digitalisation and Innovation in the World of Work

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 • Integration of Vulnerable Groups into the Labour Market

• Fighting Poverty and Promoting Social Inclusion for All

• Quality and Efficiency of Education and Training Systems

• Relevant and High-Quality Knowledge, Skills and Competences

• Lifelong Learning and Learning Mobility

• Inclusive Education, Equity, Common Values and Sustainable Development

The actions have bit extended in a manner, and the new Action Plan does give too
much input/instruction on each of them. This is in no manner strange because the
new Action Plan practically continues the work that has already been done. However,
one peculiarity can be notice in the explanation for each of the actions. It can be
concluded that based on the final report and evaluation of the EUSDR in 2019, the
European Commission has decided to stress the need for annual meeting on each
action included in the new Action Plan. We can presume that is an attempt to put
more pressure on the stakeholders to take a more proactive role in the
implementation of the EUSDR, although in the final report in 2019 it was noted that
the expectations may have been set too high for stakeholder who are all specific in
political and economic way. Overall, it can be said that the new Action Plan has
positive view on the following period.

Unfortunately, just when the new Action Plan was adopted, a new and unexpected
problem caught the entire world in a whirlwind. The COVID-19 pandemic has taken
over the world, causing economies, and countries in general, to close for month, two
or three. Consequentially, many people, especially young population, lost their jobs
and find themselves at loose ends, because it is still unknown how the circumstances
of even “normal life” will develop from here on out. It can even be presumed that the
progress made in the area of youth employment could come to a standstill due to the
new situation. After the COVID-19 pandemic, a new economic crisis is expected. It
would be a crisis that would definitely affect the Danube Region and the Western
Balkans, and it could be expect that the consequences would be much harder on them
then on the EU countries. As much hard the crisis will be on the countries, it is as
much the young population of the region will wish to leave their respective countries
and move abroad, mostly to one of the EU countries. On the other hand, under the

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pressure of their own problems, the possibility of employment within the EU could
become even more restrictive. Such chain of events could be the push factor for the
young people to turn their focus on projects under the coverage of the EUSDR.

Conclusion

With the global financial crisis and, both consequentially and parallel to it, the
European debt crisis in the background, European Commission created a strategy to
recover the economy, naming it the Europe 2020 strategy for smart, sustainable and
inclusive growth. Among its top three priorities “inclusive growth – fostering a high-
employment economy delivering economic, social and territorial cohesion” found its
place. Aside from the great economic crisis, influencing factors for the guidelines and
measures for increasing the employment rate in working population, aged 20-64
years, to 75% were seen in trends in the average age of the population and the
strengthening of global challenges and competition due to fast-developing new
economies. Average age of the population and employment are immediately
connected through the so-called dependence ratio of the elderly population, i.e. ratio
between the number of retirement-aged population and the number of working-age
population. To keep a society’s social protection system efficient, it is necessary to
establish and maintain an employment system that ensures there are as many as
possible young people, aged 15-24 years, in the working population. Therefore,
parallel to the general goal of reaching employment rate of 75%, it was necessary to
set a goal of improving conditions for employing young workforce. In accordance
with its regional politics concept, and the aim to balance out the economic
development, the EU worked on a separate strategy for the Danube Region at the
same time. The implementation of both strategies is particularly significant for the
Danube middle basin because the region includes two countries that not members to
the EU and one country that became a member only after these strategies were
adopted. The relationship between the two strategies is one of general to special. The
significance of the EUSDR implementation lies in stronger connection between the
EU member-states and countries that applied for membership. Its implementation
within the four pillars (12 Priority Areas) created conditions for developing macro-
regional projects, which contributed to improving the culture of cooperation and
developing multicultural dialogue. One of its projects, “Empowering Young People –

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Connecting Europe” has been focused on motivating young people to take active
participation in civil society of the Danube Region.

Taking into consideration the economic crisis also had its second stage, positive
effects of these strategies could be felt only since 2014. The other half of the envisaged
period in the Europe 2020 strategy has brought a constant drop in unemployment
rate not only in general, but especially in young population. Even though the number
of young persons not in employment or within the NEET category is still large, the
youth unemployment rate has been lowered to a record minimum of 14.10% in
December 2019. Such results were achieved mostly owing to fulfilment of actions
provided by the Strategy, both on the EU and national levels.

In respect to the Middle Danube region, the EUSDR Action Plan from 2010 pointed
out the need to use the advantages of the region so as to achieve maximum benefit for
the human potential. In connection to that, guidelines were given for improving
conditions for the workers. When it comes to young people and their employment, it
is necessary to create certain conditions on the labour market, especially regarding
mobility, possibility to make decisions about mobility, eliminating indirect and
psychological obstacles, and ensuring inclusiveness of the labour market, as well. In
order to prevent further brain drain, it is necessary to improve legal and
administrative factors relating to social insurance and recognition of qualifications.
However, regardless of the EU’s support, not only with guidelines and measures, the
current state of youth employment is still far from desired European standards. Even
when young people find a job, more often than not it is a job below their
qualifications, usually on a temporary basis, followed by lower wages for such work.
The situation is further complicated by certain specificities of every country in the
region – already for several years in Serbia there has been a ban on new employment
in the public sector, while in Bosnia and Herzegovina there has been a problem of
imbalance in realizing programs for young people in different entities or cantons.
Furthermore, having in mind the economic crisis that seems to be just around the
corner as a consequence to the COVID-19 pandemic, it could be expected that, more
so than the EU, countries of the Danube Region would be more affected by its
negative effects due to weaker and slower economic development. This would
definitely contribute to the lack of trust young people have in their own countries and
strengthen their pursuit to build their future somewhere else. Their desired
destination is most usually the EU, but even the EU will be burdened by negative

96
consequences of the past period and upcoming economic challenges. This is why it
perhaps would be most recommendable for the youth of the Danube Region to
redirect its attention to initiating projects and programs within the region, with the
support of the EUSDR, and by taking active participation in social life on a national
level, bearing in mind the goal to create better work ambient for themselves and
generations to come.

References

Ad hoc team of the European System of Central Banks. (2015). Comparisons and
contrasts of the impact of the crisis on euro area labour markets (Occasional
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Blanchard, O.J. (2009). Sustaining a Global Recovery. Finance & Development, Vol.
46, No. 3, 8-12.
Bradaš, S. (2018). Mladi i dostojanstven rad. Fondacija Centar za demokratiju
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Directorate-General for Economic and Financial Affairs of the European
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for Official Publications of the European Communities.
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European Commission. (2010a). Europe 2020 – A European Strategy for smart,
sustainable and inclusive growth. Brussels: COM (2010) 2020 final.
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%20%20%20007%20-%20Europe%202020%20-%20EN%20version.pdf
European Commission. (2010b). European Union Strategy for Danube Region.
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https://danube-
region.eu/download/communication_from_the_commission_2010/?wpdmdl=
625&refresh=5d5fe189964b61566564745
European Commission. (2019). Evaluation of the Effectiveness, Communication and
Stakeholder Involvement in EUSDR. https://danube-region.eu/wp-
content/uploads/2019/12/EUSDR_OperationalEvaluation_2019.pdf
European Commission. (2020a). Youth employment.
https://ec.europa.eu/social/main.jsp?catId=1036
European Commission. (2020b). Action Plan. https://peopleandskills.danube-
region.eu/wp-content/uploads/sites/11/EUSDR-ACTION-PLAN-SWD202059-
final.pdf

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European Parliament News. (2019). Globalisation’s impact on employment and the
EU.
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968 /globalisation-s-impact-on-employment-and-the-eu.
Eurostat. (2019). Smarter, greener, more inclusive? – Indicators to support the
Europe 2020 Strategy. Statistical Books, 2019 edition. Publications Office of the
European Union.
EUSDR and Priority Area 9. (n.d.). Danube Region Strategy.
https://peopleandskills.danube-region.eu/eusdr-and-pa-09/
EU Strategy for the Danube Region Youthplatform. (n.d.) About EUSDR.
https://www.youthplatform.eu/eusdr-pillar-9
Jednjak, J. (n.d.). Tržište kapitala i prirodnih resursa [PowerPoint slides].
http://www.vps.ns.ac.rs/Materijal/mat2639.pdf
Marjanović, D. (2016). Tranzicija mladih žena i muškaraca na tržištu rada
Republike Srbije. Međunarodna organizacija rada.
Marković, D.M. (2017). Bezbednosni aspekti Dunavske strategije. Evropsko
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i-opstinama/

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SOCIO - ECONOMIC IMPACT OF GENDER WAGE GAP
ON SUSTAINABLE DEVELOPMENT

Prof. Dr. Gordana GAŠMI1

Prof. Dr. Mina ZIROJEVIĆ 2

Abstract

The aim of the study is to briefly present gender wage gap and its socio-economic
impact on sustainable development with the particular emphasis on the Western
Balkan countries. Those countries are in the stage of economic transition striving to
become members of the European Union (EU). Reduction of gender wage gap and
improvement of equal economic opportunities of women in the labour market is an
important determinant of economic and social progress of each country. The
presence of earnings discrimination towards women for the work of same complexity
and in identical circumstances has been confirmed in many researches related to the
Western Balkan states and in the EU. According to a report by the Council of Europe
Committee on Equal Opportunities for Women and Men on Discrimination against
Women in the Labour Market and at the Workplace in 2005, two of the three
dominant forms of discrimination against women in the labour market are lower
wages than wages of men for work of equal values (the so-called wage gap) and the
obstacles to career move, which is facing women with the problem of the so-called
glass ceiling. Therefore, the most important trends and measures of gender
discrimination prevention in this area are presented, focusing on the EU and the
Western Balkan countries. Concluding remarks point to the phenomenon of
intertwining impact of negative gender stereotypes on persistence of gender wage gap
in society. Furthermore, the relatively low gender wage gap in Western Balkan
countries is important, but is not the only indicator of women’s equal status in the
labour market, since there are many obstacles for women in relation to an access to
employment, vocational training, promotion and working conditions as well. Bearing

1Institute of Comparative Law Belgrade, Research fellow. gordana.gasmi@gmail.com

2Institute of Comparative Law Belgrade, Research fellow. mina.zirojevic@gmail.com

99
in mind growing global awareness of the role of women in social and economic
development, as well as strategic aspirations of Western Balkan states to become the
EU members, which is committed to the principle of gender equality, those countries
will increase national competitiveness and sustainable growth significantly through
empowerment of women to realize their full potential in political, economic and
social participation in sustainable development of each country of the region.

Key words: Gender equality, gender wage gap, sustainable development, Western
Balkans, European Union

Introduction

Phenomenon of gender wage gap is based on the absence of gender equality, which is
of multidimensional profile. One of the essential dimension of gender equality is
economic one. According to a report by the Council of Europe Committee on Equal
Opportunities for Women and Men on Discrimination against Women in the Labour
Market and at the Workplace in 2005, two of the three dominant forms of
discrimination against women in the labour market are lower wages than wages of
men for work of equal values (the so-called wage gap) and the obstacles to career
move, which is facing women with the problem of the so-called glass ceiling. 3

Even in developed countries the deficit of economic gender equality in various

manners is present. Exempli causa, the percentage of women at the top of American
corporate structures has remained almost unchanged over the past decade. (Catalyst,
2010) An analysis of more than 8,600 companies in 49 countries of the USA
showed women held 16.9% of all global board seats in 2018, up from 15.0% in 2016.
(Deloitte, 09-05-2020) Of the CEOs of the companies listed in the Fortune 500, only
20 are women. (Catalist July 2012) Women make up only 14 percent of all CEOs and
17 percent of corporate Board members.(Catalist December 2012)

In Switzerland, for example, the average salary of women is 20 percent lower than the
average salary of men. Differences in the level of pensions are even more pronounced,

3Discrimination against women in the workforce and the workplace, Doc. 10484 (2005), Report,
Council of Europe Committee on Equal Opportunities for Women and Men, Rapporteur: Mrs
Anna, Czech Republic, Socialist Group.
assembly.coe.int/documents/workingdocs/doc05/edoc10484.htm

100
as much as 37 percent to the detriment of women, which is explained to be largely a
consequence of absence from work, i.e. termination of employment due to raising
children. (Imogen, 09-05-2020)

In the European Union (EU), women are paid on average 16 percent less than men
who do the same job (European Commission, 2012). In the USA, gender page gap is
on average 18 percent to the detriment of women. According to "Eurostat" data, the
pay gap between women and men in the EU for 2014 was 16.7 percent. The largest
pay gap between women and men was in Estonia, where women were paid on average
28.1 percent less than men. The smallest payment gap was recorded in Romania of
10.1 percent. When it comes to the Balkans region, the differences in earnings
between women and men also exist. Results of empirical research in Serbia indicate
the same phenomenon (Avlijas et al. 2013, p. 7; Babović, 2009, p. 21). The data
obtained show that women face lower incomes compared to their male counterparts
for work of equal value, which is particularly present in the private sector (10,7%
compared to 4, 2% in state owned sector) 4. On the other hand, it is also difficult for
women in Serbia, as well as in other countries, to advance, when working in male-
conducted organizations, women are facing this form of discrimination in particular.
In addition, this type of discrimination is especially faced by women who have a
high / higher level of education, i.e. highly educated women, who quite logically
expect an advancement in a working place.

The root of gender economic inequality and a gender wage gap is placed in gender
negative stereotypes about the female and male roles in social development.
Therefore, the concept of gender equality is essential in combating gender wage gap.

4“Bearing in mind that the average salary of women in Serbia is lower than the average salary of
men, we were interested in the experiences of the respondents in this regard. They are thus asked
whether they receive the same salary as their male colleague who works in the same or similar
jobs as them (according to the complexity of the job and the degree of responsibility), in the same
or similar working conditions and has the same professional qualifications. In 49 cases (8.2%) the
respondents said that their income was lower than the income of male colleagues who work in the
same or similar jobs in the same or similar conditions and have the same professional
qualifications”. Nikolić-Ristanović V., Ćopić S., Jasmina Nikolić J., Šaćiri B., “Diskriminacija žena
na tržištu rada u Srbiji,” Beograd, 2012

101
 Gender equality – strategic conceptual framework for
combating gender wage gap

Women and girls represent half of the world’s population and, therefore, also half of
its potential. Gender equality, besides being a fundamental human right, is essential
to achieve peaceful societies, with full human potential and sustainable development.
Moreover, it has been shown that empowering women spurs productivity and
economic growth. The UN Secretary-General, Mr. António Guterres has stated that
achieving gender equality and empowering women and girls is the unfinished
business of our time, and the greatest human rights challenge in our world (UN 10-
05-2020).

Women’s human rights are an integral part of universal human rights. However,
women are de facto and de jure very often subjected to unequal treatment, wherefore
there is a constant need to improve gender equality. Women defend their human
rights by every small act defying patriarchy or inequality, whether by asking to go to
school or refusing to marry the man their father chooses. Therefore, in addition to the
usual approach to universal human rights, inherent to every human being, the
definition of “women’s human rights” includes also the enforcement of specific
affirmative actions aimed at achieving real equality for women (Gasmi G. 2016, p.
24). Gender inequality is the most pressing contemporary human rights issue,
including disparities in education, employment, healthcare, power and decision-
making, violence, and poverty that impact billions of women and girls from every part
of the world throughout their lifetime

The Convention on the Elimination of All Forms of Discrimination against

Women (CEDAW), which is often described as an International Bill of Rights for
Women was adopted in 1979 by the UN General Assembly. In its 30 articles, the
Convention explicitly defines discrimination against women and sets up an agenda
for national action to end such discrimination. The Convention targets culture and
tradition as influential forces shaping gender roles and family relations. The Fourth
World Conference on Women, held in Beijing in 1995 established the Beijing
Platform for Action, which asserted women’s rights as human rights and committed
to specific actions to ensure respect for those rights. On 2 July 2010, the UN General
Assembly unanimously voted to create a single UN body tasked with accelerating
progress in achieving gender equality and women’s empowerment – UN Women. The

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UN focuses its global development work on the seventeen (17) Sustainable
Development Goals (SDGs). Women have a critical role to play in all of the SDGs,
with many targets specifically recognizing women’s equality and empowerment as
both the objective, and as part of the solution. Goal five: "Achieve gender equality
and empower all women and girls" is known as the stand-alone gender goal, because
it is dedicated to achieving these ends. Deep legal and legislative changes are needed
to ensure women’s rights around the world. While a record 143 countries guaranteed
equality between men and women in their Constitutions by 2014, another 52 had not
taken this step. Stark gender disparities remain in economic and political realms.
While there has been some progress over the decades, on average women in the
labour market still earn 20 per cent less than men globally. (UN, 2020).

At European level, Article 2 and Article 3(3) of the Lisbon Treaty on European Union
(EU) enshrine the right to equality between women and men as one of the essential
values and tasks of the Union. Articles 8 and 10 of the Treaty on the Functioning of
the European Union (TFEU) provide that the Union shall aim to eliminate
inequalities, to promote equality between men and women and to combat
discrimination based on sex in all its activities.

Despite the existence of normative framework on equal opportunities for men and
women, in many countries there is a disparity between de iure and de facto gender
equality. Since most leadership positions are traditionally held by men, women and
do not expect to reach them and so this becomes one of the reasons why they do not
come to these positions, or why they do not fight more vigorously to "win" them. The
same goes for salary. People expect women to earn less, just as they earn. The
problem is further complicated by the so-called. "threat of stereotype". Sociologists
and psychologists remind that when members of a group are aware of a stereotype,
the probability that they will act exactly in accordance with that stereotype increases
(Danaher K. & Crandall Ch. S. 2008, pp. 1655-1739).

The position of women will improve when there are more of them at top management
positions, provided that they then provide strong and unequivocal support to their
needs and interests. It is likewise significant to have more positive examples, both in
terms of individual achievements5 and in terms of legal framework. In Iceland, back
5Johan Lundgren, director of the low-budget British airline "Easy Jet", voluntarily decided to
reduce his salary by 34,000 pounds so that his monthly salary would be the same as the salary of
his predecessor Carolyn McCall.

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in 1961, the law regulated that the gender gap must not exist, but the disparity in the
income of men and women remained. The new law, which was adopted on January 1,
2018 and which should be implemented in 2021, will treat unequal salaries as an
illegal phenomenon. (Politika daily p. 1, 13)

During empirical research in Serbia, respondents were asked if they thought it was
fair for a man to receive a higher salary than a woman for doing the same job
(Nikolić-Ristanović V. et al. 2012, p. 28). The aim of the research was to determine
how women perceive discrimination in the labour market, as this kind of perception
is important being driving force in women’s endeavours to achieve gender equality
and their permanent fight for substantial and not only formal policy of equal
opportunities. The majority of respondents (692 or 98.0%) think that it is wrong for a
man to receive a higher salary than a woman for doing the same job. Respondents
who think so explained that it would be discrimination, that women are equal, that
gender should not be a criterion and that it would not be according to the law. Some
respondents also stated that only in hard physical work, men may need to be paid
more, and there are also those who said that women should be paid more, because
they are more capable and work better.

However, some of the respondents (2 or 0.3%) answered that it is fine if the employer
thinks so, because "the employer has the right to give a man a higher salary than a
woman for the same job". In addition, 8 respondents (1.1%) answered that they were
not sure about it, with one of them saying that it might be okay "because it is up to the
men to support the family, and for the woman the child is still a priority".

This attitude, as well as, although rare, the answers of the respondents who did not
explicitly state that it is wrong for a man to receive a higher salary for the same work,
reminds that patriarchal stereotypes about earning of men and women exist among
women. It should be borne in mind when creating measures to prevent the
discrimination of women at work.

In order to achieve substantial gender equality and complete emancipation of

women, it is necessary to remove numerous obstacles, from hidden sexism,
discrimination and sexual harassment to the reconciling business and family roles for
women. A report by the consulting company McKinsey (McKinsey Global Institute
2015) states that men receive promotions based on potential, while women receive
them based on previous achievements. In addition to the barriers set by society,

104
barriers also exist within women themselves. Lack of self-confidence (excess of
knowledge - lack of self-confidence) is folowed by a reduction of their own
expectations regarding what they are able to achieve and by a lack of ambition for top
managerial positions. When a position is said to be influential, challenging, and
implies a high degree of responsibility, there are more men than women who want it.
According to some research, there are few women who label "powerful position" as an
important career goal (Hewlett S.A. and Buck L.C. 2005, p.48). Women tend to prefer
jobs that are characterized as a job that helps others, allows them to develop their
knowledge and skills, and to spend more time with family (Weisgram, S..E. et all
2011, pp. 243-258). In the context of patriarchal stereotypes, professional ambition is
expected from men, but for women it is a matter of option or, what is worse, it is
perceived negatively. Socio-historical origins of gender inequality are present at
global level.

Although women gained basic social and political rights and increasingly became part
of the public professional sphere, they did not achieve public and economic positions
of power with the same dynamics. In the context of achieving visible economic
positions, increased participation of women actually corresponds to a real decrease in
privileges, i.e. the power of professions (Blagojevic – Hughson M., 2015, p. 96).
Diminishing of the socio-economic importance of the profession for sustainable
development of society is followed by increase of women’s professional participation
and thus hampers the economic gender equality. Women find themselves again on
the margins of social and economic development.

Gender wage gap - trends in the Western Balkans and the EU

Reduction of gender wage gap and improvement of equal economic opportunities of

women in the labour market is an important determinant of economic and social
progress of each country. The presence of earnings discrimination towards women
for the work of same complexity and in identical circumstances has been confirmed
in many researches related to the Western Balkan states and in the European Union
(Apostolova B. 2010; Avlijas S. et al. 2013; Babovic M., 2009; Blau F. D. & Kahn L. M.
2017; Bloj R. & Benallaoua M. 2020; Blunch N. H. 2010; Dakic S. & Savic M. 2017;
Dokmanovic M. 2016; European Commission 2018; European Parliament 2019;

105
Gasmi G. et all 2017; Meulders D. et al. 2014; Mysíková M. 2012, Nikolić-Ristanović
V. et al. 2012; Vladisavljevic M. et al. 2017; Vlahovic B. & Nikač Dj. 2010).

Women in Serbia, like women in other post-socialist Western Balkans countries, are
losers in transition, especially if they are older, low-educated, live in rural areas or
belong to marginalized groups. Statistics, as well as relevant research results, indicate
their unfavourable social and economic position in those countries, i.e. the high share
of women without regular personal income, lower wages of those who are employed,
their longer waiting time for work, high unemployment, low activity rate and high
risk of poverty. These groups relate to particularly vulnerable categories of women,
such as rural women, single mothers, housewives, Roma women, refugees,
uneducated and unemployed women, the disabled and women victims of violence.
They require special strategy and planning measures within the social policy
program.

The average salaries of employed women in the Republic of Serbia for each level of
education are lower than the salaries of men. The same is applied likewise to other
Western Balkans countries, such as North Macedonia and Montenegro: in Serbia
11%, 17,9% in Macedonia and 16.1% in Montenegro (Avlijas S. et al. 2013, p. 44).
Employed women in these countries have better labour market characteristics than
employed men (levels of education and work experience), although they are working
at the same job positions. Women face high barriers at the point of entry into the
labour market, so they need to be better qualified than men on average to be able to
access employment in the first place. It is common feature for the whole region of the
Western Balkans labour market.

The true gender wage gap in those countries is interpreted in economic literature as
the effect of discrimination, i.e. it is not based on economic reasons, but is due to
differences in female and male labour market behaviour patterns, which employers
reward or punish within the same occupations and sectors of the economy, e.g. that
women may be less flexible in terms of working hours or business trips, due to home
and reproductive responsibilities (Avlijas S. et al. 2013, p. 45).

The sources of the gender pay gap may differ across the wage distribution due to a
“glass ceiling” effect, i.e. a number of factors spanning from employers’ unwillingness
to promote women due to personal prejudice, differences in econometrically
unobservable characteristics of women and men, such as attitudes towards risk

106
taking and competition, and/or self-selection of women away from positions of
greater responsibility, due to their private / family responsibilities.

Consequently, gender stereotypes being uncritical opinions about the place of women
and men in economy and society are significant source of gender wage gap, so it is
necessary to work on raising awareness of both the public and employers that
discrimination against women actually means violating one of the basic principles -
the principle of equal opportunities for women and men, which is guaranteed by the
Constitutions of all Western Balkans countries.

Women’s obligations regarding the raising of children, in which employers recognize

the reason for more frequent absences from work, have consequences that employers
invest less in women’s training and professional development in the workplace,
considering it less profitable.

Thus, there is a phenomenon of gender segregation from higher to lower ranked

positions at work, due to the absence of professional development and those positions
are therefore lower paid.

In relation to the situation in the European union (EU), an equal pay principle is
enshrined in the European Treaties since 1957 (today Article 157 TFEU) and
recognized in Article 23 of the Charter of Fundamental Rights of the EU. Lisbon
Treaty on the Functioning of the European Union (Art.8, TFEU, 2009) requires the
Union, in all its activities, to aim to eliminate inequalities, and to promote equality,
between women and men. In 2006, a number of existing directives on gender
equality in matters of employment and occupation were ‘recast’ and consolidated into
a single Directive 2006/54/EC (the Recast Directive) that also incorporated relevant
case-law of the Court of Justice of the EU. In 2014, the Directive was complemented
by Commission Recommendation 2014/124/EU on pay transparency (European
Commission, 2014).

Despite the legislation, there is still a significant gap between men’s and women’s
gross hourly earnings (known as the ‘gender pay gap’) of around 16% on average,
ranging from 10% in Romania to 28% in Estonia. 6 Nine out of ten citizens in the EU –
women and men - think that it is unacceptable that women are paid less than men for
the same job. Concept of same job is based on the work of equal value, as defined in

6Figures are based on 28 Member States, see Eurostat (2019), Gender pay gap statistics, available
at: https://ec.europa.eu/eurostat/statisticsexplained/index.php/Gender_pay_gap _statistics

107
the Commission Recommendation 2014/124/EU on pay transparency: „The value of
work should be assessed and compared based on objective criteria, such as
educational, professional and training requirements, skills, effort and responsibility,
work undertaken and the nature of tasks involved.“ (European Commission 2014).
Despite the adoption of the Recommendation, only Eleven Member States have
legislation on pay transparency in place (European Commission 2017).

Source: genderpaygap.eu

A study of the European Institute for Gender Equality (EIGE) highlights that unequal
pay does not just hurt women but is a cost for society in general. There is a negative
impact of the gender pay gap to a child poverty and skills shortages. In addition,
underusing the skills of women’s in a society also involves a cost to the economy in
general. (EIGE 2017)

Comparatively seen, the gender wage gap trend is the opposite of that observed in the
Western Balkans economies. In the EU Member States employed women are on
average less qualified than employed men, so that the unadjusted wage gap that exists
in every country (the EU average is 16.2%) is partially explained by the male
advantage in labour market regarding education and working experience. In other
words, after controlling for men’s and women’s differences in labour characteristics,
it is usually significantly narrowed (Avlijas S, et al. 2013, p. 36).

108
In the EU Member States, such as Sweden, Germany and others, a “glass ceiling”
effect is likewise present as in the Western Balkans countries. Employers can be
prejudiced and perceive women with children as less productive or less ‘devoted’ to
work than men and women without children, which can also influence their decisions
to promote women (Avlijas S. et al. 2013, p. 37). Such discrimination often takes
place in an informal manner. This type of discrimination also includes harassment
and mobbing at work, which can affect an employee’s performance, and consequently
carrier opportunities and earnings. Thus, discriminatory behaviour of employers
produce the source of gender wage gap in favour of men.

Gender wage gap – factors, relevant policy measures and

impact

At global level, according to Sustainable Development Goal (SDG) 5.4 of the United
Nations (UN) 2030 Agenda for Sustainable Development, unpaid care and domestic
work should be recognized and valued through the provision of public services,
infrastructure and social protection policies and the promotion of shared
responsibility within the household and the family as nationally appropriate. In
addition, SDG 8.5 of the UN 2030 Agenda for Sustainable Development includes a
reference to the principle of equal pay for work of equal value. The UN Convention on
the Elimination of all Forms of Discrimination against Women (CEDAW) in the Art.
11 identifies the right to work as “an unalienable right of all human beings”. 7

The International Labour Organisation (ILO) Equal Remuneration Convention of

1951 in the Art. 2 provides that each Member shall promote and ensure "the
application to all workers of the principle of equal remuneration for men and women
workers for work of equal value", so referring to the establishment of rates of
remuneration without discrimination based on sex.

7It requires States Parties to "take all appropriate measures to eliminate discrimination against
women in the field of employment in order to ensure, on a basis of equality of women and men,
the same rights," including the right to equal remuneration, the right to social security and the
right to paid leave. This Article also requires States Parties "to introduce maternity leave with pay
or with comparable social benefits without loss of former employment, seniority or social
allowances.

109
At European level, the European Social Charter (revised) of the Council of Europe of
1996 requires the Parties to undertake certain actions to ensure the effective exercise
of, inter alia, the right to work and the right to a fair remuneration. In this context,
the recognition of "the right of men and women workers to equal pay for work of
equal value" is stated in Article 4(3).

Policy measures for combating gender pay gap have been also recently identified at
the EU level. That can serve as a role model for the Western Balkans countries.
Furthermore, gender equality and work-life balance are recognized in Principles 2
and 9 of the European Pillar of Social Rights proclaimed by the European Parliament,
the Council and the Commission on 17 November 2017. “Reducing the gender pay,
earnings and pension gaps and thus fighting poverty among women" is also one of
the priority areas identified by the European Commission in its Strategic Engagement
for Gender Equality 2016-2019 (Council of the EU 2019; European Commission
2014).

The EU Action Plan 2017-2019 on tackling the gender pay gap, adopted by the
European Commission, lists specific measures to combat the root causes, such as:
occupational gender segregation, both horizontal and vertical; the lack of pay
transparency and the unequal sharing of care responsibilities between women and
men. The Action Plan also sets out awareness-raising measures and measures to
unveil inequalities and to fight stereotypes.

To tackle the gender pay differential, it is crucial to take into account its structural
characteristics in order to assess its impact on sustainable development. The fact that
it exists in developed countries of the EU as well as in the transition economies of the
Western Balkans (Blunch N. H. 2010, p. 24), indicates that decisive factors for gender
pay gap are not economic in their nature, such as: the overall pay structure, the
presence of regulated minimum wage at national level (Gasmi G. et al. 2016), an
industrial organization and a corporate management organization.

Key factors of gender wage gap are not econometrically measurable, such as, inter
alia: 1) discriminatory practices of employers, 2) differences in human capital; 3)
sectoral and occupational segregation and/or concentration, 4) working time, 5)
education and the access to internal and public training schemes, 6) the organization
of training time, 7) women's representation in trade unions in bargaining or in
corporate representative bodies (Meulders et al. 2014, p. 5) and 8) social security

110
schemes and fiscal regulations being incentives for women to interrupt career. Those
key factors and more precisely, each of them, have immense impact on socio -
economic development, bearing in mind that women constitute half of the population
in each country. Consequently, when analysing relevant policy measures, it is very
important to have key factors of gender wage gap identified.

Combating the gender pay gap requires complex set of actions on a policy agenda,
primarily starting from the strategic framework of gender equality concept and the
policy of equal opportunities across different levels of policy-making. Adequate
normative context has to be followed by specific policy measures in order to be
effective. Therefore, data collection strategy has important place in targeted policy
measures implementation. Statistics on wages with gender dimension often lacks in
many countries of the Western Balkans. There are also other data categories to be
analysed for the sake of efficient policy measures, such as: employment on full time
basis or part-time, the household situation (e.g. marital status, number and age of
children, labour performance features (education, experience, tenure, career breaks,
training programs, occupation, etc).

Human capital theory suggests that education and potential experience directly affect
earnings through the impact on individuals’ productivity in the labour market and
also suggest additional factors that are potentially important determinants of
earnings, such as: sector of employment, part-time status, type of contract, social
security contributions, and location of residence (Blunch N. H. 2010, 23). Those data
categories are essential if one wants to compare wages of women and men who
perform equal work and work of equal value and to establish optimal policy
measures.

Relevant policy measures that are thoroughly defined at the EU level in March 2020
(European Commission, 2020). It is likewise important for the Western Balkans
countries being in the process of their EU accession, are the following:

Pay transparency - Binding measures could improve pay transparency, encouraging

organisations to review their pay structures to provide for equal pay for women and
men for the same work and work of equal value, and enabling victims of
discrimination to bring claims. National equality bodies, labour inspectorates and
trade unions can play an important role in this context.

111
Burden of proof - Enabling workers to provide evidence which allows discrimination
to be presumed would swiftly trigger the reverse burden of proof for the employer.

Victim support - The fact that victims are unlikely to bring claims reduces the
deterrent effect of the legislation. National equality bodies could be better equipped
to assist victims of discrimination, either by bringing claims on their behalf or by
being empowered to investigate cases and take decisions. Better legal aid could also
be made available to victims.

Compensation and other sanctions - Compensation awards are not high enough to
have a deterrent effect on employers. Sanctions could be improved to increase their
deterrent effect.

Gender-neutral job evaluation and classification systems - Such systems help

detecting indirect pay discrimination related to the undervaluation of jobs by
measuring and comparing jobs whose content is different, but of equal value. In this
way, they support a transparent pay system and enhance clarity on what is
considered work of equal value, thus contributing to reducing the gender pay gap.
Nevertheless, this is limited in the private sector.

Awareness raising - Lack of awareness about equal pay rights, and the right not to be
victimized for bringing a claim, means that injustices are more likely to continue.
Therefore, awareness raising is to be primarily directed to the employers aimed at
elimination of unconscious gender bias, but also to workers in order to spread
awareness of the equal pay rights.

Measures to promote a gender-balanced representation in managerial positions in

business – Those measures are to ensure that the selection of candidates, in
particular for management positions in the private and public sectors is based on
unambiguous, objective and gender-neutral assessment and on the merits and
qualifications of the candidates.

Measures in order to facilitate the reconciliation of work, family and private life for
both women and men, thereby encouraging the equal sharing of care and household
responsibilities between women and men. – Those measures are to address the need
to professionalize and regularize family care and domestic work, which mainly
remains an unpaid women’s task.

112
To the extent of implementation of those policy measures, positive impacts on
reducing gender wage gap and furthering of socio – economic sustainable
development is to be achieved. Those measures are to ensure equal opportunities
between women and men in terms of access to the relevant rights and arrangements.

Council of the EU has called the Member States (June 2019), in accordance with their
competences and taking into account national circumstances and respecting the role
and autonomy of the social partners, to encourage dialogue with relevant
stakeholders, including the social partners, businesses, national equality bodies and
organizations working for gender equality, on the fight against pay discrimination,
gender bias and stereotypes in education and the labour market, thus promoting
mutual learning (Council of the EU, 2019). Council of the EU also called the Member
States and European Commission to take measures to eliminate gender stereotypes
and to challenge stereotypical assumptions about gender roles with a view to closing
the gender pay gap, to reducing horizontal and vertical gender segregation on the
labour market and to promoting a more equal sharing of care responsibilities by men
and women.

According to relevant research results (Blunch N. H. 2010, p. 24), among other

factors, the education system is a potentially important vehicle for decreasing the
gender earnings gap in the formally gender-neutral economies of the Western
Balkans. It is important to take effective measures to promote equality in education
and employment in order to address labour market segregation and close the gender
pay gap, including the measures to ensure unbiased education and training at all
levels, including higher education, vocational education and training, lifelong
learning and career guidance and equal access to them for everyone.

Direct socio – economic negative impact is that the continued presence of a gender
earnings gap is likely to keep out females from the labour force who would otherwise
be part of this and add to the economy. Increased economic activity of the whole
population has been important during the transition from a planned to a market
economy in Western Balkans countries, with the current financial crisis and
especially after the pandemic, such efforts are more vital than ever. Parallel, with
narrowing the gender wage gap there are also improvements of the regulatory
environment of those economies, which represents direct positive impact on
sustainable development in the Western Balkans countries.

113
Positive socio – economic impacts of decreasing gender wage gap are also gender
equality policies that are drivers of smart, sustainable and inclusive growth and a
precondition to promoting prosperity, competitiveness and employment, as well as
inclusiveness and social cohesion (Council of the EU, 2019), Globalization is
inevitable phenomenon and therefore the question arises what is its influence on
gender wage gap. In line with the study performed under the auspices of the World
Bank (Oostendorp, R. H. 2004, p. 8), a cross-country study of the impact of
globalization on the occupational gender wage gap was done, based on the rarely used
but most far-ranging survey of wages around the world, the International Labour
Organization’s (ILO) October Inquiry. This ILO annual survey was started in 1924
and contains a wealth of information on wages and the gender wage gap. For the
period 1983–99, there is information on the gender wage gap in 161 narrowly defined
occupations in more than 80 countries around the world. On that basis Oostendorp
finds that the occupational gender wage gap appears to be narrowing with increases
in GDP per capita, i.e. with improvement of economic development.

Conclusions

Women's economic empowerment and gender equality are some of the key
preconditions for sustainable economic development. However, women were always
given a less prominent function at job and thus prevented them from showing their
talents in the business world, which caused negative social and economic
consequences. One of the most obvious phenomenon of this discrimination is a
gender wage gap. UN statistics indicate that: women do 67% of the world's work, but
they earn 10% of the world's income, women are owners of 1% of the world's wealth
and women make up 70% of the world's illiterate. Women around the world earn 15-
50% less for equal work than men and of the 1.3 billion people who live in complete
poverty, 70% are women. Closing the global gender gap could give the world economy
a substantial boost — potentially doubling the growth in global GDP contributed by
women in the next decade (McKinsey Global Institute, 2016, p. 2). However,
government measures are needed in the form of public policy activities, which
include not only legislation, but also its implementation together with integrated
government approaches to labour market – incentives for narrowing gender pay gap,
health protection and social protection issues (Gasmi et al. 2016, p. 18).

114
The issue of equality is not a women's issue, but a state issue and an issue of
sustainable social development and economy. Many countries have signed numerous
conventions on gender equality, adopted national strategies and developed action
plans, but the position of women in real life is not fully equated with the position of
men. Convention no. 100, adopted in 1951 by the International Labour Organization
(ILO) strictly stipulates the prohibition of all forms of discriminatory behaviour in the
provision of remuneration for work in terms of gender. This Convention has been
ratified in 2006 by more than 160 countries worldwide. It established the obligation
of every state to establish such system (through legislation and / or collective
agreements) to prevent any attempt of different remuneration of women and men for
work of equal value. This principle is in the literature considered as one of the most
important international principles in the effort to establish gender equality worldwide
(Dakic S. et al. 2011, p. 4).

In reality, women are still paid less than men for the same job, women find it harder
to get a job, get fired more easily and there are not many of them at top corporate
positions. Gender discrimination is most often perpetrated against women. Its key
causes are firmly rooted, negative traditional, patriarchal stereotypes about the
gender roles of women and men in the family and at the working place. Available data
confirm that women are at a disadvantage compared to men in all areas of social life
and especially in economic domain. The negative consequences of structural and
indirect discrimination against women are visible in both the public and private
spheres, but particularly in a gender wage gap. There is the phenomenon of
intertwining impact of negative gender stereotypes on persistence of the gender wage
gap in society.

Situation in the Western Balkans region indicates that an important determinant of

economic and social progress is a good economic status of women in the labour
market and the reduction or complete closing of the gender gap in earnings. EU
Member States are also trying to diminish gender pay gap through coordinated policy
measures.

Gender wage gap in favour of men can be the result of direct discrimination, where a
woman is paid less for exactly the same position as a man (within an establishment),
or the result of more covert practices, such as reduced opportunities for job
promotion of women equally qualified as their male counterparts. Furthermore,

115
discrimination of women at the point of career promotion or selection for top
managerial positions, which is in literature referred to as the “glass ceiling effect”, i.e.
unofficial barriers to advancement in a profession, results in larger wage differentials
between the two genders. Female entrepreneurship can be a solution for those
women who want control over their career and want to oppose “the glass ceiling
effect” (Gasmi et al. 2017, p. 17).

Special importance is attributed to awareness raising measures in combating gender

pay gap, since reforms of negative cultural patterns and gender stereotypes that are
one of key causes of gender wage gap, cannot be achieved solely by legislation.
Consequently, permanent transformation of socio and cultural norms in society
directly results in positive impact on socio – economic sustainable development.
Final objective of the awareness raising campaigns is to eliminate situation that
enable men and boys to be trapped in oppressive masculinities and within such
campaign to spread importance of economic equality between men and women.

Finally, notion of average gender wage gap includes separate models for private and
public sector workers because institutions differ greatly across the two sectors.
Among the Western Balkan countries wage differences between the public and
private sector are the lowest in Montenegro. The wages in the public sector in the
Western Balkan countries are, as in the majority of the EU countries (European
Commission, 2014) higher, than in the private sector. Furthermore, in all Western
Balkan countries, similarly to the majority of the EU countries, public sector attracts
higher share of high-skilled workers (Vladisavljevic et al. 2017, p. 11). The public
sector is less exposed to competitive pressures and in almost all countries, gender
wage gap is less present due to the fact that the public sector is more adjusted to
government regulations and objectives, which promote gender equality.

Bearing in mind growing global awareness of the role of women in social and
economic development, as well as strategic aspirations of the Western Balkan states
to become the EU members, which is committed to the principle of gender equality,
those countries will increase national competitiveness and sustainable growth
significantly through empowerment of women to realize their full potential in
political, economic and social participation in sustainable development of each
country of the region. However, pronounced negative impact of the economic crisis
after pandemic in 2020 is to be further observed in the forthcoming period.

116
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II – RECENT AND EMERGING SECURITY
ISSUES
 ASSESSING THE IMPACT OF CLIMATE CHANGE ON
ENVIRONMENTAL SECURITY

Vera AREŽINA, Ph. D 1

Nenad SPASOJEVIĆ 2

Abstract

In this paper we will study several aspects of climate change and assess their impact
on environmental security. Climate change has become a global problem, as many
conferences of the United Nations on the environment and sustainable development
have confirmed since the 1970s, as well as the European Environmental Agency
reports. Besides, the most powerful countries hardly agree to accept international
climate agreements.

In addition, we will highlight the problems of environmental migration due to the

negative impact of climate on their places of residence, as well as the cooperation of
the European Union and other Mediterranean countries within the Euro-
Mediterranean Partnership (EUROMED), with the aim to clarify that environmental
security is getting higher primacy than other security sectors.

Keywords: climate change, impact assessment, environmental security,

EUROMED.

Defining climate change and their negative impact

Over the years, the term climate change has become more common in everyday
speech among people around the world. Unfortunately, the negative impact that
these changes have, which do not stop growing, is the main reason for mentioning
them. "Climate change means a change of climate which is attributed directly or
indirectly to human activity that alters the composition of the global atmosphere and

1Assistant Professor at Faculty of Political Sciences University of Belgrade

2Faculty of Political Sciences University of Belgrade, master studies

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which is in addition to natural climate variability observed over comparable time
periods" (United Nations Framework Convention on Climate Change [UNFCC],
1992). Counting from the second half of the 20th century, it can be said that this was
the initial period of the creation of this new global problem, which continues
unquestionably even today.

Ever since the industrial revolution that took place in the 18th century, the world has
started to change at a very rapid pace. Resource exploitation and new application of
certain fossil fuels, primarily in the automotive industry from the end of the 19th
century represented only the beginning of a new development in the history of
mankind (Nadić, 2012, p. 53). Since 1950s, that trend has increased. In that post-war
period, the world began to renew and develop, new industries emerged, and the
exploitation of various resources (primarily coal and oil) became increasingly
important. In order to achieve progress of the newly established world, the wave of
development of the world economy spread to parts of the planet that did not meet
such trends. This whole process was accompanied by a new phenomenon -
globalization. Both the development and the connection of the world, as well as the
problems that will arise from all this, are best described by the mentioned term,
because the rise and consequences of that development process are global.

This development trend was made possible by the application of new technologies
and their constant progress. In the general aspiration to satisfy the needs of the world
population, the exploitation of resources and the production of various products and
energy also grew (Stepić, Budimir, 2011, p. 128). For example, the production of
energy from coal increased from 1950 to 2000 from 12,602 TWh to as much as 27,421
TWh (Ritchie, Roser, 2010). In addition to the mentioned coal, other non-renewable
energy sources were and still are the basis of the energy system in many countries
(Nadić, 2012, p. 43). This trend in meeting energy needs will make climate change an
increasingly significant problem. Along with the mentioned growth of the economy,
there was an accelerated growth of the world population, but also the growth of urban
areas. This has led many authors to consider whether the planet will be able to
provide adequate life to the billions of people who live on it. Population bombs or
booms also demanded the aforementioned growth of economies in order to meet the
needs of an increasing population (Pavlović, 2009, p. 232-233). Those consequences,
but also of what may yet follow, have been discussing at many scientific conferences.
The fact that development cannot follow the current situation is warning, but it will

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certainly lead to even more serious issues. Although this problem has pointed out in
1972 in A Report for the Club of Rome's project on the predicament of mankind
(Meadows et al., 1972, p. 43), even today many still do not understand it.

As a consequence of human development during the 20th century, numerous

environmental problems began to appear in parallel, and as they became more and
more pronounced, the safety of citizens around the world was endangered from a new
angle. At the initiative of Soviet President Mikhail Gorbachev, the very concept of
environmental security was introduced by the UN General Assembly through a
Resolution that represented a kind of response to the Chernobyl disaster (Arežina,
2010, p. 172). During the 1987, in the Report Our Common Future was pointed out
that the security issue should not be understood only in the traditional sense
(national and political influence on sovereignty), but also with a view to the
environmental impact (World Commission on Environment and Development, 1987).
When talking about this security, it is necessary to give a vision of it itself, that is,
what it represents for a person. Thus, "environmental security implies a very complex
process of confronting threats from any source, any species and any natural
component, including human society, while achieving some degree of protection from
dangers to existence, needs and interests" (Arežina, 2010, p. 172).

One of the types of endangerment not only of the human species, but also of nature
itself is the excessive use of fossil fuels and related emissions of pollutants. During the
twentieth century, there has been a huge increase in emissions of gases called
greenhouse gases. For example, at the beginning of the 20th century, CO2 emissions
amounted to 2 billion tons of carbon dioxide annually, while 115 years later, those
emissions reached as many as 36 billion tons annually (Ritchie, Roser, 2017).
Excessive emissions have taken their toll, because the particles in the air have
prevented the normal reflection of the sun's rays, and in the process there is a
retention of excess heat energy, which results in an additional rise in temperature on
planet Earth (Cooper, Alley, 2010, p. 7). According to the data of the World
Meteorological Organization, the last four years are have been the warmest since the
temperature on Earth was measured. In addition, previous years recorded a
temperature that was on average 1˚C higher than in the period 1850-1900 (World
Meteorological Organization, 2020). Despite numerous environmental problems, it is
certainly the rise in temperature that, as a consequence of climate change, is by far
the most worrying for the survival of many species, but also of man himself. That is

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why, from the security aspect, it is very important to mention how devastating these
consequences are, which is already represented in many parts of the world. Another
negative consequence of primarily polluted air, but also related climate changes, is
the growth of the sick and the prematurely deceased. This negative trend on an
annual level takes more and more lives, especially people who have respiratory,
chronic-respiratory, cardiovascular and other health problems (World Health
Organization, 2006, p. 154).

As climate change has inevitably begun to become an increasingly serious problem

and to develop more and more, causing enormous damage to nature and people, it is
necessary to point out the consequences. First of all, the most pronounced impact is
on the growth of sea levels and great threats to island states and the population in
coastal places, then the impact of extreme weather conditions on crops and food and
healthy drinking water production, as well as effects on plant and animal species
(Evropska komisija, 2014, p. 4). Climate changes affect so many countries with
different consequences. For example, India and China are facing more frequent
floods, Malawi and Ethiopia with droughts, and Sudan, Zimbabwe and Senegal with
desertification. The combination of these problems is forcing more people around the
world to decide to migrate and move to more suitable places to live. It is assumed that
in the future conflicts and crises, caused by the negative effects of climate change, will
become more frequent. Fears of potential conflicts are expected primarily in parts of
the world that are currently poor, and which will be most affected in the future due to
climate change. Such situations will additionally reflect on encouraging people to
migrate in order to seek better living conditions.

United Nations conferences and European Environment

Agency reports

As stated in the previous part of the paper, with the development of industries and
technologies and the growth of resource exploitation, climate change has become an
increasing problem. In the late 60's and early 70's of the last century, there was more
talk about environmental problems, which are becoming more serious, and among
them primarily about climate change. As a reaction to the new world events
concerning excessive pollution and disturbance of the appearance of the planet Earth,
an increasing number of environmental activists began to appear, primarily in

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Europe, and eventually in other parts of the world. This contributed to the emergence
of another new, social movement - environmental. The supporters of this movement
then united in the fight to raise awareness and prevent not only environmental
problems, but also many other world problems, through joint interaction (Pavlović,
2009, p. 227). Thus, the supporters of the environmental movement, together with
the supporters of the student, peace, anti-nuclear and other movements, set out on
the path of starting the fight against the newly created problems. With the actions of a
growing number of citizens, frequent protests and certain books that raised people's
interests and thoughts, new political parties began to deal with and talk about these
topics. These parties arose mainly from a large number of organizations /
movements, and the social movements themselves were the roots for their
emergence. Through three waves, numerous environmental parties were formed both
in Australia (where the first one was created) and in almost all countries of the
European continent during the 20th century (Nadić, 2007, p. 33-35). In the
following years, these parties contributed primarily to the introduction of new topics
into political discussions, and thus to the aspiration to solve the accumulated
environmental problems.

With the increasingly pronounced action that the previously mentioned movements
have achieved on a global level, the United Nations has begun to include these
problems in its agendas. The United Nations Conference on the Human
Environment, so called Stockholm Conference held in 1972 is considered to be a key
moment for the United Nations to take seriously different environmental problems.
The Declaration of the United Nations Conference on the Human Environment was
adopted as the final document of this Conference (United Nations, 1973). In this
document, through 26 principles, which were based mainly on the development of
international law in the field of environmental protection, states refer to mutual
cooperation, introduction and application of these norms in their legislation. The
United Nations Environment Program - UNEP has established at that conference in
order to coordinate all activities in the field of environment between UN member
states.

Since 1972, the UNEP has become very important body of the United Nations in the
fight against environmental problems. In its work, UNEP puts a special focus on the
coordination of various activities of the United Nations related to environmental
issues, as well as the implementation and enforcement of regulations and policies in

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the field of environmental protection. UNEP activities are related to the promotion of
science, implementation and financing of projects, as well as publishing various
reports, studies and publications and raising awareness about climate change and
other environmental issues.

During the period of development of UNEP activities, in order to deal with ozone-
depleting gas emissions the Montreal Protocol was adopted in 1987, and entered into
force two years later. For decades, it has been harmful to humans, primarily by
releasing Chlorofluorocarbons - CFCs, and the hole created in the mantle has been
getting bigger. However, timely action and revisions of the protocol with adaptation
to new pollutants have succeeded in solving the problem of ozone depletion after
several decades (The United Nations Environment Program [UNEP], 1987). Besides,
in many reports of the European Environment Agency - EEA is also stated that
exceedances of ozone-depleting gas emissions are still present in almost all countries
of the European continent. Although the ozone layer has been renewed, the very fact
that harmful substances are found in the stratosphere leads to the conclusion that it
will enable further negative development of climate change and global warming.

One year after the adoption of the Montreal Protocol, the Intergovernmental Panel on
Climate Change - IPCC was established at the joint initiative of the World
Meteorological Organization - WMO and UNEP. The panel was supposed to help
address a number of issues related to the problems associated with the negative
growth of climate change (Arežina, 2011, p. 35). After that, UNEP has increasingly
begun to draw attention to the alarming state of climate change. Also, both the
establishment of the IPCC itself and assistance in organizing future conventions will
make UNEP a very important factor in the struggle. According to UNEP estimates
from 1989, negative consequences were predicted in the future for all countries if the
trend of global warming continued in the coming years. UNEP also predicted in a
2005 report that in the future, over 50 million people worldwide would be forced to
migrate due to the effects of climate change (Spielmann, 1989). The
Intergovernmental Panel on Climate Change, through its working groups to produce
various reports, has been working for years to warn about the problem of rising
temperatures and the consequences they will have in the future.

Through the increasingly frequent commitment to the topic of climate change by the
United Nations, one of the key moments in the fight against climate change was held

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in 1992, and that was the Summit in Rio de Janeiro. At this summit, there was an
international treaty - the United Nations Framework Convention on Climate Change -
UNFCCC, and it began to apply in 1994 when it was ratified by a sufficient number of
states/parties. The ultimate goal of this Convention is to enable the stabilization of
the concentration of green house gasses, even to the extent that would prevent the
further development of negative human activity. Also, one of the set goals is to adapt
ecosystems to the current situation in order to ensure food production and economic
development. In order to mitigate climate change at global level, UN Framework on
Climate Change adopted in 1997 the Kyoto Protocol, which entered into force on
2005, with goals on further stopping the trend of rising temperatures, as well as the
negative effects of climate change (UNFCCC, 1997). What has been shown with this
Protocol is the inconsistency of certain states in accepting the goals, and the fact that
it came into force only in 2005 speaks in favour of that. The failure in the fight
against climate change continued at the next summits, and some reports on the
situation with temperatures do not support it at all. Thus, the Reports published by
the IPCC from the beginning of the 21st century state that by the end of 2100, the
temperature will increase by an average of 1.4˚C - 5.8˚C (Arežina, 2011, p. 35-36). In
recent report of the European Environment Agency, which is an overview of the
analysis of the state of air quality in the last two decades, the results of progress
towards establishing standards in this area are presented. What has been noticed is
the fact that there is still a large amount of polluting particles in the air.
Concentrations of polluting particles in many locations across Europe exceeded the
permitted limit values. Although turning to renewable energy sources and applying
the principle of energy efficiency has led to a reduction in emissions, they still exist.
This trend has a negative impact on human health and the cause of premature death,
but also on the environment. Although emissions are declining, the impact of further
emissions on climate change continues its negative course (European Environment
Agency, 2019).

After the failure of the Kyoto Protocol and several summits without major and serious
goals, the Summit was held in Paris at the end of 2015. The Paris Agreement differs in
that it is finally accepted by all states/parties, and it is also on a voluntary basis. The
main goal is to stop a further increase in the average temperature below 2°C
compared to the pre-industrial period. In order to achieve that, it is planned to
gradually and then completely eliminate greenhouse gas emissions (UN Treaty

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Collection, 2015). However, there are many problems in the implementation of these
goals, and certainly the biggest inconsistencies are some of the most economically
powerful countries.

According to some estimates, even if these plans will be realized by UN member

states, we would still expect an increase between 2°C-3.5°C. In order to point out the
problem of climate change and global warming, the island nation of the Maldives held
in 2009 an underwater meeting of the Government. Another consequence of the
problem of climate change not only with the Maldives, but also with other island
states are migrations. Thus, the Maldives authorities decided to redirect part of the
money from tourism to buying a new homeland in areas that are not affected by
rising sea levels (The Guardian, 2008). However, despite numerous examples and
clear problems understandable in the reports of individual organizations and bodies,
the demand for certain resources (fossil fuels) and their exploitation in order to meet
the energy systems of many countries continues to grow (Gidens, 2010, p. 221).

Evaluation vs. Assessment

Although assessment scales have been defined during 80's, many authors agree that
"assessment, measurement, research, and evaluation are part of the processes of
science and issues related to each topic often overlap" (Huitt, Humel, Kaeck,
2001). In methodology of political sciences, measurement is mostly defined as
procedure in order to quantitatively determine characteristic of a phenomenon or
process (Arežina, 2009, p. 135-136). Evaluation and assessment are forms of
measurement. Evaluation determines the quality, quantity, as well as the validity of
any process, and mostly it is diagnostic. For example, UN Environment Programme -
UNEP conducts several types of evaluation. Upon criteria of medium-term,
evaluations are conducted at formative stage, mid-term and end of cycle. Thematic
evaluations are carried out at UNEP's department and programmes regarding climate
change, ecosystem management, disaster and conflict, resource efficiency and others.
According to country, UNEP conducts Country Programme Evaluations - CPEs, or
upon project as criteria, they carry out project evaluations to determine the relevance,
performance and outcomes of that project.

Assessment determines the quantity, frequency, diffusion, probability and value of a

phenomenon or process. Assessments are based upon evaluation, because we assess

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the upcoming situation on the basis of evaluation. Also, assessments are made by a
defined procedure, where comparison is very important, therefore assessments are
prognostic. Goode William and Hatt Paul have noted three elements of the
assessment scales such as assessors, the phenomena and the third is continuum for
assessing (very positive, positive, neutral, negative, very negative). They have pointed
out that all three elements and their logical connection have to be defined, "otherwise
unreliable and incomplete results can be obtained" (Gud, Het, 1966, p. 240). Besides,
assessments validate "the importance of the issue being assessed by providing an
authoritative analysis of policy relevant information based on scientific questions"
(UNEP, 2020).

Environmental impact evaluation vs. impact assessment

Environmental impact evaluations are conducted to determine "the range of effects of

the programme/project activity on the environment and human living conditions,
including unforeseen and longer-term effect as well as effects beyond the immediate
target group/area. ...The focus is on evaluating progress towards high-level goals and
providing estimates of development impact" (UNEP, 2016, p. 12).

UNEP conducts evaluations in environment upon many criteria, such as a) relevance,

b) quality of project design, c) nature of external context, d) effectiveness and impact,
e) financial management, f) efficiency, g) monitoring and reporting, and h)
sustainability. Those criteria are rated on six-point scale as: highly satisfactory,
satisfactory, moderately satisfactory, moderately unsatisfactory, unsatisfactory and
highly unsatisfactory (UNEP, 2019). Upon those criteria have been conducted all
environmental evaluation reports, such as Medium-Term Strategy Evaluations,
Synthesis Reports or Sub-Programme Evaluations, such as Evaluation of the
Environmental Cooperation for Peacebuilding Programme, Evaluation of the UNEP
Division of Early Warning Assessment, etc. UNEP has evaluated in the Synthesis
Report 2016-2017 that at programme level "projects rated as ‘Highly Likely’ to
achieve impact were from Ecosystem Management (19%), Chemicals and Waste
(17%) and Environmental Governance (10%) sub-programmes" (UNEP, 2018, p. 43).

Environmental impact assessment is a preventive measure which includes

"preparation of studies and consultations with public participation and analysis of
alternative measures, in order to collect data and predict the harmful effects of

129
certain projects on human life and health, flora and fauna, land, water, air, climate
and landscape" (Zakon o proceni uticaja na životnu sredinu, 135/2004, 36/2009). It
also refers to measures by which harmful impacts can be prevented, reduced or
eliminated. There are different types of environmental assessments. Upon
geographical extent, there are environmental assessments on global, regional and
national level. Upon theme, assessment types are:

a) Environmental Vulnerability Assessment for Climate Change, Natural

Hazards, or Disasters (EVULA) - identify exposure and risks from predicted
climate change, natural hazards, or disasters; assess adaptive capacity; identify
potential threats to the environment and people;

b) Post-crisis Environmental Assessment (PCEA) - assess the environmental

impacts of crises on human health and identify environmental risks caused by
conflicts, disasters and industrial accidents;

c) Environmental Valuation Assessment (EVALA) - quantify the impacts of the

economy on the environment and the contribution of the environment to the
economy;

d) Environmental Impact Assessment (EIA) - assess determine the potential

impact of a project to the environment including to a limited extent economic
and socioeconomic impacts; and

e) Strategic Environmental Assessment (SEA) - determine the integration of

environmental considerations into policies, plans and programmes (UNEP,
2019, p. 12).

Regarding measuring impacts on ecosystem, there are many quantitative and

qualitative methods for valuing ecosystem. In Guidelines for Conducting Integrated
Environmental Assessments, the value refers to environmental conditions, and this
value can be measured and reported in different context, such as monetary, social or
cultural context. "Single measures are state indicators. Changes in these values over
time are what measure impacts, both on the environmental resources or processes
themselves, and on the services and human benefits they provide" (UNEP, 2019, p.
74). Assessing those trends would correspond to impacts in the DPSIR model
adopted by UNEP and European Environment Agency. DPSIR model consists of:

a) drivers – economic growth, human activities,

130
 b) pressures – pollution, emissions, waste,

c) states – physical, chemical and biological,

d) impacts – environmental damage, biodiversity loss, and e) responses –

environmental laws, standards and taxes (Gregory, Atkins, Burdon, 2013, p.
558-569).

Those assessments of trends should range from the relevant past to the predictable
future, and be at an appropriate scale for both ecological and human processes. The
first global environmental assessments is UNEP Global Environment Outlook - GEO,
published in 1997. UNEP has recently pointed out in GEO-6 the analyses the
effectiveness of policies, the environmental trends at global and national level,
including six regional assessments (UNEP, 2019).

Both environmental impact evaluation and impact assessment are based on Theory of
Change – TOC, aiming to explain the process of change by outlining the causal
pathways from "outputs (goods and services delivered by the project) through direct
outcomes (changes resulting from the use of outputs by key stakeholders) through
other ‘intermediate states’ towards impact" (UNEP, 2017, p. 1). TOC defines
intermediate states as changes required in between "project outcomes and impact,
e.g. wide –scale adoption of improved natural resource management practices,
country-wide shift towards renewable energy sources; Impact: positive and negative
long-lasting effects resulting from an intervention, directly or indirectly, intended or
untended" (UNEP, 2020). Besides, drivers are defined as external conditions over
which the project has a certain level of control, such as strong support from other
development partners in-country, public pressure on policy makers regarding certain
environmental issue. Assumptions are also external conditions necessary for project
results but, "over which the project has no control e.g. turn-over of government
officials, global financial situations, technological advances" (UNEP, 2020). Also,
theory of change - TOC is mostly used to assess an intervention’s causal logic,
probability and effectiveness of an impact. TOC is usually presented as a narrative
description and with a diagram to show the causal pathways, the cause-to-effect
relationship between different results or changes, and the drivers and assumptions in
the causal pathways.

According to the Theory of Change, it is made TOC design in order to define: the
expected impact from the project, such as improvement in the state of the

131
environment main causal pathways, and measurable indicators for the direct
outcomes (as a minimum) and, ideally, for the intermediate states and impact in the
main causal pathways. Those indicators have to be SMART - Simple, Measurable,
Accurate, Relevant, and Time-bound.

Figure 1. TOC Diagram Source: UNEP, TOC Diagrams

The Theory of Change is important for determining the environmental impact

evaluation and impact assessment, as well many UNEP projects and programmes,
and it can be applied to many others, such as EUROMED.

Euro-Mediterranean Partnership

Euro-Mediterranean Partnership - EUROMED has been established in 1995 upon the

Barcelona Convention for the protection of the Marine Environment and the Coastal
Region of the Mediterranean as well as the UNEP Mediterranean Action Plan (UNEP
– MAP, 2020). The main aim of EUROMED is to improve bilateral and multilateral
cooperation between EU and Mediterranean countries, with the exception of Syria
and Libya, in the area of peace and stability, economy, environment and culture. It

132
will mitigate the risks of environmental migration (Arežina, 2006, 961) due to the
negative impact of climate on their places of residence. Regarding environmental
issue, main goals of the Barcelona Convention's are "to assess and control marine
pollution; to ensure sustainable management of natural marine and coastal
resources; to integrate the environment in social and economic development; to
protect the marine environment and coastal zones through prevention and reduction
of pollution" (European Commission, 1995). Beside environmental issues, the
Barcelona Convention points out the protection of cultural heritage, improvement of
the quality of life and solidarity among Mediterranean coastal countries.

Several environmental impacts have been identified such as "local impacts on water
resources, soil fertility and biodiversity in areas of high existing stress; higher
environmental stress in cities, resulting from declining rural employment and
accelerated rural-urban migration; higher air pollution and coastal water pollution
from greater international transport" (European Commission, 2009). It is also
pointed out that it is necessary to take effective actions, otherwise some of these
impacts may induce environmental problems in the region. EUROMED has
conducted several regional and national projects aiming to prevent and mitigate
climate changes, reduce pollution, enhance capacity building, as well as sustainable
water integrated management and marine protected areas, such as Environment and
Climate Regional Accession Network - ECRAN, for Western Balkans and Turkey, El
Ekaider Dump Site in Jordan, Al Ghadir Waste Water Treatment Plant in Lebanon,
Tangier Solid Waste Management in Morocco, Lake Bizerte Integrated De pollution
in Tunisia, Development of a Mediterranean Marine and Coastal Protected Areas
Network, etc. (European Commission, 2019). In the report Integrated Monitoring
and Assessment Programme of the Mediterranean Sea and Cost, the UNEP points out
"integrated assessments, for example from integrated biological and chemical
programmes, or linking the observed changes in spatial distribution and temporal
trends in substances or their effects to inputs into the UN Environment/MAP
Barcelona Convention maritime area" (UNEP, 2017). Several days ago, the UNEP has
announced the Mediterranean Sea Programme (MedProgramme): Enhancing
Environmental Security with the aim to strengthen climate resilience and water
security, and improve coastal and water management, as well as health of coastal
populations in the Mediterranean region in the period of 2020-2024. In that
document it is pointed out assessments of the investments required for important

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infrastructure projects, including the "depollution of the waters in drains and canals
in the Nile Delta, wastewater collection systems in coastal hotspots in Lebanon and
plans to improve surface water, groundwater and coastal water resources in Tunisia,
will also be conducted" (UNEP, 2020). Environmental impact evaluation and impact
assessment conducted by UNEP and other organizations, or bilateral and multilateral
cooperation between countries such as Euro-Mediterranean Partnership aim to
clarify that environmental security is gaining increasing primacy, compared to other
security sectors.

Conclusion

Climate change is inevitably causing more and more serious consequences

worldwide. In the race for economic growth, those consequences have been created
for decades, and that problem still exists today. Although the United Nations, as well
as many other organizations, and the citizens themselves have contributed to
preventing this problem, unfortunately, more concrete successes are still lacking. At
global level, different types of organizations have made an effort to mitigate and to
raise awareness about climate changes. We have pointed out the environmental
impact evaluation and impact assessment conducted by UNEP, such as Synthesis
Reports or Global Environment Outlook - GEO which analyses the effectiveness of
policies, the environmental trends at global, regional and national level. In last two
decades, Euro-Mediterranean Partnership - EUROMED is improving bilateral and
multilateral cooperation between EU and Mediterranean countries, aiming to
mitigate environmental impacts on water resources, soil fertility and biodiversity in
order to reduce pollution, enhance capacity building, as well as sustainable water
integrated management in many Mediterranean countries. Therefore, the EUROMED
and many other programmes and projects have many positive impacts to
environmental security.

However, the key problem is the lack of consistency and will of the world's most
powerful actors in this fight against climate changes. As long as the future of the
world depends on the financial and other interests of individual actors, success in
preventing climate change will remain unresolved.

134
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 THE POLLUTER-PAYS PRINCIPLE IN THE
LEGISLATION OF THE WESTERN BALKANS
COUNTRIES AS AN ELEMENT OF ECOLOGICAL
SECURITY

Jelena ŠOGOROV VUČ KOVIĆ , PhD1

Darko M. MARKOVIĆ , PhD,2

Abstract

The paper is analysing one of the basic principles of environmental law – polluter
pays. This principle has found its place, as one of the most important principles, in
the legislation of the Western Balkans countries.

In the first part of the paper the emphasis is on theoretical analysis of the principle
from the standpoint of national law, international law, the law of the European Union
and the law of the Western Balkans countries. In international law, the polluter-pays
principle has been mentioned for the first time in the recommendation of the Council
of Organization for Economic Cooperation and Development (OECD) in 1972.
According to the document, the polluter should bear the costs of implementing the
measures by state authorities in order to ensure the acceptable state of the
environment. The principle has multiple functions. Firstly, the polluter is the one that
should pay the damages to the environment, not the state at the expense of society.
Secondly, the principle should be a redistribution instrument. The third function is
achieving prevention (encouraging people to reduce harmful emissions or to develop
and use technologies that are less harmful for the environment). The fourth function
of the principle is repairing the damage inflicted on the environment through the
funds collected from polluters. In the ‘70s of the past century, the European

1Associate Professor at Faculty of European Legal and Political Studies,

Novi Sad; jelenasogorov@fepps.edu.rs

2Assistant Professor at Faculty of Legal and Political Studies, Novi

Sad; darko.markovic@fepps.edu.rs

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Community introduced this principle, which was further developed with the policy of
environmental protection.

The second part of the paper is dedicated to analysing the implementation of this
principle in practice and its place in ecological security.

Respect of this principle when legally regulating the environmental protection, and
especially its strict application, represent very important factors in ecological
security, primarily in protection of air, land, flora and fauna from pollution by
individuals and industrial plants.

The purpose of this paper is to identify the current state of application of this
principle in practice and its role in the ecological security of the Western Balkans
region.

Key words: polluter-pays principle, environment, ecological security, Western

Balkans, pollution

Introduction

In the modern age, due to industrial production and other characteristics of modern
life, changes in nature have reached dramatic proportions. Global warming and other
climate changes, land and air are polluted, the lack of drinking water is obvious,
rivers are left without fish. We are witnessing the disappearance of millions of animal
and plant species, the depletion of non-renewable energy sources, and numerous
other global problems, which arose as a direct consequence of the hitherto
homocentric civilization. We come to the situation to ask the question of the very
survival of the human species. When we add to that, precisely thanks to civilization,
the achieved level of human ability for self-destruction (atomic, chemical and
biological weapons, and other means of mass destruction), the picture becomes even
gloomier.

In the modern world, it is becoming increasingly clear that the current model of
abusing the use of nature to meet human needs can no longer be practised. The
attitude towards nature can no longer be such that only what is useful to man is taken
from it, and everything unused and harmful is discarded in it, not caring about the
disastrous changes that will occur in nature for the entire living world, and thus for
man.

139
Hence, today the most important global question has become - how to stop negative
processes, above all how to change man's attitude towards the nature that surrounds
him. The protection of that nature, the protection of the environment, is becoming
the first imperative of today's man. Modern societies are becoming more and more
aware of this imperative and are increasingly taking systematic, well-designed
measures to solve the problems that have arisen.

The gases that are in the atmosphere absorb part of the heat radiation that is reflected
from the Earth's crust, and return them back to the Earth. This increases the
temperature of the Earth's surface, and this process is called the greenhouse effect.
The biggest causes of the greenhouse effect are water vapour, carbon dioxide, and
methane. Since water vapour stays in the atmosphere for a short time, not longer
than a few days, the greenhouse effect is mostly created thanks to carbon dioxide and
methane. Unlike methane, which is scarce, the amount of carbon dioxide in the
atmosphere has grown to such an extent that the oceans, as the largest natural
reservoirs, cannot absorb it. The accelerated development of technology has led to an
increase in carbon dioxide emissions, and the main emitters are industry and
agriculture. The main source of carbon dioxide emissions is the combustion of fossil
fuels, which is why thermal power plants are among the biggest polluters and the
world tends towards other sources of electricity. Since it takes decades to remove
carbon dioxide from the atmosphere, and melted ice masses hundreds of years to
return to its original state, it is clear that global warming due to the greenhouse effect
is producing huge climate change. The fight against climate change is among the
priorities of the European Union (EU), and it is easiest to implement it if we react to
the first step - by reducing pollution.

The paper analyses the principle of ‘polluter pays’, which is at the same time a
preventive and suppressive tool in environmental protection - except by sanctioning
polluters it preventively affects other potential polluters, in a fair way provides
financial resources to repair environmental damage. Bearing in mind that the
countries of the Western Balkans have expressed interest in joining the EU, they are
obliged to adopt the standards of this community in terms of environmental
protection. Obligations in this regard are defined by Chapter 27, and among other
things include the adoption of the ‘polluter pays’ principle through legal regulations
governing environmental protection, and then consistent implementation in practice
as well.

140
In the first part of the paper, the authors emphasize the theoretical analysis of the
principles from the standpoint of national law, international law, European Union
law, and the law of the Western Balkans countries.

The second part of the paper is dedicated to the analysis of the application of this
principle in practice and its place in environmental safety. Respect for this principle
in the legal regulation of environmental protection, and especially its consistent
application, represent a very important factor of environmental safety, primarily in
the protection of air, soil, flora, and fauna from pollution by individuals and
industrial plants. In order to emphasize ecological integrity of the region security
space and ecological interdependence of the countries, in this part the problem of
pollution is expressed through the ecological characteristics of three basins - the
Black Sea, Adriatic, and Aegean, with reference to the applicability of the ‘polluter
pays’ principle. This part is rounded off by pointing out the criticisms expressed by
the EU officials within the Balkan process summit, and in connection with that, to the
demands for a more efficient environmental policy, with a focus on the application of
the polluter pays principle.

The purpose of this paper is to identify the current state of application of this
principle in practice and its role in the ecological security of the Western Balkans
region.

The ‘polluter pays’ principle - theoretical and legislative

framework

The concept of the ‘polluter pays’ principle

General principles and tenets are an important instrument of legal policy in any legal
system.

In modern environmental law, it is considered that in the multitude of established

principles, several of them are of key importance. These are, first of all, the principle
of prevention, the principle of causality and responsibility of the causative agent, and
the principle of coordination and cooperation (Ramsauer, 2010, pp. 84-85). Along
with them, the principle of sustainability (sustainable development) and the principle
of integration are increasingly affirmed as key principles in international law, but also
in many national laws (Ramsauer, 2010, pp. 84-85).

141
The principle of ‘polluter pays’ has found a place, as one of the most important
principles of environmental rights, in the rights of all Western Balkan countries.

We view the principle of ‘polluter pays’, above all, as a derivation of the principle of
causality.

The polluter pays principle is one of the most important principles in environmental
law (Frenz, 1997). This principle means that the responsibility for environmental
pollution can be attributed to the causative agent, i.e.. to the one who caused the
pollution. Therefore, this principle can be marked as the principle of the perpetrator's
responsibility. Broadly understood, the principle of causality means that anyone who
causes harmful effects, dangers, or risks to the environment, must be responsible for
it. It does not matter whether the pollution occurred by doing or not doing (omitting
to do).

The principle of causality is sometimes narrowly understood as the principle of

bearing compensation for damages or costs. Understood in this way, the principle of
causality is then further linked to financial compensation that is achieved through
damages or public-law fees (Scheuing, 1989, p. 152). The principle is also realized by
making demands on the perpetrator, imposing prohibitions, physically disabling a
certain activity or action, etc., which means that his responsibility is not only of a
monetary nature. This is especially evident when looking at potential hazards and
potential risks. Namely, according to the principle of causality, a potential polluter is
obliged to avoid or at least reduce possible pollution.

In Serbian law, the principle of causality is expressed in two ways. It is, first of all,
manifested through the principle of responsibility of the polluter and his legal
successor, and then especially through the principle of ‘polluter pays’. The principle
of responsibility is defined as the principle according to which ‘a legal or natural
person whose illegal or improper activities lead to environmental pollution is
responsible in accordance with the law’ (Zakon o zaštiti životne sredine, 2004b, Art. 9
it. 5 para. 1B). On the other hand, the ‘polluter pays’ principle is defined as the
principle according to which a polluter pays a fee for environmental pollution when
his activities cause or may cause a burden on the environment, i.e. if he produces,
uses or places on the market raw materials, semi-finished products or products
containing harmful substances on the environment (2004b, Art. 9 it. 6 para. 1). In
addition, the polluter, in accordance with the regulations, bears the total costs of

142
measures for prevention and reduction of pollution, which include the costs of
environmental risks and the costs of eliminating the damage caused to the
environment (2004b, Art. 9 it. 6 para. 2).

As can be seen, the principle of polluter liability and the ‘polluter pays’ principle are
defined in Serbian law to imply the general responsibility of the polluter, as well as
his specific responsibility for ‘environmental pollution when its activities cause or
may cause a burden on the environment, i.e. if it produces, uses or places on the
market a raw material, semi-finished product or a product that contains harmful
substances for the environment’. The principle of liability of polluters appears as
more general and covers all three types of liability (liability for removal or reduction
of pollution, liability for bearing the costs of removal or reduction of pollution, as well
as liability for damage caused by pollution, through the payment of civil-law damages
or public-law compensation). In contrast, the ‘polluter pays’ principle is defined more
narrowly and implies only the responsibility of the polluter for the payment of the
environmental pollution fee, ‘when his activities cause or may cause a burden on the
environment, i.e. if he produces, uses or places on the market raw materials, semi-
finished products, or a product containing harmful substances for the environment’
as well as the responsibility for bearing total costs of taking measures to prevent and
reduce pollution, which include the costs of environmental risks and the costs of
eliminating the damage caused to the environment. This way defined responsibility
for compensation to some extent exceeds the general responsibility of the polluter
because it implies not only responsibility for the actual pollution but also
responsibility for the costs of taking measures to prevent pollution, therefore the
costs incurred before the pollution, which brings the ‘polluter pays’ understood in this
way closer to the principle of prevention and the precautionary principle.

The ‘polluter pays’ principle - legislative framework

International Law

In international law, the principle of ‘polluter pays’ first appears in the

Recommendation of the Organisation for Economic Co-operation and Development
(OECD) from 1972. According to this document, the polluter should bear the costs of
implementing measures by state authorities in order to ensure an acceptable state of

143
the environment. The principle has multiple functions. First of all, the polluter is the
one who should pay for damage caused to the environment, and not the state at the
expense of society. Second, the principle should be an instrument for redistribution.
The third function is achieving prevention (encouraging people to reduce harmful
emissions, i.e. to develop and use technologies that endanger the environment to a
lesser extent). The fourth function of the principle is achieved by repairing the
damage caused to the environment through funds collected from polluters.

European Union

In the seventies of the last century, the European Community introduced this
principle, which then has developed through environmental policy.

Today, the protection of the environment according to the principle of ‘polluter pays’
is regulated in the European Union (EU) by Directive no. 2004/35 / of the European
Parliament and of the Council of 21 April 2004 on environmental liability with regard
to the prevention and remedying of environmental damage (2004, pp. 56-75). The
adoption of this Directive is based on the provisions of the Treaty establishing the
European Community (in particular Article 175 (1)) concerning the principles of
providing protection against damage, and elimination of harmful effects at the
source. Starting from the conclusion that there are now many polluted sites in the
Community that pose a significant health risk, and that biodiversity loss has
accelerated dramatically over the last few decades, the Directive affirms the view that
environmental damage should be prevented and eliminated by promoting the
‘polluter pays’ principle, according to the Treaty Establishing the European
Community and according to the principle of sustainable development. Therefore, the
Directive focuses on the financial liability of operators whose activities have caused
damage to the environment or led to the threat of such damage. The purpose of this
Directive is precisely to establish a framework for environmental liability based on
the ‘polluter pays’ principle, in order to prevent and remedy damage to the
environment (2004, Art. 1).

This Directive aims to prevent and remedy the environmental damage and it does not
affect the rights to compensation for customary damage under any relevant
international agreement governing civil liability, as the many EU Member States have
concluded a number of international agreements on liability for damage in certain
areas.

144
Thus, for example, in the Republic of Croatia, in Art. 15 of the Environmental
Protection Act of the Republic of Croatia stipulates that the polluter bears the costs
incurred by environmental pollution. Costs are defined as: costs incurred in
connection with environmental pollution, including the costs of damage assessment,
assessment of necessary measures, and the costs of eliminating environmental
damage (Zakon o zaštiti okoliša, 2019, Art. 15 para. 2). Also, the polluter bears the
costs of monitoring the state of the environment and applying the established
measures, as well as the costs of taking measures to prevent environmental pollution,
regardless of whether these costs were incurred as a result of prescribed liability for
environmental pollution, i.e. emissions into the environment, or as fees determined
by appropriate financial instruments, i.e. as an obligation determined by the prescript
on the reduction of environmental pollution (2019, Art. 15 para. 3).

As can be seen from the legal text, the obligation to compensate for the damage and
pay the costs incurred by environmental pollution is very broadly determined, which
clearly wants to emphasize the preventive nature of the measures, i.e.. encouraging
people to reduce harmful emissions and refrain from environmental pollution.

Funds collected in this way from polluters, pursuant to Art. 38 para. 2 of the Law on
Environmental Protection, represent a large part of the funds of the Fund for
Environmental Protection and Energy Efficiency of the Republic of Croatia. These
funds are used to achieve the objectives of the Fund for Environmental Protection
and Energy Efficiency, among which the most important are: financing the
preparation, implementation, and development of programs, projects, and similar
activities in the field of conservation, sustainable use of renewable energy sources,
promotion of environmental goals and principles; exercising the rights of citizens to a
healthy environment.3

3Environmental Protection and Energy Efficiency Fund Article 38 (1) Financing preparation,
implementation, and development of programs, projects and similar activities in the field of
conservation, sustainable use, protection and improvement of the environment, and in the field of
energy efficiency and use of renewable energy sources, promotion of environmental goals and
principles to achieve systematic and comprehensive preservation of environmental quality,
preservation of natural communities and rational use of natural resources and energy as basic
conditions for sustainable development and realization of citizens' right to a healthy environment,
is performed by the Environmental Protection and Energy Efficiency Fund in accordance with the
law by which it was established.

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 The Western Balkans Countries

The ‘polluter pays’ principle is regulated in the legal systems of all Western Balkan
countries. In the laws that regulate the field of environmental protection, this
principle is defined.

The Republic of Serbia

The principle of ‘polluter pays’ and the principles that are closely related to it are
explicitly defined in several laws, and are implicitly present in numerous other laws
as well as other regulations in the field of environmental protection. We point out the
provisions of the Law on Environmental Protection, the Law on Integrated
Prevention and Control of Environmental Pollution, and the Law on Strategic
Environmental Assessment.

In the Law on Environmental Protection, which is the central law in this area, the
principle of ‘polluter pays’ is defined as the principle according to which ‘the polluter
pays a fee for environmental pollution when his activities cause or may cause
environmental pollution, or if produces, uses or places on the market a raw material,
semi-finished product or product that contains substances harmful to the
environment’ (Zakon o zaštiti životne sredine, 2004b, Art. 9 it. 6). The polluter is
defined as ‘a legal entity or an individual who by his activity or inactivity pollutes the
environment" (2004b, Art. 3 it. 14); environmental pollution as "introduction of
pollutants or energy into the environment, caused by human activity or natural
processes that have or may have harmful effects on the quality of the environment
and human health" (2004b, Art. 3 it. 11) and pollutants as "substances whose release
into the environment affects or may affect its natural composition, properties, and
integrity’ (2004b, Art. 3 it. 15). Finally, the environmental load is defined as
‘individual or cumulative impact of an activity on the environment that can be
expressed as total (multiple related components), common (multiple disparate
components), permitted (within limit values), and excessive (above-permitted limit
values) load’.

When the mentioned legal provisions are analysed in more detail, several important
conclusions can be clearly drawn on their basis.

First, the principle ‘polluter pays’ is completely related to the fee paid by the polluter,
through which the principle is defined (this is the principle according to which the

146
"polluter pays the fee ..."). This fee in the valid legal framework is a fee of a public-law
character (public-law fee) as will be seen later.

Second, ‘the polluter pays’ a fee ‘when by its activities he causes or may cause a
burden on the environment", i.e. "if produces, uses or places on the market a raw
material, semi-finished product or product containing harmful substances for the
environment’.

Third, the polluter will be obliged to pay the prescribed compensation not only when
its activities have actually caused damage, but also when its activities could produce
it, i.e. when it could cause a burden on the environment.

Fourth, the polluter will be obliged to pay the prescribed fee when he produces, uses,
or places on the market raw materials, semi-finished products, or products that
contain harmful substances for the environment, also regardless of whether the
damage or "environmental burden" actually occurred.

It is important to note, furthermore, that this law, when defining the principle of
‘polluter pays’, also contains a norm according to which ‘the polluter, in accordance
with regulations, bears the total costs of measures to prevent and reduce pollution,
including environmental costs and costs environment’ (2004b, Art. 9 it. 6 para. 2). It
is clear, therefore, that the protective object is the environment itself, and not things,
rights or interests of individuals natural or legal entities. Hence, it is clear why the
prescribed compensation has the character of a compulsory public law duty and not
the character of a simple civil law compensation for damage.

Bosnia and Herzegovina

The Dayton Peace Agreement from 14 December 1995, which ended the war in Bosnia
and Herzegovina (B&H), established three entities within a single B&H - the
Federation of Bosnia and Herzegovina (Federation of B&H), the Republic Srpska and
the Brčko District. On that occasion, the entities were given a high degree of
autonomy, which, among other things, includes the legislature in those areas that are
not exclusively within the competence of the federal state. Legal regulation of
environmental protection is one of the competencies that belongs to the entities, and
in accordance with that, each of the mentioned entities has regulated the issue of the
‘polluter pays’ principle with its own laws.

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In the Law on Environmental Protection of the Federation of B&H (2003), the
principle of ‘polluter pays’ is contained in Section III, which defines the basic
principles of environmental protection. Article 11 para. 1 of the Law on
Environmental Protection stipulates that the polluter pays the costs of monitoring
and prevention of pollution, regardless of whether the costs were incurred due to the
imposition of liability for pollution emissions, fees determined by appropriate
financial instruments or as an obligation established by the regulation on
environmental pollution. The user of the environment is responsible for all activities
that have an impact on the environment, in accordance with the provisions of the
Law on Environmental Protection, as well as other regulations (Zakon o zaštiti
životne sredine, 2003, Art. 11 para. 2). With this provision, the legislator has widely
set the responsibility of polluters, that is. users of the environment with the aim of
facilitating the sanctioning of users in case of any harmful impact on the
environment.

The principle of ‘polluter pays’ is highlighted in a separate article in the Law on

Environmental Protection of the Republic Srpska as one of the seven principles of the
environment (Zakon o zaštiti životne sredine, 2012, Art. 6). It is prescribed that ‘an
environmental polluter pays a fee for environmental pollution in accordance with the
regulation governing the financing of environmental protection when its activities
cause or may cause environmental pollution, or if he produces, uses or places on the
market raw materials, semi-finished products or products contains harmful
substances for the environment’ (2012, art. 13 para. 1). Accordingly, all costs of
preventive measures, costs of environmental risks, as well as costs incurred in
eliminating the harmful consequences, are borne by the polluter (2012, Art. 13 para.
2).

The Brčko District has incorporated the ‘polluter pays’ principle into its Law on
Environmental Protection in the same way as the Federation of B&H, even in the
same article of the Law (Zakon o zaštiti životne sredine, 2004a, Art. 11).

Montenegro
In Montenegro, the ‘polluter pays’ principle is enshrined in Art. 5 of the Law on
Environment ("Sl. list CG" br. 52/16) which defines the principles of environmental
protection. In item 5 under a) the ‘polluter pays’ principle stipulates that a legal entity
and natural person who has caused damage to the environment or imminent danger

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of damage, is obliged to compensate the damage by implementing preventive
measures and remediation measures at his own expense. Funds collected according
to the stated principle represent eco-fees (Zakon o životnoj sredini, 2016, Art. 77
para. 1). Eco-fees are required to be paid by legal entity and natural persons for:

• release of pollutants into the air;

• import of ozone-depleting substances;

• creation and disposal of hazardous waste (2016, Art. 77 para. 2).

The amount, manner of calculation, and payment of fees is determined by the

Government, as provided in Art. 77 para. 3 of the Law on Environment of
Montenegro.

The Republic of Albania

The Republic of Albania has regulated the environment with the Law on
Environmental Protection no. 10 431 dated 9 June 2011 years. Section II defines the
principles of environmental protection. As one of the basic principles in this section,
Art. 12 of the Law regulates the principle of ‘polluter pays’. Legal entities or natural
persons whose actions or omissions result in environmental pollution or risk to the
environment are responsible and must bear the costs of such pollution or risk. These
costs include the costs of assessing the damage, assessing the necessary measures and
the costs of repairing the damage caused to the environment, including the costs of
remediation and the costs of compensation.

The Republic of North Macedonia

Finally, in the Republic of North Macedonia, the ’polluter pays’ principle is regulated
by the Law on the Environment. Article 9 of the Law stipulates the obligation of
polluters to reimburse the costs of eliminating the danger of environmental pollution,
to bear the costs of remediation and to pay fair compensation for damage caused to
the environment, and to bring the environment (as far as possible) to the condition in
which it was before pollution.

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 Polluter Pays Principle’s importance in ensuring a regionally
secured environment

Ecological integrity of the Western Balkans security space

Ecological environment cannot be closed within national borders, so the defence

against threats to the environment is not only a local, but also a regional and global
issue. The area where the countries of the Western Balkans are located is a compact
whole. Natural obstacles in a form of rivers and mountains do not actually divide that
natural entirety, but unite neighbouring countries in the obligation to keep the
common ecological space healthy and safe. This is not limited only to the Western
Balkans countries, but also to the countries that surround them, and further to the
countries of Europe and the world. Circulation of airspace, and the river flows'
movement makes the whole world a global ecological village, which can be applied
when we talk about Europe, and especially about a region such as the Western
Balkans. Apart from the fact that the territorial connection of the region's countries
makes the airspace an inseparable whole, the interconnection by a river network
characterizes the Western Balkans. The river watersheds from these countries are
concentrated in the direction of flow into three seas - the Black Sea, the Adriatic Sea
and the Aegean Sea. In the geographical sense, everything is known about the river
basins of the same name. However, in order to shed light on the importance of the
‘polluter pays’ principle application for all countries in the region without exception,
it is useful to look at these basins through an ecological prism. Primarily, because
these basins are the bloodstream feeding the ecological organism of the region, which
is why they are also weak points of the ecosystem, since water is the source of life, and
endangering its security is also a threat to the living world without distinction.
Settlements built on the banks and near rivers, and with them industrial plants and
thermal power plants, are the biggest polluters. Since these basins are made of
networks of watercourses covering different parts of the region, they are a picture of
the ecological integrity of the Western Balkans security space. Therefore, in the
following, through a brief overview of the general characteristics of the Western
Balkans' river basins, we will point out the main sources of pollution, both
watercourses and land, as well as the air space ‘belonging’ to them. In this way, we
will gain insight into the wide possibilities of applying the ‘polluter pays’ principle in

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the region, and cognition of its potential for strengthening the ecosystem, both of
each country for itself and of the Western Balkans as a whole.

Black Sea basin

a) Regardless of the watershed affiliation, the Danube basin deserves the most
attention, because it is a huge international hydrological basin and ecological corridor
that connects about 81 million inhabitants of 19 countries, including all Western
Balkan countries and 11 EU countries.4 Before passing through Serbia, the Danube
splashes the shores of seven European Union countries, directly connecting Serbia,
and indirectly Western Balkans with four EU countries5. The Danube region covers
an area of 801,463 km2, which is 10% of the territory of Europe, that is why regional
cooperation in environmental protection in this area is of wider importance. In 1991,
UNESCO declared the Danube Delta a World Heritage Site. Before flowing into the
Black Sea, the Danube flows through a dense network of populated areas, including
large industrial cities.

Figure 1. Danube River Basin Overview Map.

Source: www.icpdr.org/main/publications/danube-river-basin-overview-map

4Germany, Italy, Austria, Slovenia, Slovakia, Czech Republic, Poland, Hungary, Croatia,
Romania, and Bulgaria.

5Hungary, Croatia, Romania and Bulgaria

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When it comes to the region, the largest Danube cities are Novi Sad and Belgrade.
According to the specialized website IQAir, the capital of Serbia is among the 100
cities with the most polluted air in the world. In addition to industrial pollution,
Belgrade is burdened with high traffic density and city fuel oil boilers. Occasionally,
Novi Sad also has problems with air pollution, as well as with the Danube pollution.
Smederevo is a city on the Danube downstream towards Djerdap, and the biggest
polluter in this city is the ironworks of the HBIS group. However, although developed
industry and large population in these cities are a source of pollution, the most
serious environmental problem is the dam near Djerdap, which is considered an
‘ecological black spot due to the formation of alluvion and accumulation of toxic
sediments’ (Ocokoljić, Malijašević and Milanović, 2009, p. 9). Among the Danube
countries, Serbia's share in the Danube basin (587.35 km) is the third largest, after
Romania and Germany. Environmental protection in the Danube Basin is
implemented in three priority areas: restoration and maintenance of water quality,
environmental risk management and ecosystem protection. The first one implies also
protection of natural water resources from pollution (Marković, 2017, p. 234), so the
‘polluter pays’ principle is applicable to it, as well as to the third one. This principle
was legally defined in 1994 within the Convention on Cooperation for the Protection
and Sustainable Use of the Danube River, which was confirmed in Serbia by a special
law from 2003. The Convention defines the ‘polluter pays’ principle, as well as the
precautionary principle, as ‘the basis of all measures aimed at protecting the Danube
River and waters in the Danube Basin’ (Zakon o potvrđivanju Konvencije, 2003, Art.
2, para. 4). The most important rivers in that basin are the Tisza, the Tamis, the
Velika Morava, and the Sava.

The Tisza springs in Ukraine, then flows along the border with Romania and touches
the border with Slovakia and Hungary, then extends through Hungary and Serbia to
Stari Slankamen where it flows into the Danube as its longest tributary. Poor water
quality in the network of canals in Vojvodina lowers the water quality in the Tisza,
and the additional pollutants are industry and agrotechnical measures (Ocokoljić,
Malijašević and Milanović, 2009, p. 10).

The Tamis river springs in Romania, where most of its water flows, and flows into the
Danube in Serbia near the town of Pancevo. Until it was linked with the Danube-Tisa-
Danube (DTD) canal system in the 1970s, the Tamis was considered a very clean
river, but only two decades later it gained the status of the most polluted river in the

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territory of Vojvodina. Slow-conducting channels of the DTD hydro system caused
oxygen deficiency, especially during low water levels. Anthropogenic pollution factors
are most pronounced in the border area, from the farms of Bacova, Gatania, and
Birda in Romania, and almost half of the 16 subjects of Tamis polluters in Vojvodina
are located in Pancevo (Fakultet za primenjenu ekologiju Futura, 2010, p. 2).
Although in 2019 Serbia signed the Declaration on the Energy Transition of the
Western Balkans, which implies beginning of the process of decarbonization of
ecosystems, the construction of a new thermal power plant in Pancevo began in the
same year, which will run on natural gas.

The Velika Morava River is the most important river that originates and flows into
Serbia, because with its tributaries it forms the Moravian system, which is located on
the territory of Serbia with more than 95% of its surface, and the rest is in Bulgaria
(Babić Mladenović, 2009, p. 2). Although due to frequent floods, there are not many
populated places on the very bank of the Velika Morava, its basin is densely
populated, which affects the types of pollution. In addition to pollution resulting from
hydro morphological changes, organic pollutions and pollutions from industrial and
municipal waste, as well as nutrients, predominate (Marković et al., 2011, p. 48). In
addition, there are large air pollutants in the Velika Morava basin, among which coal
basins Kostolac and Resava are particularly risky.

b) The central river of the Sava Basin is the Sava, which springs in Slovenia and
flows into the Danube River in Belgrade. It connects Serbia with Croatia, Bosnia and
Herzegovina and Slovenia, as well as with Romania and Bulgaria after it flows into
the Danube River. Also, the Sava River is the natural border between Bosnia and
Herzegovina and Croatia, and the northern border of the Balkan Peninsula.

The Sava is navigable from Sisak (Croatia) to Belgrade (Serbia), where it flows into
the Danube. The Sava is classified as a class III river of water quality, and does not
meet the criteria for drinking water, as well as for use in more sensitive industries.
Although the river Drina, which belongs to the II class, improves the quality of the
Sava's water by flowing into it, the risks of pollution are high due to the industrial
plants in Šabac and the thermal power plant in Obrenovac. Additional pollution
arrives into the Sava through its tributaries, and the main tributaries from the
territory of Bosnia and Herzegovina are the Vrbas, Bosnia and the Drina, while from
the territory that belongs to Serbia except the Drina it is the Kolubara as well.

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 Figure 2. Sava River Basin Overview Map.
Source: d3i71xaburhd42.cloudfront.net/2d63aafeb85ac0f8077f02749b1fd2554deb95fa/3-Figure1-1.png

The Vrbas River flows through eight municipalities, among which the city of Banja
Luka is the largest settlement. This river has a large number of tributaries, mostly
mountain rivers. The Vrbas itself is mostly a mountain river, which is why the water
quality in it is high and, in connection with that, it has a rich fish stock. A special
feature of this river is that its canyons and gorges through which it flows are
protected by the Law on the Protection of Natural Values, which was adopted in 1955.
Pollution of the Vrbas River is most often caused by the discharge of wastewater from
households and agricultural land, as well as from industrial plants, with the more
dominant influence of the first one. (Pavlović and Perišić Trubajić, 2010, p.219 and
221).

Unlike the Vrbas, along with the Spreča, the Bosna River is the most polluted river in
Bosnia and Herzegovina. This central river of Bosnia and Herzegovina is 273 km
long, flows into the Sava near Bosanski Šamac, and its valley is the most populated in
the country. Also, its valley has the most industrial plants in Bosnia and Herzegovina,
which is why the highest air pollution is recorded in those towns. When the entire

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region was hit by heavy pollution in early January 2020, according to a report by the
specialized site IQAir, also known as AirVisual, Sarajevo was the most polluted city in
the world on January 11, but five days later the pollution index in Tuzla was higher
(327/100) than in Sarajevo (285/100) (Tanjug, 2020, January 16). The chemical and
motor industry has been developed in Tuzla, and the river Jala flows through the city,
then flowing into Spreča. However, the Tuzla Thermal Power Plant, which burns as
much as four million tons of coal a year, has identified as the main polluter
(Sadiković, 2020, January 13). Thus, independent monitoring showed that PM2.5
particle pollution in this city caused the premature death of 136 people, and in the
same year, PM10 particle pollution caused 1339 new cases of adult bronchitis.
Environmental NGOs in the city have blamed the authorities for failing to determine
the exact contribution to pollution from the three main groups of polluters - thermal
power plants, individual furnaces and traffic (Balkan Green Energy News, 2019, June
25). In circumstances where it is not possible to identify the polluter, it is practically
impossible to apply the ‘polluter pays’ principle. To make matters worse, the air in
B&H is not the most polluted in Tuzla, but in the valley of the river Bosna, especially
in Visoko, Ilijaš, Zenica and Sarajevo.

The Drina River has a special significance as the border river between Serbia and
Bosnia and Herzegovina, and it originates on the territory of a third country,
Montenegro - by merging the Tara and Piva rivers near Šćepan polje. In addition to
Tara and Piva, the Drina basin has two other rivers that flow through Montenegro -
Ćehotina and Lim. The town of Pljevlja is located on the river Ćehotina, which is the
largest source of pollution, as the most populated municipality in Montenegro, but
primarily because of the thermal power plant and the coal mines, which are the
biggest polluters in Montenegro beside the Aluminum Plant from Podgorica. The
water flow of the Drina along the border to the confluence with the Sava is considered
preserved, with water quality of the II category, so it can be used for water supply
with prior purification. However, in the lower course, near the mouth into the Sava,
the water of the Drina is from III to V category, due to heavy metals that occasionally
arrive from its right tributaries. Also, a big problem is floating islands of garbage
made of plastic, rusty barrels, and even dead animals that are thrown in by
unconscionable residents and passengers during breaks from driving on roads along
the river. Garbage dumps are being created along the Drina, which gives the
opportunity to find those who create and use them through organized supervision,

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and to be fined according to the ‘polluter pays’ principle, which is way this
phenomenon be suppressed. However, on this problem and the passivity of the state
was pointed out and criticized in the Assembly of the Republic of Serbia (Drina Info,
2018, October 17).

Rich deposits of lignite in the basin of its tributary Tamnava are connected to the
river Kolubara, which flows into the Sava near Obrenovac. There are several lignite
mines in this area, which are used in the thermal power plant TE Nikola Tesla
(TENT) near Obrenovac. In public, frequent air pollution in this area has inertially
associated with the work of the TENT, but the state in the previous period also took a
passive stance, and even denied the contribution of the TENT to air pollution. 6 Such
an attitude automatically excludes the possibility of applying the ‘polluter pays’
principle, and that there were grounds for its application is confirmed by reports on
emissions of substances that affect air quality for 2018, prepared by PE ‘Electric
Power Industry of Serbia’ and the Regulatory Institute for Renewable Energy and the
environment (RERI). According to these reports, in that year, the thermal power
plants within the Electric Power Industry of Serbia exceeded the permitted values of
powder matters emissions by six times. (Istinomer, 2020, January 27).

Adriatic basin

The Neretva is the only river in Bosnia and Herzegovina that flows into the Adriatic
Sea, and it does that on the territory of Croatia. Trebišnjica also flows into this sea,
but it is a sinking river. There are several towns on the banks of the Neretva, the
largest of which is Mostar, where one of the four hydropower plants on this river is
located. For a long time, the Neretva was considered an extremely clean river, but
lately, water pollution has been happening due to wastewater released by processors.
The Neretva is considered to be the coldest river in the world, whose water
temperature can be only 7 degrees in the middle of summer, which is a consequence
of its springing at an altitude of 1,095 m (Pariona, 2018, March 12). The application
of the ‘polluter pays’ principle due to air pollution in Mostar is practically impossible,
because in this city, as well as in the whole of Herzegovina, no measurements are
being made (Sadiković, 2019). The cleanliness of the Neretva is most endangered in
the area of Mostar, because wastewater and faeces flow into the river through the

6‘Thermal power plants did not contribute to the air pollution’ – statement of the Minister of
Energy in the Government of the Republic of Serbia, Aleksandar Antić, Prva TV, 22 January 2019.

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sewage system, and solid waste is also thrown into the river. Due to the discharge of
technological wastewater, the water of the Neretva is also seriously polluted in the
area of Konjic (Celing Celić, 2019). Although it has been determined that the
technological wastewaters originate from the business zone, the Federal Water
Inspectorate has its hands tied in terms of sanctions, because in Bosnia and
Herzegovina the limit values of certain parameters in the sediment are not
prescribed. This is a complex issue because the same parameters, methods, and units
do not apply to the assessment of the state of sediment (deposited sand material in
the riverbed) as for wastewater, and it must be taken into account that industrial
activity in Konjic has been present in the last 50 years. (Bljesak.info, 2019, November
12).

From the territory of Kosovo *, the river White Drim flows towards Albania, where it
joins Black Drim into the river Drim, which has tributaries from North Macedonia as
well. One branch of the Drim flows into the Bojana, the border river between
Montenegro and Albania. The Bojana River flows out of Skadar Lake and flows into
the Adriatic Sea, and the wider surroundings of its mouth are considered a unique
ecosystem in Europe, a natural wetland characterized by ‘unique and endangered
natural and cultural landscapes, habitats and species’ (Petković, 2012, p. 836). The
Skadar Lake is the largest lake on the Balkan Peninsula, and it is located on the
border between Albania and Montenegro as well. The ecosystem of Skadar Lake is
characterized by endemic fish species, and especially by a pelican habitat. This
ecosystem is mostly endangered by wastewaters that flow into Skadar Lake from
Shkodra itself, but in a much larger amount and more dangerous chemical
composition through the rivers Zeta, Morača, and Crnojević Rivers from the
Montenegrin cities of Nikšić, Danilovgrad, Podgorica, Cetinje and Rijeka Crnojevića
(Šundić and Radujković, 2012, p. 17). The biggest industrial polluters are the
Aluminum Plant from Podgorica and the Ironworks Nikšić, and precisely they were
the ones who had the most objections to the provisions of the Law on Industrial
Emissions, concretely to the part that prohibits work if the operator does not perform
activities without a permit (Article 38), as well as to the amount of the fine. The
Environmental Protection Agency of Montenegro announced that during 2016, PM10
particles were above the limit values, in Pljevlja for 181 days, in Podgorica for 81 days,
and in Nikšić for 71 days. In the same year, the Ecological Inspectorate initiated

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proceedings against all major polluters, and they were fined by law (Onogošt, 2017,
March 3).

The 272 km long Vjosë River, which springs in Greece and flows into the Adriatic Sea
in Albania, also belongs to the Adriatic basin. Considering that there are no larger
settlements in its valley, not even industrial plants. Thanks to the engagement of non-
governmental environmental organizations, the government gave up the construction
of hydroelectric power plants on this river, declaring Vjosë-Narte wetlands a
protected area, and this river is not associated with significant pollution.

Between the Adriatic and Aegean basins, there are border lakes with unique
ecosystems. On the border between Albania and North Macedonia is Lake Ohrid,
which is a World Heritage Site along with the city of Ohrid in North Macedonia and
both are under UNESCO protection. Lake Ohrid has as many as 40 tributaries - 23
from North Macedonia and 17 from Albania. The ecosystem of this lake is
characterized by rich biodiversity, with endemic plant and animal species. However,
due to human negligence, Lake Ohrid has been under special UNESCO monitoring in
recent years, with warnings that it could be placed on the World Heritage List in
danger. Threats to the lake ecosystem come from ‘uncoordinated urban development,
increasing population, inadequate treatment of wastewater and solid waste, and
tourism pressure, as well as a number of other issues’ (UNESCO, n.d.). Lake Prespa is
divided between North Macedonia, Albania and Greece. This lake consists of two
lakes, Great and Small Prespa, the first of which is divided between all three
countries, while Small Prespa is mostly within Greece, and a smaller part is in
Albania. Lake Prespa is the hydrological source of Lake Ohrid, into which it flows.
Cooperation between the three countries on maintaining the ecosystem of Lake
Prespa is an example that everyone in the region should follow. The result of this
cooperation is a high level of protection achieved through preventive action, which is
also one of the principles of the EU. Dojran Lake is located on the border of North
Macedonia and Greece. In the last 15 years, it has been characterized by declining
water levels, and ecosystems have been disrupted, and in order to reduce lake
pollution, a special sewage system has been built (Popovska, Gesovska and Ivanovski,
2005, p. 175).

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 Aegean basin

The Aegean basin is the smallest when it comes to the inflow of rivers from the
countries of the Western Balkans. The largest river that flows into the Aegean Sea
from the territory of this region is the Vardar - before entering Greece, it flows 301
km through North Macedonia. From the area of Serbia, through the territory of
Kosovo *, the rivers Pčinja and Lepenac flow into the Vardar. Unfortunately, since the
Vardar is central and the longest river in North Macedonia, almost all sewage and
industrial waters flow into this river. The biggest problem are heavy metals in the
water in places where crops are treated with too many pesticides. This is especially
noted for the areas around Gostivar and Negotino, as well as Delčevo and Kočani on
the river Bregalnica as a tributary of the Vardar, where their use in the private sector
is uncontrolled (Macura et al., 2009, p. 91). Therefore, it is difficult to determine who
is the polluter who should pay for the damage, since the direct connection between
the pollution of the Vardar River and the excretion of toxins from a specific
agricultural property would have to be proven. However, it is necessary to find an
effective way to identify polluters, in order to apply the ‘polluter pays’ principle to
them and thus break the vicious circle of endangering the health of the population.
The vicious circle is created by irrigating the land in agricultural areas with water
from the Vardar, which was previously polluted by the irresponsible behaviour of
other agricultural producers, on another, upstream, part of the river, or some of its
tributaries.

The Berlin Process and the demand for a more efficient environmental
policy

Obligations from international agreements define cooperation between the countries

of the Western Balkans. However, the adoption of international agreements is not
automatic, based on the very fact that a state is an international legal entity.
Therefore, especially in the practice of regional cooperation, there is often a mismatch
in treatment precisely because of the lack of a universal mechanism for reconciling
interests. Relying on a common interest - the EU accession - at the suggestion of
Germany, a mechanism to connect the countries of the Western Balkans was
established with the aim of improving economic, political and social regional
cooperation within the European integration process. The launch of such an initiative

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called the Berlin Process, took place at the Summit on August 28, 2014, in Berlin,
organized and led by representatives of the European Commission, with the
participation of Prime Ministers, Foreign Ministers and Ministers of Economy of the
states belonging to the Western Balkans region,7 as well as of France, Austria,
Slovenia and Croatia. Later, this initiative was joined, first by Italy and Germany, and
then by Great Britain, Greece and Poland. Although the goal of launching this
initiative was to reach a joint agreement on strengthening regional cooperation
within the four-year period (2014-2018), the importance of the projects launched in
the meantime showed the need to continue this initiative after 2018. Thus, in
addition to the Summit on the Western Balkans in Berlin in 2014, the summits in
Vienna (2015), Paris (2016), Trieste (2017), London (2018), Poznan (2019) followed,
while the planned summit for 2020, in Skopje and Sofia, has not yet been held due to
the COVID-19 pandemic.

The Berlin Process has grown into an umbrella initiative for all regional initiatives
dedicated to the Western Balkans, so, in addition to very important issues of
resolving all political and cross-border disagreements between the countries of the
region, also in the focus of this initiative is one of the most important security issues
within the EU - environmental protection. European Union officials are especially
concerned about the insufficient commitment of the Western Balkan countries to
solving environmental problems, which was confirmed by the presence of a small
number of representatives of these countries at the panel dedicated to environmental
protection during the summit in Poznan - A Better Environment for a Better Life
panel. Johannes Hahn, the EU outgoing Commissioner for European Neighbourhood
Policy and Enlargement Negotiations, as one of the speakers at that panel, especially
pointed out his disappointment with the fact from the report Health and
Environment Alliance (HEAL), Sandbag, Climate Action Network (CAN) Europe,
CEE Bankwatch Network and Europe Beyond Coal, that ‘sixteen thermal power
plants in the Western Balkans pollute the region and Europe more than all other 250
European coal-fired power plants’, which is a humanitarian problem because more
than 3,000 people in the region die prematurely each year from air pollution
(Muminović, 2019, August 16). This is completely contrary to the European Union's
efforts to develop environmental policy on the principles of preventive action, by

7Albania, Bosnia and Herzegovina, Kosovo* (without prejudice to the status), Montenegro, North
Macedonia (before 12 February 2019 – FYR Macedonia) and Serbia.

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combating pollution at the very source, or by state coercion over polluters to bear the
costs of environmental protection, which is the essence of the ‘polluter pays’
principle. These efforts are very transparent, among other things, highlighted in the
negotiating Chapter 27, which requires countries that have applied for the EU
membership to implement and enforce the EU standards related to environmental
protection, and the key standard is the consistent application of the ‘polluter pays’
principle.8 Speaking at the environmental panel in Poznan, Johannes Hahn reminded
the countries of the Western Balkans that in the process of the EU integration, its
environmental standards cannot be questioned, nor is it allowed to return to a
previous state later. The warning that there will be no return to the old should be
interpreted as a criticism of the attitude of the Western Balkan countries towards the
obligations from the signed Declaration on Energy Transition of the Western Balkan
countries, which include reducing carbon dioxide emissions and switching to clean
energy in the region. The goal is to halve carbon dioxide emissions by 2050 compared
to 1990, i.e. to bring the decarbonization of Europe to a level where there will be no
more carbon dioxide in the atmosphere than can be absorbed. However, a year after
the signing of this declaration, there are no indicators in the countries of the Western
Balkans that would confirm the reduction in the use of fossil fuels, primarily coal.
‘Dirty’ electricity production, by burning coal, has a very negative impact on climate
change. The climate in the region is inseparable, so it is in the region's interest to
connect with each other and cooperate during the so-called. green energy transition.
Thanks to the Cross-Border and Transnational Cooperation Programs (INTERREG),
which have been accessible to non-EU countries since 2004, cooperation in the
region has received strong financial support. By financial resources from these
programs’ projects in the field of environmental protection are also supported.
However, for the reorientation to clean energy production, the countries in the region
need additional financial injections. Funds from EU funds for pre-accession
assistance cannot fully meet the needs of all countries, and in addition to the
involvement of the European Investment Bank, these countries will have to make
their own efforts to provide these funds. Given the state of air, water, and soil
pollution in the region, investing more effort in the implementation of the ‘polluter
pays’ principle, in addition to reducing pollution, would significantly contribute to
providing funding for reforms in the field of energy production.
8Montenegro opened this chapter in 2016; On January 21, 2020, the Government of the Republic
of Serbia adopted the Negotiating Position for Chapter 27.

161
 Conclusion

Responsibility for environmental pollution cannot be collective, because behind the

irresponsible attitude towards pollution protection measures is always an individual,
and it is necessary to determine the individual responsibility from which the guilt
arises. The ‘polluter pays’ principle implies punishment on the basis of such guilt, in
such a way that the person responsible for the pollution not only pays the penalty to
the state but also repairs the damage and provides material compensation to the
injured parties. The countries of the Western Balkans have incorporated this
principle into their legislation regulating the issue of environmental protection, and
some of them have gone a step further by providing a legal framework to the
procedure for determining liability for environmental damage. Also, concrete steps
have been taken to establish bilateral and multilateral cooperation between the
countries of the region in taking environmental protection measures. However, in
practice, this cooperation is realized at certain local levels, and at the state level, it is
mainly reduced to signed agreements. In circumstances where irresponsible and
illegal behaviour on one side of the state border causes damage to the ecosystem of a
neighbouring state, the application of the ‘polluter pays’ principle depends on the will
of the competent authority of the state to which the polluter belongs. Such
phenomena are not uncommon, because the ecological system cannot be isolated by
state borders, both due to the transfer of harmful substances through the air and
through a very branched and interconnected water network. Even when there is a will
to apply this principle, there are problems with determining pollutants, both due to
omissions in the organization of the monitoring system and due to the impossibility
of measuring the required pollution parameters, as well as the lack of prescribed limit
values for certain types of pollution. Bearing in mind that the protection of the
environment, especially when it comes to pollution because it directly affects climate
change, is a priority standard of the European Union, developed in Chapter 27, and
that the countries of the Western Balkans are obliged to fully adopt and apply this
standard in the practice as soon as possible, cooperation between these states in this
regard is imposed as a necessity. The countries of the region have not fully responded
to the set EU requirements, even in the normative part. Delays in the adoption of by-
laws that further regulate the application of this standard make it difficult and often
make it impossible, for the work of services in whose jurisdiction the implementation

162
of environmental protection measures is located. This is especially pronounced in the
application of the ‘polluter pays’ principle because, as we have seen in the paper, in
order to determine that pollution exists and who the polluter is, a reliable
measurement system must be built, as well as normative limit values for all pollution
parameters. Harmonization of regulations is one of the three areas of the EU
integration process in the field of environment. The second area is the building of
administrative capacity, including the capacity of institutions in the field of
environment. As we have seen in the paper, there are institutional shortcomings at
both the state and local levels. An example of regional integration and cooperation
achieved in order to preserve the natural environment of Lake Prespa is an indicator
that effective management of environmental security issues can be achieved if there is
high-level political support, as well as strong links between institutions and
communities with decision-makers. Administrative shortcomings are particularly
pronounced at the local level, due to small capacities for inspection supervision,
sometimes due to the ban on employment in the public sector (Serbia), and
sometimes due to the attitude that there are not enough financial resources to
develop administrative capacity (B&H). Securing financial resources is the third area
of the EU integration process. Financial resources are necessary for the organization
of any system, but in this case, they are provided, among other things, by applying the
principle of ‘polluter pays’, especially bearing in mind that all potential polluters pay
special environmental taxes before entering the infringement zone. When the funds
based on the INTERREG program are taken into account as well, financial resources
cannot be an excuse for incompleteness in the application of the EU principles in the
field of environmental protection, including the ‘polluter pays’ principle. The
criticisms made at the Berlin Process summit in Poznan in 2019 must be taken
seriously by the governments of the countries in the region because acting contrary to
the requirements of the negotiating Chapter 27 undermines the EU's efforts based on
the principles of preventive action. Consistent application of the ‘polluter pays’
principle would protect both the region's water resources, and the ecosystems
associated with rivers and lakes in the region as a whole. The EU insists on the
application of this principle because it would greatly affect the reduction of carbon
dioxide emissions produced by thermal power plants in the region, which was
emphasized in the criticism as an alarming situation. This negatively affects the
status of the countries in the region in the process of joining the EU. However,

163
regardless of that status, if something does not change in the attitude of the countries
in the region towards environmental protection, the EU countermeasures can be
expected, in order to stop the negative impact of pollution from the region on climate
change in Europe. In that case, some countries could be labelled as polluters and the
‘polluter pays’ principle could be applied to them in the form of economic and
political measures.

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 SOCIAL AND FINANCE SECURITY -
THEORETICAL ANALYSIS AND CHALLENGES FOR
SERBIA

Dr. Kristijan RISTIĆ , Ph.D.1

Ilija Ž IVOTIĆ , MSc2

Milan MALIDŽ AN, MA3

Abstract

In theory and practice, there are typical models of welfare, that is, social development
and social policy with emancipatory-humanitarian character and a democratic motive
as the ultimate value. The structure of global welfare models is composed of the
following models: neo-liberal model, social democratic model, corporative-consensus
model and model of integrated welfare. The optimum of economic and social
freedoms and rights derives from the conditions of consistently and consequently
implemented market relations. Since market relations are free and aware, from the
aspect of individual participation, they cannot be subject to moral trials or social
interventions, as they undermine the natural laws of freedom and the position of
individuals. Market relations, as part of the overall spontaneous relationships of
individuals, regulate both economic and social relations at the same time. Therefore,
someone who suffers from the consequences of the market cannot be subject to
judgments from the aspect of social justice or fairness, but generosity and mercy.
Intervening in these relationships is an injustice compared to those who possess,
because in this way they are deprived of what they had achieved with their skill in the
equal competition

Key words: welfare state, finance, insurance

1 Associate professor, Business and law faculty, University Union – Nikola Tesla, Belgrade. E-
mail: kristijanristic.fpim@yahoo.com

2 International police organization, IPO Serbia

3 ProFinance, Belgrade, Serbia

167
 Social Security

The neo-liberal model (anti-collective, neoconservative) reaffirms the central

principles of the proprietary social-economic model of social-economic relations and
social and fiscal policy based on the principles of laissez-faire. The epicentre of this
model puts the market as the superior natural mechanism for resolving social
conflicts and economic contradictions as an efficient mechanism for allocating goods
and services and as a rational regulator of supply and demand relations. In this
context, the state has the task of providing economic freedoms and institutional
arrangements for entrepreneurship, and nothing more. The state should not interfere
with economic trends so as not to derail a private initiative. The protagonists of the
original model of the liberalist concept of civil society represent a neo-liberal model
with classic ideas about a perfect market game, maximizing the needs of consumers
and maximizing the profit of the producers. Hayek and Friedman, as the typical
representatives of the neoconservative and anti-collectivist understanding of the state
of welfare, contributed the most to the theoretical reaffirmation of the neo-liberal
model. In Hayek’s opinion the freedom of choice and freedom of actions had always
represented the basics of total human freedoms and determinants of economic and
social relations. (Ristić, et al, 2013a)

However, Hayek does not stop at this statement only, but goes on to warn about the
risk of state intervention in the social sphere of social-economic life. He opposes this
influence not only in relation to social justice and freedom of individuals, but also
from the aspect of social structure, pointing to the growing paternalism of the
modern state, which by interfering with the market and social relations disturbs the
balance of the system and narrows down the possibility of choosing. In this way, the
state interferes with the essence of economic and social relations. State interfering in
the economy and state welfare programs are, according to this author, the main
causes of economic ruin and economic crises. (Ristić, et al, 2013b)

This is Hayek’s opinion. Friedman shares his opinion, according to which the
absolute privatization of almost all segments of social and economic relations and the
elimination of state interference in market and social relations is an essential
prerequisite for returning to the starting principles of civil society. "Possible
exceptions are only those parts of the social structures that influence the possibility of

168
equal participation in free competition and the choice of individuals, such as
education or general activities that cannot be achieved on market principles
(protection of the environment, for instance). The state also has the role of
strengthening and developing the information systems necessary for free choice and
decision-making, as well as legislation that reduces monopolies, eliminates market
abuse and fosters competition and peer rivalry. The subsidiary model of the state
social services can only function if the previous mechanisms of the market, family or
other individual solidarity and mercy had not eliminated poverty and deprivation of
the inferior in the market.

Selective social measures must not, however, jeopardize the principle of freedom,
decision-making and choice and acquisition on the basis of market-proven abilities
and results. One recent summary of Friedman’s deserves attention because of
attempted projections of a transition period for former socialist societies. Friedman
apparently pointed his arrows to former socialist societies that degraded the liberalist
option. For this reason, Friedman insists that post socialist societies bet their odds on
the civil, economic, political and personal freedoms for all their citizens. The key to
this are economic and political changes based on consistently implemented principles
of market rules. The transition to the freedom of citizens and society is possible with
four key conditions: 1. transferring the basic social wealth to private ownership, 2.
basic and guaranteed protection of personal property, 3. a strict limitation of state
administration, the function of which is the protection of legality and 4. free market
relations, the supervision over the fulfilment of private contracts, and in no way
interference in the economy and social activities, especially in monetary affairs and
the exchange rate of foreign currencies, and a relatively stable monetary system.

Distribution and allocation of needs, goods and services, including the social ones,
are best achieved through the market. It is used as a mechanism embedded in the
allocation of goods and services, realized through the mechanism of the so-called
social activities. The exception to this are those activities that depend on the freedom
of individuals and their initial equality in a market competition. Friedman strongly
opposes providing assistance to transition economies, as it would preserve the state’s
role in the process of habitual redistribution of resources.

Neo-liberalists, such as Hayek and Friedman, one-sidedly reject Keynes's concept of a

public budget deficit in the period of crisis and the state surplus of the budget in the

169
period of prosperity. They do not recognize the expansive and restrictive exchange
rate of the deficit, or surplus. According to them, the creation of the deficit, followed
by the growth of aspirations and demands of the population, only stimulates inflation
and, consequently, the economic crisis.

Attempts of some governments to cut inflation through controlling the income and
prices because they do not target the inflationary sources, which are, according to
neo-liberalists, widespread functions of the state, especially in the social sphere. The
control of the money supply, with the balance between what is financed from the
budgetary funds, can be established only by the market mechanisms, not by planning
or activities of the state. Significant reduction of state functions and costs, and in
particular the reduction of social benefits and programs, which have the character of
spending, are an important prerequisite for escaping economic and other crises.

Prosperity is possible if the highly-accrued capital is freed from tax, in order to be

used for investing in production. Investing will stimulate employment, and greater
material resources would make it easier for everyone in society to make the
distribution of social values more equitable to the contributions verified on the
market. This would also reduce the area of grey economy. The market is just one of
the social institutions. Why should it be the best way of decision-making and
allocating social goods and resources? Freedom of choice does not only depend on the
offer, but also on the coverage of demand, as well as the information and ability of
individuals to make the best choice. The market itself does not have to be efficient.
The efficient market is the premise for the market competition.

If there is a monopoly of the owner of goods or services, then there is no efficient

market. Some goods are of such social character that they cannot be distributed
through the market. This is a problem in relation to those goods or services that are
more of a general type, common, and rest on the idea of solidarity and general
interest. The question of freedom of choice on market principles is especially raised
for those who do not have enough income, especially in relation to social services.
This can also be said about the tendency of the lowest price of services for the
marginal offer, as this can affect the quality and the scope of services. In this regard,
the question of the domination of social welfare beneficiaries is raised, especially
since they operate individually in market conditions and they are otherwise unable to
articulate, express or impose their common interest.1

170
Marginalized and poor classes do not have either economic or political power. The
situation is similar in relation to the quality of services and available goods according
to market criteria, due to insistence on the absence of regulations (except for supply
and demand mechanisms) and standards of goods and services. In other words, the
introduction of market laws does not mean automatic monitoring of efficiency in
social activities. The latter can best be judged on the basis of the effectiveness
indicators of the private health insurance schemes in the United States.

Namely, research has not yet proved the effectiveness of the market principle: the
best service for the lowest price, which is the interest of consumers. On the other
hand, the question of possible manipulation of the beneficiaries’ needs is raised,
which is why the welfare state and its institutions are blamed, since private
professional institutions can do it, also in order to secure their own economic position
in market relations. The paternalism of one relationship is replaced by the supremacy
of the other type of relationship, in which the beneficiaries remain in a deeply
subordinate position.

Social Policy: The critical observation

In contrast to the neoliberal model, the social-democratic model attracts attention in

almost all European countries of the market economy, which, in principle, resolves
the growing social contradictions and the rising social tensions. The relationship
between social policy, social institutions and change is viewed dynamically within the
framework of the social democratic model. Social policy of a welfare state is one of the
means of encouraging and directing social changes, first of all seen as qualitative
facts. The state of equilibrium at a certain stage, under the impact of qualitative
changes, is transformed into a state of imbalance that requires new resources,
solutions and adaptation of social institutions to new needs. (Vuković, 2017)

The state appears as a significant integrative institution of society and at the same
time promotes change, especially in the social sphere. Unlike other models, the
social-democratic model sees the welfare state and its development as a way for the
transition of a civil society into a socialist one in a peaceful parliamentary way.

In the realization of this global goal, the most important changes are made through
fiscal policy, industrial development and social policy. Social policy, basically based

171
on the principles of equality, social justice, guaranteed social security and integration
of citizens, is viewed as a path of social change and the establishment of an equal and
democratic pluralistic society, in which there is a balance between economic, political
and social rights and freedoms. The socialization of the state wealth through the
redistributive function of the welfare state represents the way to overcome the
contradiction of production that is not socialized but is dominantly private.

Social protection is a part of social policy and a way to reduce differences, especially
in relation to marginalized and disadvantaged people. The development of
institutions in the social sphere, the reduction of income differentials through the
progressive tax system and other mechanisms of state intervention in the distribution
of profits are important ways of social change, development and expansion into a
socialist society.2

The welfare state, in some respects, represents the midpoint between capitalism and
socialism. It goes a step further, as to represent a post-capitalist or post-industrial
society. These last stances should not be confused with ideas about the death of
ideologies and convergence. Social policy, therefore, as a means of social reform and
change, is one of the powerful means of a gradual expansion of capitalism and the
fundamental contradiction between collective creation and individual distribution.

The social-democratic welfare management model is essentially an electric model

that is suitable for empirical analysis. Therefore, it is a more pragmatic model,
through which the influence of the ideological opportunities of a concrete society is
exerted. It largely insists on institutional changes and the development of the
theoretical foundations of the global model. The Swedish type of socialism most
inspired the further development of the social democratic model of social welfare,
which today is of particular benefit to societies in transition and post-socialist
economies. The transition from capitalism to socialism, according to this option, has
several degrees. The first stage, equated with political democracy, is achieved through
realization of civil rights, freedom of creating associations, especially trade unions
and political organizations on interest principles.

By strengthening the role of workers' parties and trade unions, broadly educating the
masses in political decision-making and, in particular, socializing the distribution of
resources and profits, the mechanisms of the welfare state of are introduced into the
next stage, which is designated as a social democracy and a welfare state. This stage is

172
a consequence of a historic compromise between the working class and the capital.
Economic democracy as the next stage, which is less and less claimed to represent a
transition to socialism, is related to the introduction of payment funds of employees
through mutual contracts, thus forming the basis of the so-called model of the
consensual welfare state, as a possibility of survival of the basic welfare state model
that has faced serious and fundamental criticism, both from the leftist and the rightist
ideological positions. (Ristić, Zivković, 2018)

Due to the growing real economic difficulties in some OECD countries, there has been
an increase in the impact of the necessary reduction of tax burdens on high incomes
and large capital, and imperative cuts in social spending, in order to avoid growing
budget deficits and decrease growing unemployment. It was necessary to reduce the
cost of state and its institutions trying to lure their voters with attractive social
programs.

The corporative-consensus model is based on: the concept of large-scale capital,

which completely autonomously brings investment decisions, the concept of
economic development dominated by monopolies on the wage and prices control
system, in order to control inflation and undesirable crises, the cooperation of large-
scale capital and the planning civil service, in order to jointly determine the
development and investment priorities, in the consultative presence of trade unions,
which should take into account the social position of workers, control of social
programs, in order to prevent the penetration of economic distortions, on the
consensus on decisions that affect social rights and transnational corporative
economic and social policy of a global type, as a general rule in the behaviour of
modern political sets.

In a word, the corporative model represents a combination of the so-called welfare

state and the liberal model of production. It is an attempt to reconcile various
economic interests and structures, ensuring the relentlessly dominant position of
large capital. Social policy is not viewed separately from the economy, but is rather
considered to be interconnected and conditioned. Concrete measures serve to
establish a functional link between the economic and social aspects of politics.
Controlled pluralism of interest allows for different interests in politics to emerge, but
not so as to jeopardize the interests of others and the common interest. An important

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mechanism that ensures this is the consensus in political decision-making, including
social issues.

In the corporative model, as a rule, it is insisted on linking and coordinating

economic and social development, which is a significant evolution in relation to the
classical model in which economic and social policies are strictly separated from one
another. Politically, this concept of political relations and social policy in this context
starts from the idea of the possibility of social integration on a base of agreement,
compromise and consensus, especially between the global interests of the capitalist
and working class. Market economy, as the end goal of large capital owners and
capitalists in general, and a highly developed system of social rights and social policy,
as the interest and the need of the labour class, can only function if there is
cooperation and consensus among different social groups and classes, in which the
state plays the role of mediator.

In this sense, capital owners can accept a policy of full employment, or rather
controlled minimum unemployment, as a basic social goal, if associations and
representatives of producers accept the necessity of controlling earnings, as well as
the importance of increased productivity for overall economic and social
development. Within this concept, which works in increasingly more countries in
Austria and Sweden in recent times, it is spoken of "social partnership", which also
implies mutual responsibility for economic and social development. The policy of
revenue and distribution is left to the agreement of the representatives of the
employer and employees, while the state seeks to control their realization as well as
the basic social security of those who are outside the system of production and
labour. (Saltman, 2004a)

The regulation of economic and social relations is largely based on social agreements
and voluntarism, which, of course, is a mere semblance thereof, since most
relationships are nevertheless established by the strength of social circumstances and
power relations. In the system of political relations, there are formal mechanisms,
that is, institutions that seek to institutionalize consensus and cooperation, on the
principle of representativeness, as a rule of thumb.

On the whole, this model is relatively satisfactorily functioning internationally,

because it has a global character and admits entrance of liberal options from the right
side of welfare. Corporative and consensual relations do not require the growth of the

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state apparatus, and collective responsibility in economic and social policy is closer to
economic and social freedoms and rights. The model of an integrated welfare state is,
finally, based on the concept of Keynes and Beveridge, whose epicentre is the idea
that the welfare state rests on the state's responsibility for the well-being of its
citizens through a set of interventions that do not disturb ownership relations. The
social function of the welfare state, as a form of intervention in the adverse
consequences of the unequal and unfair position of citizens on the market, is possible
thanks to the large growth of the total material wealth of the society and the overall
progress, whose fruits can be partly enjoyed by all members of society.

Unlike the social-democratic model, the concept of an integrated welfare state claims
that social policy, through a developed system of social services and institutions, and
especially social programs, is closely related to the industrial, economic and public
sectors in general. It is about ensuring the well-being and prosperity of citizens and
also a significant segment of civil status, coupled with economic, personal and
political rights.

This model of integrated welfare state, regardless of its modalities in practical

application, is based on certain principles: the principle of universality of measures
and the comprehensiveness of the entire population, the principle of social and
material coverage of significant social risks, the principle of the establishment of
social rights, terminations and forms of protection of the civil status and civil rights,
the principle of complementarity of economic and social policy measures and
complementarity of social security measures and social care, the principle of the state
competence and responsibility for the adoption of social programs and the
development of social services, and the principle of complementarity of economic and
social measures in order to increase the efficiency of the social system, productivity of
the economic system and creation of conditions enabling a more stable and
harmonious overall development of society and economy.

The presented principles reflect, basically, the functionality of the integrated welfare
model. Functional and practical activities have made this model applicable in almost
the entire post-war period in almost all European countries. Fiscal policy, state
budget and taxes, as instruments of economic policy and measures of social security
and social protection, have a decisive influence at the same time on the deviation of
economic growth and productivity as well as the social security of all citizens based

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on harmonious and positive functional relations between various parts of the social
system. (Saltman, 2004b)

The social policy framework constitutes a developed social security system that
"covers" all the significant social risks, with the tendency of universal coverage of the
population at least at the level of meeting the minimum of needs and social security,
as well as a system of social services and institutions, that would also be universally
available, specifically designed around social issues and specific needs of individuals
and families, as well as the protection of the poor and marginalized social classes.

The state is equally responsible, both for investments in areas that employ a large
number of labour force or are highly productive, and for the adoption and
implementation of special social programs and the development of institutions and
social protection services. In this regard, especially with regard to social services,
complementary local governments and voluntary organizations and associations are
engaged.

However, the model of an integrated welfare state has not been created and launched
for the purpose of devising social development, but in order to overcome accumulated
social tensions, and primarily to reduce unemployment, to improve the health of the
population, to combat illiteracy and to prevent poverty and scarcity, as a cumulative
expression of social contradictions. Therefore, the whole model is based on the idea
of harmonious economic and social development, and on complementary measures
of economic and social policy in the market economy.

Social engineering, therefore, comes to the forefront of a civil society, which in the
long run deals with the social problems of modern man in terms of values, ethical,
human and democratic principles. The neoliberal welfare model is based on the
general principles of liberalism, such as private property, free competition, individual
freedoms, personal responsibility, personal autonomy, equality in opportunity,
efficiency and rationality. Social policy, adjusted to the neoliberal model, is
nevertheless based on the principles of subsidiarity, selectivity, charity, social justice,
redistributive justice and social equality.

The principle of subsidiarity arises from the concept of human society as a functional
whole, whose development is determined by the laws of the market economy, in
which the freedom of initiative is realized and private property is praised. Equality of
opportunity and free competition enable the most capable and most effective people

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to acquire social positions and goods that make them superior. People who make
choices freely and are autonomous in their decision-making with regard to their lives,
are responsible for their position in society and for what they have or do not have.

Those who have not used their chances and options are responsible themselves, and
providing assistance to such individuals or families means disturbing spontaneous
social relationships and intervening in the natural course of things. The weak players
in the market and social competition and socially handicapped can count on the
solidarity of their family, admittedly within the framework of the mentioned
principles and possibly on the mercy of others, who can help to the extent and in the
way they choose on their own.

The principle of mercy does not, however, derogate the existence of a much dissolved
system of voluntary organizations and charitable institutions, as well as the creation
of new forms of self-help and mutual protection, which are characteristic of the
neoliberal model. In their theories, neo-liberalists deny the validity of the principles
of social justice. The premise is the notion that in a society of free people, whose
members are allowed to use their knowledge and power for their own ends and
interests, the concept of social justice is completely devoid of meaning and content.
Moreover, attempts to introduce social justice into such a society make its institutions
inefficient.

Therefore, social justice is not, as it is usually thought, an innocent expression of good

will towards the less happy and successful. According to this view, social justice
implies the reciprocity of the freedom of each individual in relation to others. The full
freedom of every citizen implies compatibility with the freedoms of others. On the
other hand, the openness of social positions and, in particular, institutions towards
everyone in society, constitutes an essential prerequisite for social justice, including
the fact that social inequalities are an advantage rather than a limitation on people. In
other words, social justice implies equal opportunities for all.

The principle of redistributive justice is also an integral part of the welfare state
where wealth, power and social status always belong to somebody in society. It is
considered that the redistribution of these values, by any principle, means that they
are taken away from someone, and this is in itself a moral act, which confirms the
rights and freedoms of those from whom it is taken away.

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In line with this, social justice is linked to the fair acquisition of certain values, based
on natural abilities and talents. The state has no right to interfere with distribution of
values that have been acquired in this way. After all, in the free market and private
property society, economic growth serves everyone in society, which is a specific
dimension of social justice.

Within the liberal model, the principle of equality or inequality arises from the so-
called individual contribution. The contribution to society is the material basis for the
entitlement to additional social benefits. From a moral point of view, it is socially
justified that someone (person, individual) owns property and assets, if wealth is
acquired in a market competition. From a moral point of view, any acquisition of
property is justified, if the property concerned is used to increase social welfare. In
this context, the so-called inequalities are also justified, which, as a rule, stem from:
allocation of funds in accordance with the economic and social division of power,
distribution of prizes in proportion to the social and economic contribution of the
overall welfare, and the distribution of rewards in terms of ability, skills and talents.

The social-democratic model of social policy and social protection is based on the so-
called "mixed economies, the pluralism of economic and property interests, the
dilemma of human needs and social needs, on the principle of equality of citizens and
social justice and guaranteeing social security and social integration.

Citizens' equality is an expression of freedom and responsibility for the development

of society and individuals, as well as the availability of social services to citizens and
the alleviation of inequalities in the social and economic sphere. In this context, social
restrictions are a part of social justice and social security. Mechanisms of
redistribution of income, assets and resources, serve to guarantee social security of
citizens, social stability of life, social integration of personality and self-renewal of
society.

Thus, social institutions become important prerequisites for social development, with
a built-in principle of collective responsibility, which does not call into question
individualism. On the contrary, the complementary measures of alternative
institutions (private and non-governmental) in the promotion of social programs only
increase "competitiveness" in rendering social services and the expansion of the
institutional and non-institutional social network. The corporative-social model of

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social policy is a representative mix of liberal social policy and welfare state social
policy.

This model respects the pluralism of interests up to the level of endangering

accumulation and interest of the total capital. In fact, social protection incorporates
limited pluralism of interests, consensus, mutual responsibility and control of social
programs, which cannot be incurred at the expense of productive employment and
efficient business. Working conditions and the minimum remuneration are at the
centre of social security.

The minimum of social security for the most vulnerable citizens is provided by the
state. Social protection is a complementary social security segment. The principle of
mutual responsibility implies responsibility of citizens for their own social position,
and responsibility of the state, which only helps when all possibilities are exhausted
and when there is no other way of solving social problems. The principle of consensus
applies only to social insurance, since social protection beneficiaries are beyond the
power of social decision-making.

The principle of the so-called general responsibility for social welfare in the
community is usually combined with the principle of subsidiarity (as is the case with
the Austrian model of social protection. The model of the integrated welfare state
incorporates social benefits, social services and social restrictions, as integral parts of
the overall social rights and civil status.

The institutional welfare state mechanism automatically launches the social

protection, as soon as the need for social intervention in certain social structures is
felt. The principle of universality reflects the right to satisfy the basic needs of
citizens, to protect them from social risks and provide them with social assistance.

It is about national solidarity, which implies rights and services meeting the
minimum national standards. That, however, means that no citizen can be below the
guaranteed level of satisfaction of social needs, in accordance with standards and
supervision (as a control mechanism).

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 Health Insurance

The medical doctrine advocates a wider approach to defining a health care system
and health protection. In that sense, health care could be defined as a set of
institutions and activities that work to preserve and promote health. But this
approach to the health care system is somewhat narrower than the health protection
system, which in addition to the activities of medical health institutions, includes all
other measures aimed at preserving and improving health, that is, the health care
system includes other sectors that actively contribute to health promotion. In the
broadest sense of the word, the health care system also includes health insurance,
which incorporates the social security of citizens. In a narrower sense, the health care
system applies to measures that are aimed at combating and preventing illness,
treatment and rehabilitation. The elements of the health care system are healthcare
facilities, health personnel, health technology and healthcare procedures.

The healthcare system is divided into the activities of primary health protection and
health care systems and specialist-consulting activity, the task of which is to examine
patients in specialist clinics, including a significant part of laboratory diagnostic
activities and part of therapeutic and rehabilitation activities; the activity of
stationary protection of health services (comprehensive healthcare) that presupposes
integral treatment, i.e. functional linking of all these activities.

In that context, the primary physician is the central figure of health care that
"balances" preventive, curative and social activities. In their function, primary
doctors monitor the process of diagnosis and treatment of patients, conduct post-
hospital care and home treatment, and are involved in the process of consultation-
specialist and stationary health care. And since they are equipped with the
appropriate laboratory diagnostic service, they contribute to reducing the pressure of
demands for expensive health services of highly specialized clinics and hospitals. In
our health care system, the teams of primary doctors are located in health centres of
enterprises and local communities, in ambulances, including a complex primary
health care service, hygienic-epidemiological activity and laboratory diagnostic
service.

Conciliatory polyclinic activity is carried out in hospital polyclinics and independent

diagnostic centres, and within special health centres. The stationary health care is
carried out by general, special and clinical hospitals, and various other stationary

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health and social institutions. The basic task of this defined system of health care and
health protection is the preservation and improvement of health as a common good.
Realizing this goal reflects the process of achieving the final task - as an intermediate
goal - of every society, which is reflected in raising the level of well-being of people,
which synthesizes the increase of quality of life, raising creative possibilities and
ensuring social security.

Therefore, the goals of the health care system are (1) the preservation and
improvement of health (increasing the quality of life, increasing creative capacities
and increasing social security), (2) increasing labour productivity, (3) strengthening
the country's defence capability, and (4) increasing the contribution to economic and
social development of society; while forms of health protection are (1) primary health
care (preventive and curative), (2) polyclinic-consulting health care, and (3)
stationary health care. Thus, forms of functional organization of health protection are
(1) in primary care - health station, health centre, medical centre; (2) clinic-
consultation and stationary protection - clinics, general and special hospitals, special
institutions, medical centres; (3) other institutions - health care institutions,
emergency medical centres and pharmacies.

Health care system economics, as a rule, deals with the identification of the level and
structure of health needs, finding the most effective methods for meeting health
needs, assessing the health status of the nation, determining inputs and outputs in
health care and measuring benefits or losses in case of satisfaction or failure to satisfy
health needs.

In this context, the basic economic characteristics of health services, which are
numerous and different in relation to economic goods and services, are important.
Prof. Jurković states the following distinctive economic characteristics of health care
system and health services: (1) irregularity and unpredictability of disease outbreaks;
(2) the existence of the so-called "external” effects (3) the inability of an individual to
assess his or her health, (4) the double nature of health care expenditures,
simultaneously observed both as consumption and as investment, (5) low
substitution of inputs and relatively high engagement of both work and resources per
unit of output, (6) interdependence of core activity with the process of educating new
staff (so-called production of related products), and (7) non-competitive nature of
healthcare activity. Consequences of conceptual reforms or interventions in the field

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of social medicine and health protection have contributed to the creation of new
terms and concepts, such as: "quality of life, health development, lifestyle, behaviour
modification, holistic health, health promotion, self-care, mutual aid, with the aim of
replacing classical terms such as prevention, health protection, health education,
health information. (Ristić, Zivković, 2018)

In this context, prof. Jurkovic emphasizes the term "health promotion", which
expresses a new philosophy and a new paradigm of health policy and development. In
the current "disease model", the disease reflected the fundamental criterion of global
production of health services: disease prevention, disease detection, disease
treatment, rehabilitation of the ill, illness insurance, compensation for economic
losses due to illness. The concept of "health promotion" does not deny the importance
of the disease, but requires a radical orientation of medicine and social policy towards
health: "discovering" health and its determinants, measuring health, improving
health. In the epicentre is "positive health", i.e. "health of a man living with
diagnoses.

The concept of "health promotion" implies action. In this spectrum, a technological

scenario of health development arises, which is based on the application of modern
medical technology and computerization of medicine. Genetic research, it is believed,
will help eliminate genetic diseases and handicaps in the future; organ transplants
and "spare parts bank" will make repair of the human body possible; new drugs will
control social health and treat mental illnesses, prevent cancer, obesity, drug
addiction, dementia, viral illness

In estimating the economic value of a man and economic losses due to premature
death, there was two methods known: Weisbrod's and Hanlon's method in analysing
the economic effects of health care programs. In his analysis, Weisbrod9 claims that
"better health can be bought" and tried to quantify economic effects as a decisive
criterion for assessing social benefits of health promotion. Having applied specific
methods for quantifying economic losses due to the producer's premature death,
Weisbrod has compiled tables from which, based on the difference between the
average income and the average demand of producers in each year from 0-75 years
old, the present values of future wages can be calculated.

Weisbrod's table shows the average social investment in man in his unproductive age
and his average contribution to the increase in social wealth in the productive age.

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Wiesbrod's method allows us to estimate "the amount an average worker would earn
had he not died prematurely, or the present net value of his future wages, which is
lost due to premature death. This enables calculating losses incurred by premature
death due to any illness or other cause by simply entering the corresponding current
net worth of future earnings with the number of deaths by age and gender. The table
enables us to calculate the losses of the community if the producer dies at the very
beginning of the productive period, that is, prior to the beginning of returning to the
company the amount of funds invested by the community in the period of upbringing.
The sum of the invested assets of the company and the present value of future wages
gives a total loss amount due to premature death. "The table thus provides two ways
of calculating the loss of a community due to the premature death of a man: first,
calculating the losses signifying a pure deduction from the existing social wealth in
cases where a person died before he managed to create a surplus value by means of
his productive work by returning the debt to the community in the amount invested
in their upbringing until they reached their productive capacity; secondly, calculating
the losses of the potential earnings of untimely death victims who would have
returned the invested amount to the community and enrich the community, had they
not died prematurely.

The Hanlon method, in contrast to the Weisbrod method, provides more detailed and
complex quantification of the economic value of life, taking into account the following
factors: (1) cost of capital (amount each community invests in each child prior to
their birth), (2) the cost of introducing a man into a productive phase of life (amount
that a company invests in a human being from the time of his birth until the age of
18) and (3) the period of productivity (return of assets that a society expects from
their investments in a man, including differences.

Hanlon has now "broken" each of the above factors into the calculating elements of
the social-economic value of human life, namely, the capital value is broken into
seven elements. The first element refers to the economic cost of incapacity of a
mother to work during her pregnancy in which a part of the productive potential is
lost. According to Hanlon, the loss of the pregnant woman's productive potential (due
to pregnancy) for the given pregnancy age meant an economic investment in a child
of $ 500. The second element of capital investment in life is the assessment of the risk
of maternal death due to childbirth. Within investment in a man Hanlon also
incorporates the amount of death risk per parent denominated in dollars for each

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live-born child. The third element of capital value refers to the assessment of the risk
of maternal injury during delivery resulting in consequences incurred on her
productive capacity and the length of life. Hanlon counts this value as an initial
investment in human life.

The fourth element of the capital value of life represents direct delivery costs (cost of
prenatal and postnatal health care, cost of hospitalization and childbirth, cost of
maternity and new-born equipment, and loss of "maternal production" during
maternity leave from work). The fifth element of initial investment in human life
refers to the estimation of the risk of stillbirth and neonatal death of the child
(mortality up to a month's life), although it is very difficult to find a monetary
determinant of the economic value of risk of stillbirth and neonatal death. The sixth
element of capital value is the economic value of the risk of childhood illness and
injury during delivery and immediately after delivery.

Finally, the seventh element of the initial investment in life refers to the interest
"which could be generated on the amount initially invested in a man if this amount,
instead of being invested in a man, was placed on the savings."13 Taking into account
all of these elements of capital value, Hanlon calculated that at the time of a child’s
birth in the USA about $ 1070 is already invested. Another factor of Hanlon's method
is the price of introducing a man into a productive phase of life. In this second phase
of life, parents and society invest in physical maturation and vocational training of
the child. The "cost" of investing in a person until the age of 18, when the productive
phase of human life actually starts, takes the following elements into calculation: (1)
the cost of accommodation, clothing and footwear; (2) the value of the time that the
mother dedicated to taking care of and upbringing of the child, (3) the costs of
education, (4) health care costs, (5) the costs of recreation and transportation, (6)
other costs, (7) risk assessment in the case of death before turning 18 (years old) (8)
interest on investments in the so-called formative period.

Finally, the third factor in Hanlon's calculation of the economic value of life is the
period of productivity, which begins with the age of 18, i.e. coming of age. "Only then
does a man come into a position to produce means for his own sustenance, but also a
surplus sufficient to return to his parents and community what they have invested in
him before, to take care of himself in the unproductive phase during his old age, and
to contribute his share to the general social progress.

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National Financial Security: Discussion about financial crises,
and euro crises. What does it mean for Serbia

The economic and financial crisis was initially launched by "bursting of the mortgage
bubble" in the US that culminated in the collapse of investment bank Lehman
Brothers in September 2008, and is generally a consequence of a combination of
unsustainable global macroeconomic imbalances and weaknesses in the structure
and functioning of the financial system in the context of too "loose" monetary policy,
excessive liquidity and cheap money, rising prices of goods and the growth of
financial innovation and globalization, with a weak regulatory framework and weak,
almost non-existent control of the financial sector, especially in the capital market.

New financial products that are derived from existing are designed to adapt to the
circumstances of time and the markets where they are traded Strategies that
primarily use these financial products should represent an efficient mechanism for
the distribution of risk, in an effort to circumvent the rules and find "holes" in the
law. In the years preceding the crisis, our traditional bankers, who based their
relationship with customers on the trust, have drastically changed, aggressively
expanding its activities by changing other activities, including the activities
historically associated with investment banking.

Historically, dominant financial theory is developed from the theory of efficient

markets. The conclusion of this theory is that financial markets are efficient
mechanism for determining prices of financial assets, but with the assumption of a
stable and developed institutional and legal framework that will allow access to all
relevant information for the proper valuation of assets.(Ristić, et al, 2017a, p. 79)

It is common that the first line of defence against a recession in the USA and the EU
consists of the central banks, which will immediately reduce interest rates in the case
of economic crisis. Due to the specific legislation in the EU and the Eurozone-
member countries at the beginning of the financial crisis, the ECB has been quite
limited in speed of response to new market conditions and only after a series of legal
changes it was able to increase the money supply and lower interest rates, and to
intervene in the money market and government bond markets in the southern
countries of the EU.

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In May 2010, the ECB uses the euro-dollar exchange at the time of occurrence of the
debt crisis in Greece. For one week, the ECB borrowed about $ 9.2 billion. All this
indicates that a new financial architecture significantly increases the overall risk in
the global financial system.

Modern global financial crisis, as commonly addressed and manifested, is

characterized by such a depth and the complexity of the global consequences, not
recorded in economic history. Often the question arises: whether the crisis was made
deliberately (orchestrated from the United States of America), or was it a result of
tectonic disturbances in the functioning of the neoliberal system (credit and market).
It is undisputed that until now the neo-liberal and monetarist model reached its
complete collapse, which essentially shook all the pillars of neoliberal capitalism. In
this context, the fears expressed by Stiglitz and Krugman took place exactly at the
moment when there were changes in focus, shift from the employment to the
problem of relationship between deficit and debt. Fear of the budget deficit has
resulted in the so-called fiscal rigour and a sharp reduction in public spending. Thus,
political discourse has also shifted from employment issues to the budget deficit,
although it is not a tragedy that debt continues to grow until it is growing faster than
overall economic growth and leads to a rise in inflation. The global financial crisis of
2007-2009 has shaken our confidence in economic theory. After more than twenty
years of intensive academic research on the banking economy, it was realized that we
still do not know much. For example, economists still often rely on efficient market
hypothesis and on Modigliani and Miller's theorem, which we know is based on
strong and unrealistic assumptions.

Imbalance that emerged in the Eurozone before the onset of the crisis - the
emergence in some Member States of large government debts and deficits,
macroeconomic imbalances, coupled with increased difference in competitiveness -
made it difficult for some EU countries to effectively deal with the financial crisis and
the resulting debt crisis. Many European banks faced serious difficulties in this
situation. A vicious circle was created in which banks stopped lending to each other,
leading to a lack of credit and which in turn led to a crisis of confidence and a
decrease in lending between banks. Large and persistent economic imbalances
accumulated over time are also the cause of the economic crisis. Not only have they
caused great difficulty for individual EU countries, but also affected the economic
stability in the Eurozone and the EU as a whole.

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Indicators showing the degree of financial integration suggest that in the Eurozone
the money market is the most integrated segment, while the banking services market
is the least integrated segment.

If we take the truth that the EU is a political project, we can conclude that the EU
from its inception until today experiences a very complex crisis. The fact is that this is
a crisis of the public sector, public finances and debt, but also of the effects thus
induced in the sphere of the real economy and the social sector. EU is not
comprehensive and homogeneous system in the economic sense of the word. All
member states are basically completely different in their level of development and
macroeconomic indicators. Then, monetary policy guided by a single currency "euro"
and the opposite of it, the decentralized fiscal policy and complete liberalization of
foreign trade policy led to major differences, especially in the rate of the tax burden,
the level of public debt and budget deficits of the Member States. Consequently, all
Member States have already exceeded the requirements of the Maastricht Treaty
which is the basis for the accession and "sustainability" of the EU. (Ristić, et al,
2017b, p. 84)

A short reminder, the Treaty of Maastricht indicates that members of the EU cannot
have a public debt above 60% of GDP, the budget deficit does not exceed 3% of GDP,
a rate of inflation of no more than 1.5% compared to the three countries with the
lowest inflation and interest rate of not more than 2% in relation to these three
countries with the lowest long-term interest rates. It must be noted that there is
evidence of arbitrariness in the choice of these criteria. Economy sank into recession
even in 2009, with obvious negative growth, together with austerity policy that will
lead to a further increase in public debt and budget deficit, high social security and
transfers payments, while in contrast, expansionary monetary policy implies virtual
money, with extreme caution of banks and growth of the financial and credit risk,
system risk, asymmetric information and moral hazard, is a logical transition to
Euro-scepticism and pessimism. Low inflation rate at the moment, with a total drop
of demand and high unemployment are a logical result, but there is no guarantee that
it will be followed by the next phase of the crisis which can be characterized by
rapidly growing inflation, import restrictions, growth rates and an even greater
increase in unemployment.

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 Euro Paradox

The euro was introduced in 2002, but the cracks in the arrangement of the single
currency started in 1999 and became apparent by the global financial crisis in 2008.
Economists have predicted that the test of the euro shall appear when the area is
confronted with the shock, but Europe had the misfortune to meet with the shock
that comes across the Atlantic and so soon after its creation. By 2010, the euro crisis
was in full bloom, with interest rates of government debt in the "periphery" – Greece,
Spain, Ireland and Portugal – raised to unheard levels. But a closer look at the
Eurozone shows the imbalance in the construction from the very beginning – with the
money rushing into the peripheral countries in the futile belief that the elimination of
exchange rate risk would somehow eliminate all risks. (Stiglitz, official site, taken and
translated, 2017).

It shows one of the key flaws in the construction of the Eurozone: it is based on the
belief that only the government could not have screwed up – if the deficit is hold
below 3% of GDP, debt below 60% of GDP, and inflation below 2% per year – the
growth would be ensured on market. These numbers and ideas had no basis either in
theory or in practice. Ireland and Spain, two of the worst affected countries actually
had a surplus before the crisis. The crisis has caused their deficits and debts, and not
vice versa, Stiglitz suggests.

The hope was that the fiscal and monetary discipline would result in convergence,
allowing single-currency system to work even better. Instead, there was a
disagreement, where the rich countries became richer and the poor even poorer, and
within the country, the rich got richer and the poor poorer. Yet, it was the very
structure of the Eurozone which predictably led to this. The single market, for
example, allowed the money to leave the banks of weaker countries, thus forcing
these banks to contract credit, weakening the weak even more.

In Stiglitz's elaborations can be found his claim that economists estimate the chances
of a currency arrangements from some quarters of a century, emphasizing the
importance of adequate mobility of the workforce and adequately large common
budget to mitigate shocks, as well as sufficient economic similarity between countries.
However, the euro has taken two key instruments for adjustment - exchange rate and
interest rates - and put nothing in their place. There was no common deposit

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insurance, without the usual ways of solving problems in the banking sector and
without common unemployment insurance scheme.

Equally important, these early discussions have ignored the importance of

intellectual convergence: there is a huge gap in perceptions of what makes politics
forever, especially between Germany and most of the Europe. These differences are
fixed. They were apparent to me when I chaired the Committee for Economic Policy
of the OECD in the mid-1990s. If nothing else, it was a divergence here too.

So policy of austerity, for which Germany meant, would make a quick return to
growth, failed in almost every country in which it was attempted. The consequences
were predictable, and are provided by the most serious economists around the world.
Also, many of the specific structural reforms have actually weakened the countries in
which they were performed, reducing growth and increasing their trade deficits, says
Stiglitz.

The huge democratic deficit is opened since then: people in Greece, Spain and
Portugal have all voted in large numbers for parties opposed to austerity measures.
However, they feel they have no choice but to accept the German demands. Citizens
have never been told that when they adopted the euro they will give up its economic
sovereignty.

The ambition of the euro has been the introduction of greater prosperity in Europe.
In turn, this would promote economic and political integration. The euro was a
political project, but politics were not strong enough to create institutional
mechanisms that will ensure success. While the euro leads to stagnation and even
worse, it is not surprising that it has led to an increase in the division, instead of the
more solidarity. Today, it seems that the euro, which was supposed to be a mean for
achieving the goal, became a purpose to itself the search for which presents perhaps
the most important threat to the European project.

In response to repeated crisis, Europe has made reforms, but they were too little and
too late. Some might actually be counterproductive: to have a system of joint
supervision, without adequate sensitivity to local macro conditions and without a
common deposit insurance can actually exacerbate the divergence. In the meantime,
the region has an accident to be repeatedly bombed by crises, especially by the
refugee crisis. Along with the high unemployment rate in many countries, partly
because of the euro, those who seek a new future and want to move to where jobs

189
exist, a wave of migrants in several countries came as the result. And of course,
countries where unemployment is high resist receiving new workers for scarce jobs.
(Stiglitz, 2017, www.josephstiglitz.com).

Europe is engaged in risk balancing, yet there is a high probability that in the end it
will go over the edge. Markets feel that the system is not sustainable in the long run -
speculators attack when they feel the smell of blood. The claim presented by
European Central Bank President Mario Draghi that he would do "whatever it takes"
has done wonders for a longer time than anyone expected. But it is a scam of self-
confidence: it works only because market participants believe that it will succeed.

These market forces are intertwined with politics. Voters who are supposed to be
unhappy, simply because they have done so little for so long, have expressed their
anger by voting against the centrist parties of left and right. Dissidents are on the rise.

Perhaps European leaders, sensing the urgency of the moment will finally carry out
reforms in the structure of the Eurozone which will facilitate the work of the
arrangement of the single currency, in order to achieve common prosperity.

So as to have the single currency system functioning, there has to be more Europe,
more solidarity; more willingness of stronger countries to help the weaker; more
readiness for creating institutions such as common deposit insurance and the usual
pattern of unemployment, instead of the current half-finished house, which is simply
not sustainable. But the failures of the Eurozone make such reforms more difficult.
What is more likely is that the political forces went into another direction, and if that
is the case, it may be only a matter of time before Europe views the euro as an
interesting, well-intentioned experiment that has failed, at great cost to the citizens of
Europe and their democracies. (Stiglitz, 2017).

The transition to a situation where more decisions on financial, fiscal and economic
policies will be made at the EU level also require stronger mechanisms to legitimize
decisions made and to ensure accountability and political participation. Solving the
devastating debt crisis by the strict austerity measures and the implementation of the
budget deficit below 3% of GDP leads to deepening of the crisis. The constant growth
of the debt and the budget deficit, the decline in standards, social instability and
unrest in a number of countries set conditions for deeper reforms in almost all
Member States. On the basis of interwoven contradictions in economic and financial
functioning of the EU, design flaws and inconsistencies in the scope of integration,

190
nihilism in the sphere of relations between monetary and fiscal finances clearly
indicate that the Eurozone in the coming years has to integrate even more and this
means that it is necessary that fiscal union ensures sound public finances across
Europe and that banking union must ensure a comprehensive supervision of financial
markets, and all this with the explicit aim of achieving financial stability, increase of
economic growth and competitiveness, which basically incorporates the major
challenges of the financial and banking management in the EU.

Conclusion

Social services (as mean social security) can only be engaged if the aforementioned
mechanisms are not successful or do not target some individuals. The functioning of
social services is based on the principle of selectivity, and is deemed necessary in
cases of absolute impotence of individuals to alleviate their gravest trouble. Social
services however do not assume the responsibility of an individual. Therefore, by
their engagement they should help an individual or family to accept and act in
accordance with general social principles and rules. However, unlike the principle of
subsidiarity, the principles of selectivity and mercy derive from the discretionary
right of social services, that is, from the idea of self-selection. Social programs can not
undermine natural inequalities among people, and individual responsibility for their
own social position cannot be substituted with collective responsibility.

That is key point for future economic policy of Serbia and in other case which we
analyse in our paper is something about EU. First and enough is that the fact that the
EU is just a "group of states" within which fiscal integration is very small and labour
mobility is too low. The European Central Bank is led by the policy of "easy money"
and all this leads to the creation, promotion and deepening of the crisis. Countries
with larger budget deficits are being pushed up in austerity while indebted countries
in the euro-zone pay high interest rates on government debt. The European Union is
actually an unfinished project

191
 References

Nobis, N. (2017). Real Life: This is not a Game: Personal Finance for Young Adults.
https://www.academia.edu/34091487/Real_Life_This_is_not_a_Game_Person
al_Finance_for_Young_Adults
Ristić, K., Miljković, Lj. & Klincov, T. (2017). Finansijski i bankarski menadžment EU.
časopis Poslovne studije, Univerzitet za poslovne studije, Banja Luka.
Ristić, K. & Živković, A. (2019). Understanding the global welfare state models in
financial theory – challenges for developing countries. In Conterporary trends in
insurance at the biginning of the fourth industrial revolution (pp. 95-113).
Faculty of economics, University of Belgrade.
Ristic, Ž. & Ristic, K. (2013). Economy of social, health and pension insurance.
Ethnostyle.
Saltman, R. B., Busse, R. & Figueras, J. (Eds.) (2004). Social health insurance
systems in western Europe. [part of European Observatory on Health Systems
and Policies Series]. Open University Press.
https://www.euro.who.int/__data/assets/pdf_file/0010/98443/E84968.pdf
Stiglitz, J. (2017) www.josephstiglitz.com
Vukovic, D. (2017). Redesign of neoliberalism. Mediteran Publishing.

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 III – SUSTAINABLE DEVELOPMENT,
RESEARCHES BY AREAS AND BRANCHES
CIRCULAR ECONOMY FROM THE SOCIO-ECONOMIC
AND ENVIRONMENTAL ASPECT IN THE FOURTH
INDUSTRIAL REVOLUTION

Prof. Pero PETROVIĆ , Ph.D.1

Dragan Ž IVKOVIĆ , Ph.D.2

Abstract

Fourth industrial revolution which is changing from the root the social, economic and
cultural context in which we live. Bearing in mind the great potentials of the circular
economy, which should be used in Serbia, it is necessary to change attitudes towards
the entrepreneurship and bring it into direct support of the economic growth and
development of the economy. It is necessary to provide strategic planning for
identifying the circular economy at the local and national level. The industrial
revolution 4.0., which judging by its capabilities and effects on humanity, has more
profound effect compared to there previous revolution altogether. This revolution
inevitably brings about changes that effect all spheres of economic life. This
revolution marks the beginning of a new era in human history, encompassing a
number of significant shifts in the way values are created, exchanged and distributed
in the economic, political and social systems. Technological change is taking place
exponentially, disrupting almost all sectors in the countries of the Western Balkans
and the Middle Danube. Entrepreneurship in the field of information technology is
the basis on which the information society and digital economy is based, and it
results in an integral circular economy, and together they have an impact on the
accelerated economic development. Entrepreneurs in the circular economy bring in
light and fast innovations, new work processes, new communication models. In
return, entrepreneurs influence modern technology to see its "green" potential to
conserve resources, to recycle or to maximize their use in order to create new, added

1Institute of International politics and economy, Belgrade. Email: pbp954@gmail.com

2Assistant Professor at Alfa, BK University, Belgrade . Email: dragan@sbb.rs

194
value and stimulate economic growth and growth, new employment and, in general,
lifting standard of the population. In Serbia, in the current situation, the principles of
circular economy are not sufficiently applied, and entrepreneurs should decisively
influence social awareness, especially political structures that make strategic
decisions in relation to priority sectors of development. At the same time, the
awareness of managerial entrepreneurs should be raised who at the company level
should apply the rules of the green and circular economy.

Key words: Circular economy, entrepreneurship, innovation, digital economy,

sustainable development, interaction;

Introduction

It is indisputable that the fourth industrial revolution brings a number of advantages,

but it also brings with it a number of dangers from the socio-economic and ecological
aspect. The advantages are: increased economy, productivity and efficiency, reduced
transport, trade and communication costs, significantly higher functionality and
quality of products and services, entry into new markets and reduction of negative
consequences of climate change and all other phenomena and processes that threaten
sustainable economic development. On the other hand, the biggest threat to the
digitalization of business is growing inequality, as a consequence of technological
progress but also the disruption of the labour market (automation), with a drastic
reduction in office work. This revolution is fundamentally different from the previous
three: in speed, comprehensiveness and innovation capacity. At the level of the
national economy, the changes are numerous and are reflected in various areas:
production and business models, labour force and its qualifications, as well as more
efficient functioning of the state and economic activities. Certainly the Industrial
Revolution 4.0. marks the beginning of a new period in the development of
civilization. The new paradigm in global economic development is based on
information and telecommunication technologies, which represent a necessary
technological platform for the organization of socio-economic development from the
ecological aspect. The main goal of this paper is to emphasize those processes and
elements that can be applied in the circular economy in specific areas such as the
countries of the Western Balkans or the Middle Danube. In this domain, the impact
of the fourth industrial revolution depends on how well the positive sides in the

195
circular economy are anticipated and exploited. However, the lack of understanding
of the structural basis and legality of the functioning of the social and economic
system can be a consequence of ignorance and numerous prejudices and dogmas
about how the circular system works ( “Waste economy”). This limits the possibilities
of individuals, business entities and the state, and can also apply to the entire region
of the Western Balkans and the countries of the Central Danube Region.

In modern business conditions characterized by extreme turbulence, liberalization of

the business environment, as well as extreme dynamism of the market arena, a large
number of economic entities, in the struggle for survival or in an effort to achieve a
better, perhaps leading position in the market, resort to various "straws" of
salvation. However, the circular economy is still an underutilized area that could, in
conjunction with innovative entrepreneurship, lead to higher employment. Therefore,
successful implementation of reforms presupposes the ability to create a vision,
mission, goals, strategies and policies, as well as their implementation in order to
build a functional system and sustainable economic development. At the same time,
it implies a pre-planned and designed process of institutional redesign of the
economic system in a way that enables its adaptation to the internal and external
environment, in order to achieve greater efficiency, competitiveness, flexibility and
sustainability of the system, and thus faster economic development. . The field of
innovation is multidisciplinary and various potential possibilities of application in
society and economy are considered, with special emphasis on sustainable growth
and social well-being. Therefore, in the circular economy, innovations in recycling
and resource recovery can come to the fore with entrepreneurial risk, making the
expected profit. and thus more accelerated economic development with all the
benefits it brings. The field of innovation is multidisciplinary and various potential
possibilities of application in society and economy are considered, with special
emphasis on sustainable growth and social well-being. Therefore, in the circular
economy, innovations in recycling and resource recovery can come to the fore with
entrepreneurial risk, making the expected profit. and thus more accelerated economic
development with all the benefits it brings. The field of innovation is
multidisciplinary and various potential possibilities of application in society and
economy are considered, with special emphasis on sustainable growth and social
well-being. Therefore, in the circular economy, innovations in recycling and resource
recovery can come to the fore with entrepreneurial risk, making the expected profit.

196
 Basic trends from the socio-economic and environmental
aspect

In the sustainable development of the economy and society as a whole, generated by

the new industrial revolution in the world and thus in the Central Danube and
Western Balkans, the main feature is the fusion of technologies that blur the
boundaries between physical, digital and biological spheres. This revolution is
characterized by comprehensive mobile internet, widespread, powerful and efficient
sensors, artificial intelligence and other technologies. There are 4 essential trends
that arise from the process of this revolution, which are expected to significantly
change the way it works (Schwab, K., 2016, p.14):

(1) automation of the business process with a dramatic increase in the

amount of information;

(2) robotics, and its increasing industrial application (such as additive

production -3D printing, autonomous vehicles, drones, agricultural
machinery) that will radically change production processes and thus
employment;

(3) greater availability of data and their users leads to an increase in the
number of open source protocols, which increases the possibility of data
exchange. Different organizations, from public to private, connect into
ecosystems to create a framework for data exchange for different
purposes within a single regulatory framework.

(4) the application of spiral neutron networks and other cognitive

technologies of intensive learning (deep learning) will be extended to
numerous other areas and requires the processing of an extremely large
number of complex data;

Lack of understanding of the application and effects of the fourth industrial

revolution, and especially the social and economic relationship on which civilization
rests today, naturally does not lead to effective adjustment of target performance, but
unfortunately produces everything that can be avoided: recession, unemployment,
lack of perspective, existential risk. ethical and emotional degradation. Basic
knowledge about the interdependence of the IV Industrial Revolution and the circular

197
economy, that is, about the changed circumstances, is important for setting a new
vision of structuring the social, political and economic system. On the other hand, the
application of measures and effects of the circular economy is difficult due to the
absence of applied and fundamental scientific research projects and thus the effect on
increasing the gross domestic product.

Key digitization challenges for the circular economy

Technological progress provides many opportunities for success, but many risky
situations are possible, and thus the emergence of danger for the successful
establishment of the socio-economic system. There are four key challenges: raising
the experience to a higher level, improving business operations, securing new
products and entering new market participants (Eling, M., Lehman, M, 2018,
p.21). The fourth industrial revolution will change not only what we do, but also what
we are. It will affect our identity and all related issues: our sense of privacy, our
notions of ownership, our spending patterns, time devoted to work and leisure, and
how we develop our careers, cultivate our skills, meet people, and nurture
relationships. In the circular economy, six project principles can be identified on
which the scenarios for the implementation of Industry 4.0 are based (Schwab, K.,
2016, p.15).

(1) Interoperability - the ability to interconnect and communicate CPS, people and
smart factories (successfully connect CPS of different manufacturers;

(2) Virtualization - allows CPS to monitor physical systems by connecting data

obtained through sensors with virtual and simulation production models (a
virtual copy of the physical world is created which shows the state of the CPS
within the smart factory);

(3) Decentralization - with increased product individualization requirements,

central system management becomes increasingly difficult (embedded
computers allow the CPS to make production decisions on its own - no need
for central planning and control);

(4) Ability to work in real time - it is necessary to collect and process data
immediately, constantly monitor and analyse the condition of the plant;

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 (5) Service orientation - internet service includes all participants within the
production plant and most outside it (the service architecture of the company
is comprehensive through encapsulated web services);

(6) Modularity - thanks to standardized hardware and software, it is possible to

flexibly adapt smart factories to changing requirements, by replacing or
expanding individual operating modules;

Companies in the circular economy, i.e. the transition to the digital world, requires a
consistent adjustment of the entire organization. The vision of the company's value
creation model in the future must be clearly formulated by top management and
understood and accepted by employees (World Economic Forum, June, 2018). The
dissemination of that vision within the company cannot be successful without the
integration of different sectors, which breaks the traditional relations in the
organization. Digital transformation is not feasible without a radical cultural
transformation, both at the level of individual companies and at the level of the
sector.

The impact f the fourth industrial revolution on socio-

economic relations

From the socio-economic and ecological aspect, the impact of the fourth industrial
revolution is multiple. The complexity of technology and its nature makes many
socio-economic and environ+mental aspects unknown, and threatening to
many. However, it should be borne in mind that all industrial revolutions were
ultimately driven by individual and collective choice of people. Therefore, not only
the choices of researchers, inventors and designers who develop basic technologies
are very important, but even more important are the investors, consumers, regulators
and citizens who adopt and use these technologies practically every day. The fourth
industrial revolution builds on the digital age with new and highly anticipated waves
of innovation that connect physically, digitally and biologically to create the most
advanced technologies. Namely, these technology platforms, which, for
example, makes the smart phone easy to use, gathers people, property and data, and
thus creates completely new ways of using goods and using services in the process of
use. They make it possible to find many new services on offer, but to make existing

199
ones as easy as possible. At the same time, governments in the Western Balkans and
the Middle Danube region will gain new technological powers to increase their
control over the population, based on pervasive means of oversight and digital
infrastructure control capabilities. They enable many new services to be found in
nature, but also to make existing ones as easy as possible. It is predicted that the IV
Industrial Revolution will change not only the processes of work but also the relations
between people from the economic and wider, from the general social aspect. This
means that it will affect a person's identity and issues related to him: sense of privacy,
notions of ownership, consumption patterns, time at work and free time, the way of
career development, attitude towards people. The population should be more unique
in terms of technological solutions. Labour prices are projected to continue to decline
and quality to rise. This will enable products and services to be raised to a higher
level, increasing the quality of life, while constantly reducing costs. However, negative
impacts are also possible: reduction of the number of employees, termination, but
also creation of new jobs. There will also be three major areas of concern: inequality,
security and identity. New techniques and technologies require higher levels of
education and specialist studies. On the other hand, those that are outdated and
involve physical or routine tasks, leading to an unequal position of the elderly
population with lower education, because it is more difficult to get involved in the
work process In addition to creating inequality between national economies. Namely,
less developed economies, which are just getting involved in the latest industrial
revolution, are starting to lag even further behind developed economies. In addition,
it should be borne in mind that digital media is already becoming the primary driver
of human individual and collective shaping, society and local communities,
connecting individuals with each other and with specific groups, in new ways,
achieving friendships and creating new interest groups (World Economic Forum,
June, 2018).. Moreover, such connections transcend many traditional boundaries of
interaction. However, all of these technologies were created by humans to achieve
certain goals, usually to make money, become famous, or simply to overcome
challenges (ICT Works, 23.03. 2019). Technologies do not change the world, but the
vision, ingenuity and predation of those who design, build and sell them. People still
have choices. However, there is no critical mass of reference staff and usable
knowledge, i.e. due to the lack of these staff and knowledge there is not enough
quality scientific research.

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 Innovations in the circular economy

The most important factor of success in the market, especially in times of crisis, for a
modern company, is the level of achieved competitive power in the market. The basic
meaning of competitiveness implies the ability of a certain economic entity or entity
to compete and compare with others. On the other hand, it should be borne in mind
that modern circular economy is a set of state-of-the-art technologies that aim to
conduct innovative economic operations and create added value from existing
residues of primary production and products, use of renewable energy sources, highly
efficient technological processes. implies the circulation of the material and its reuse,
which at the same time uses drastically less energy and water - in some cases over
90%). It is realistic to predict that in the near future there will be changes in business
conditions and market behaviour due to (Petrović, P., 2019, p.12):

• rising prices of non-renewable resources used in production,

• rising energy costs,

• rising population needs and migration to cities,

• especially the deterioration of the climate in the Western Balkans, which is a

medium-risk area

Therefore, the Republic of Serbia must be ready and have an answer for the economic
and social future. Innovating products, which are designed so that they can be easily
reused, disassembled, repaired or recycled, is mainly the merit of the
entrepreneur. In doing so, they use renewable energy sources in production. With a
more extensive and efficient application of the circular economy model, Serbia would
get a chance for faster development, and its citizens would get environmental
security, "green" jobs, new water and air quality, healthy food and a new quality of life
( Đorđević, B., Milanović, S., 2015, p.32).

The social capital of a nation is also an investment without which there is no progress
and prosperity. The circular economy requires a re-examination of the relationship to
natural resources. The basis of the circular economy is recycling, which is the process
of separating materials from waste and reusing them for the same or similar
purposes. The complete process includes: collection, separation, processing and

201
production of new products from used items and materials. It is important to sort
waste by type, as many wastes can be reused if collected separately. Everything that
can be reused, not discarded, is recycling. Business sophistication, which is still
unfavourable for Serbia, along with innovation is a key success factor in innovation-
driven economies. All companies, in Serbia, in relation to the application of
innovations can be classified into three groups, according to the application of
innovations(Mitrović, S., Radosavljević, I., Veselinov, M., 2017, p.11):

a) those who develop product and / or process innovations (without innovations

in organization and / or marketing);

b) those who develop innovations in organization and / or marketing, without

innovations in products and / or services;

c) those that develop all types of innovations (products, processes, organization

and marketing);

Creating and implementing innovation represents creating an advantage over the

competition, securing employment and building a progressive future. In the process
of innovation, new technical, economic and environmental requirements for investors
in equipment are highlighted, such as minimal production costs or the smallest
possible impact on the natural environment. The ability of the economy to create and
introduce innovations distinguishes strong and efficient economies from the weaker
ones, highlighting them as the most important but not the only factor. Circular
economy is a process of transition of the economy to a more efficient level, and the
price of creating these cyclical structures is "breaking" those existing sluggish and
inefficient participants in the economic life of the country. Entrepreneurs have a
vision of using new technologies, but if the recipe for economic growth is so simple
and obvious, the question arises when and how does the problem arise in its
application? The problem lies in decision-makers, in power and political factors. In
the process of European integration, we should keep in mind the agreement between
the European Parliament and EU members that by 2030, 32 percent of energy is
produced from renewable sources, obliges Serbia to increase the share of green
energy in the overall energy mix. Apart from wind farms, natural gas, biomass, which
is not much represented at the moment, has the greatest potential in Serbia, a share
of as much as 61 percent in renewable energy sources. Resources are estimated at as
much as 3,405 million tons of oil equivalent, agricultural biomass has about 1.67

202
million tons of oil equivalents, but the degree of its utilization is not more than two
percent (Petrović, P., Pavlović, Đ., 2018). It is this utilization that should be increased
in the recycling industry with the cooperation of entrepreneurs who should have a
leading role when it comes to the recycling economy.

Competitive positions of Serbia and circular economy

Serbia, from the aspect of real potentials, both as a system and as a state, can be more
prosperous, more powerful and more influential in the environment. However, this
implies that Serbia is functionally organized, united, united and offensive in
protecting its national interests, with the adopted concept, clear mission, vision,
goals, strategy and policy of functioning and development (sustainable) and to
manage the resources and opportunities disposes. Precisely one of such possibilities
is provided by the circular economy, which in interdependence with entrepreneurship
can raise the level of employment in the economy, and thus accelerate its growth and
development, as well as raise the living standard of the population to a higher
level. Modern society is characterized by accelerated changes because industrial
technology has been replaced by information technologies. New trends have also had
a major impact on human resource management in the circular economy. These
trends that also apply to the circular economy are: growing competition, management
of international affairs, technological innovation, management in accordance with
applicable regulations, trade union action, ethics and interpersonal relations. The
problem of employment, employment and unemployment is one of the key problems
in the development of every society and state. Among them, the problem of young
people stands out as a "burning issue", both in the countries in the region and in the
European Union, as well as in Serbia. The entrepreneurial economy and its principles
incorporated into the part that makes up the circular economy, to a large extent, can
alleviate this problem, reduce unemployment. Modern economic theory recognizes
the problem of market failure of various goods and services due to incomplete
information and considers it desirable for state intervention that would reveal the
missing information in its original form, especially in the treatment of the circular
economy. From the aspect of economic and social development, it should be borne in
mind that the circular economy, among other things, can raise the national
competitive position. Almost all materials can be recycled: paper, cardboard, plastic,

203
glass, aluminium, copper, iron, ceramics, electronic and electrical waste. Serbia is
successfully implementing the process of managing packaging waste and special
waste streams, recycling the total amount of generated tires and batteries, and in
packaging waste the anticipated national goals have been achieved(Stanković, Lj.,
Đukić, S., Popović, A., 2014., p.268).

Serbia has been investing resources in establishing a circular market since 2017, in
the form of increasing the institutional capacity to support such development, raising
the social capacity to accept it, and changing the economic system towards a cleaner,
circular economy. It is predicted that by 2035, this way of doing business will become
the dominant paradigm of business in Serbia, with which it is approaching all world
trends (Petrović, P., Jović, Ž., 2014, p.17). The partial reform of education is
influencing the creation of a new profile of workers who will be more educated in the
field of CE, while the market becomes professionally independent. By investing in
renewable energy sources, the state and the market become more independent from
the import of fossil fuels. The creation of a modern market for services (rather than
products) is becoming evident. Such a market is growing rapidly globally and it is
predicted that the transition to such a market will provide the creation of products for
services, which have 2 to 10 times higher market value. Thus, Serbia is moving away
from the process industry and by applying this model, it is moving towards a service
type of business. In a circular economy, product-related innovations can be the
following (Stanković, Lj., Đukić, S., Popović, A., 2014, p.17]:

• Designing products easy to maintain, repair, improve, process or recycle (eco-

friendly design);

• Developing the necessary services for consumers in this regard (services -

maintenance / repair services, etc.);

• Incentives and consumer support in waste reduction and high quality

separation;

• Construction of waste

separation and collection systems that minimize recycling and reuse costs;

• Facilitating the creation of industrial clusters that prevent by-products from

becoming waste (industrial symbiosis);

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 • Encouraging greater and better choice for consumers by reducing, lending or
sharing services instead of buying products, while protecting consumer
interests (in terms of costs, protection, information, contract terms, insurance
aspects, etc.);

Modern business is increasingly based on high technology, especially information

technology. Therefore, the modern entrepreneur must know the main trends (mega-
trends) of production and management technologies and respect them as key factors
in achieving a competitive advantage. Modern business is increasingly based on
legally regulated and increasingly internationally standardized and harmonized
procedures. Therefore, a modern entrepreneur, a representative of the circular
economy, must know the logic of complexity in the field of legislation and respect the
legality of competent domestic and international institutions and accepted
conventions, treaties, agreements, etc. The modern entrepreneur is increasingly
focused on the global business scene. Therefore, he must know international
relations, ties between countries and peoples,, different cultures and economies and
must be able to develop the goals and strategies of its company in the broader context
of international business and increasingly fierce competition. Unsurpassed talent for
innovation, and especially for imitation, large domestic markets and aggressive
export orientation, are reason enough to reconsider the current trajectories of
entrepreneurship based on the Western paradigm of selfish individualism and rapid
enrichment. The Eastern concept of rationality, efficiency and cooperation shows
superiority over the models of Western competitiveness, which is all in the function
of maximizing profit as the most important, and often the only measure of
success. From the aspect of the circular economy, innovation, change and creative
destruction are in constant conflict, as well as resistance to any kind of
change. Entrepreneurship, innovation and permanent acquisition of knowledge,
personal and collective, is the path of development of the economy and society.

Sustainable economic growth and the impact of the circular

economy

In the process of European integration of Serbia, one should keep in mind a very
important area of environmental improvement, i.e. ecology. In that respect, the
comparison with the countries of the Western Balkans and the Middle Danube region

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is an indispensable comparison. Then, from the aspect of economic growth,
investments in ecology affect it by raising the growth rate. However, Serbia has been
among the most polluted countries for many years, and this fact is pointed out not
only by environmentalists but also by economists. It is considered that the level of
investments in this area is very low. Economic growth is positively affected by
investments in water supply, sewerage, waste recycling and other forms of
environmental protection. However, for years, insufficient funds have been allocated
in the budget and outside it for this area, and it is proposed that they be multiplied
(the Fiscal Council proposed to allocate about 130 million euros from the budget for
this area, which is about 0.3% GDP). In the second decade of the twenty-first century,
a rare opportunity to increase investments and strengthen the state's capacity in the
field of environmental protection was missed, and it was possible to start important
and rather expensive facilities and processes faster and more efficiently. Shifting the
inevitable investments in the environment, further into the future, carries the risk
that they will have to take place in a much more unfavourable fiscal environment (not
just the freezing of wages and pensions or tax increases).

Review No.1 Relative lag in environmental protection

Position Serbia Average of CEE countries

1. City water supply with correct drinking water 56% 99%

2. Population with connection to the public sewer 55% 84%

3. Municipal wastewater treatment <10% 70%

4. Organized collection of municipal waste 80% 95%

5. Total waste processed <5% 50%

Source: Politika, Belgrade, 15.11.2019, page 10.

Numerous economists believe that investments in ecology would not only increase
economic growth, but also contribute to human health and increase living
standards. However, since investments in such facilities are large (e.g. construction of
water supply, treatment plants, etc.) for which the local government does not have
sufficient funds, it is necessary to allocate increased amounts from the budget (e.g. to
provide earmarked transfers, and joint investments). Improving the environment
would reduce budget allocations for health care and improve the quality of life of the
population. There is space for private and state investments: in waste processing,

206
water, air purification, etc. There are opportunities for new industry, for employment,
especially of socially vulnerable categories.

Investments in ecology and the circular economy are one of the conditions for joining
the EU (for example, without a certificate for wastewater treatment, which is not
treated in Belgrade or Novi Sad, food exports are endangered). Now in Serbia, there
are almost no landfills that meet sanitary standards, almost half of public water
supply systems do not have proper drinking water, and approximately 2.5 million
citizens live in areas with excessively polluted air dangerous to health. Therefore,
investments in environmental protection and investments in the development of the
circular economy and economic entities in this area are necessary to raise it to the
level of 1.3 percent of GDP. In the field of waste management, there are already ready
projects worth around 60 million euros for the construction of the plant, which
mainly refer to the beginning of rehabilitation and closure of unsanitary landfills in
cities and municipalities and the continuation of construction and procurement of
equipment for regional landfills.

Recycling industry and entrepreneurship of Serbian

companies

In modern business conditions, the current chance for Serbia is a circular economy,
because thousands of new jobs are hidden in the recycling industry. The economic
development strategy should contain measures that will contribute to the
encouragement of "green" development that will improve economic activity,
investments, entrepreneurship and employment, while focusing on the gradual
transition to new technologies, which includes joint projects with countries in the
region. In these economic measures, it is not the price that is important when buying
a certain product, but how much that product costs in a lifetime. Also, the
cooperation between science and economy is extremely important, as well as the
business benefits that come from such cooperation. In this process, new knowledge
and skills are acquired, the competencies of the best people in science and in
companies are used, and cooperation promotes the transfer of knowledge from the
faculty to the economy and vice versa. In the circular economy, waste is eliminated at
the design stage, and innovations are present for the entire life of the product, and
these are the following domains that have positive effects (Saxenian, A., 1994, p.234):

207
 • reducing the amount of materials needed to perform a particular service (load
reduction);

• extension of product life (durability);

• reduction of energy and material use in the phases of production and use
(efficiency);

• reduction of use, in products and production processes, of materials that are

hazardous or difficult to recycle (replacement)

• creation of a market for secondary raw materials, recycled (based on

standards, public procurement, etc.);

In theory and practical action, i.e. different circumstances, there are different types
and models of successful entrepreneurs, and in all these models, business success,
in addition to a number of criteria, is their basic core.

Business success always results from the action of a number of factors, and above all
the five main ones: perseverance, happiness, dedication to work, energy and courage;

It is very popular among entrepreneurs and in the circular economy, which is based
on the theory of four C. The approach to this theory (four C), a successful
entrepreneur, is based on the analysis of the following elements: characteristics,
competencies, conditions, context;

All these characteristics that the entrepreneur uses in the circular economy refer to
the psychological and hereditary characteristics of a person. Abilities indicate the
possession of certain human knowledge about recycling, but also skills that are
applicable in the practice of waste processing. The conditions refer to the state of
awareness in the social environment about the advantages of the circular economy
and the legal framework for its application. The context refers to a micro-
environment conducive to entrepreneurial functions and the business culture and
climate appropriate to an efficient recycling process. In the current situation, all these
elements can be two-way, i.e. they can have a positive and negative impact on the
entrepreneurial process or venture. Certain life circumstances can also have an
impact on an individual becoming an entrepreneur:

• dissatisfaction with the business environment (inability to place their ideas);

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 • negative experience (entrepreneurship as a consequence of major changes in
life);

• career development depends on certain circumstances in a person's life that

can affect him positively or negatively;

• positive influences (may come from mentors, investors or potential partners);

In times of rapid technological change, there is often an opinion that for success it is
only necessary to apply new technology and place it in a linear economy and then in a
circular economy. while only 5 to 7 percent of waste is recycled annually). Business
start-ups, entrepreneurs, show some research, are much more important for the
circular economy than technology or products / services. Undoubtedly, new
technology is very important for success, but the decisive factor in investing is the
quality and experience of individuals owned by entrepreneurs. In a circular economy,
shared skills and communication, trust and agreement with the basic vision are
important skills that team members must possess. Entrepreneurs are by nature
optimistic and look for "grains" of the positive in every failure, and interpret failure as
a new challenge, i.e. as part of the process of learning about what, integrally, a
circular economy represents for one economy. Entrepreneurs "bring positive
surprises" to the market, i.e. new products and services, new management solutions,
new marketing strategies and tactics, and incorporate new initiatives for growth and
development strategies of the company and thus the economy as a whole, as a
contribution to the application of circular principles. Economy. Therefore, the full
acceptance of these principles is necessary to redefine, i.e. redesign the profile of the
entrepreneur, as a key creator of change, who is facing a great challenge. There are
already many examples from practice and they can serve as an excellent signpost of
the interdependence of the circular economy and individual entrepreneurs in the
context of the affirmation of Serbian entrepreneurship, in the future:

(1) plastic recycling to construction foil and bags;

(2) waste tire recycling;

(3) from tetra-packs to waterproof eco-boards;

(4) recycling of multilayer packaging for beverage and liquid food packaging;

(5) heating on coffee husk briquettes;

209
 (6) recycling of used antifreeze;

(7) ash processing (over 6 million tons, and only a small part is processed into
cement);

Conceiving the vision of the company is a countermeasure to the atmosphere of

reconciliation with the existing position of the company in its business
environment. Visionary, an essential characteristic of an enterprising manager, with
leadership qualities, has several components:

• good understanding of the existing position of the company in the

environment (strategic options);

• the manager symbolizes the created vision in order for it to be realized (firm
commitment);

• the manager must be an innovator (inventive person ready to do new things

and take the initiative);

• for the realization of the vision, the manager must be a mobilizer (launching
employees into action);

• ability to realistically assess the results (when the action starts);

• the manager represents the company in all places in the environment, where
necessary, in order to provide support for the strategic vision of the company;

From the aspect of economic development, i.e. economic stagnation, the way out is
sought and found in the entrepreneurial economy and entrepreneurship as a process
and entrepreneurs as the most important factor in a wide range of human
resources. Entrepreneurs are, indeed, the most important factor in the emergence of
an entrepreneurial environment, as well as the most important element of any
entrepreneurial endeavour and process.

The concept of employability and recycling economy

Recycling or waste processing is considered a segment of general culture in the world,

and it is necessary for Serbia to continue in that direction, developing the general
awareness of the population not only about the importance and values but also in
order to increase employment and raise living standards. Recycling should be

210
considered as a matter of morality and serious and responsible business, and not
through the sphere of costs. The concept of employability, on the other hand, as a
synonym for lifelong learning and training, is not a new concept, but it has regained
its importance with the onset of the crisis period and the increase in unemployment
in all categories of the workforce (Pokrajac, S., Tomić, D., 2016, p.12). The problem of
employment of young people who acquire theoretical knowledge through schooling,
but are not competitive on the labour market, is especially emphasized. Therefore,
Serbia must take active measures, both the state and individuals, to create a
favourable climate in which it is possible to influence the increase of youth
employability, because in that way it also influences the increase of the quality of the
total labour force. This concept aims at lifelong learning and training of a person in
order to increase the quality of his competencies and provide employment, because
lifelong employment and non-investment in training, in many cases, is no longer
possible. A number of reasons, and above all unfavourable conditions on the labour
market, are an important reason to emphasize the implementation of the concept of
employability today. However, this concept should not be equated with employment
in the circular economy. Employability refers to the ability to get a job, and
employment is the result of someone’s employability. The essence of this concept is
the attitude that continuous learning and adjustment are the only way to increase the
probability of an individual to get a job, i.e. to provide the highest possible level of
employment security and increase benefits for themselves and their community and
the entire economy. If we follow the genesis of the understanding of employability, in
the conceptualization of this category, three perspectives can be distinguished:
economic-social, organizational and individual perspective. All three perspectives
differ from each other in terms of which key player they represent, i.e. who is the key
entity that generates the employability of early strength. In conditions when
employability is viewed from an economic and social perspective, it is related to the
ability of different groups of the labour force to achieve and maintain employment
status. Then, if employability is viewed from an organizational perspective, it refers to
human resource management practices that optimize the allocation of manpower
within an organization in order to increase its flexibility and competitive
advantage. The individual perspective on employability focuses on the
predispositions and behaviour of individuals that enable him to identify and realize
career opportunities, i.e. the possibility of a successful transition in the market in

211
terms of transition from unemployed to employed status, change of job, change of
employer and the like. It is the individual perspective that dominates in Serbian
conditions, but also in modern understandings of career, where the focus of
responsibility for continuity and career development is transferred from the
organization to specific individuals who take responsibility. He significantly
evaluated this concept over time: first he had a macro perspective, then a meso and
micro perspective which then developed rapidly, and the micro perspective became
dominant. The basic message given by this perspective is that the individual becomes
a key generator of personal employability. Therefore, the individual himself should be
involved in the activities and should take measures to become more competitive in
the labour market. In this way, he increases the chances of retaining or gaining
employment status. However, employability is not only determined by factors that
are controlled by individuals, but also by factors that are outside its scope, such as
labour market characteristics, government interventions targeted at certain groups of
people, the global economic situation (global crisis) and the like. Thus, although
employability, from the micro aspect, promotes the idea that individuals should take
into account their attractiveness in the labour market, events and activities at the
macro level can still significantly affect the employability of individuals encompassing
the market aspect. This classification of perspectives on the concept of employability
shows that it is possible to identify three key groups of entities that can generate
employability of labour force, i.e. to increase the probability of its employment and
quality of labour force, especially young people as the group with the highest
unemployment rate in Serbia. These are the state, organizations and individuals. At
the same time, each entity has different mechanisms and a set of measures that can
be implemented in order to achieve employment, i.e. enable other transitions in the
labour market. The package of services for young people, according to the strategic
document "National Action Plan for Employment for 2018", includes steps of this
service that will prevent the obsolescence of knowledge and skills relevant to
competitive entry into the labour market and fall into long-term unemployment of
young applicants to the records of unemployed persons. The package includes the
following components (Đuričin, D., Janošević, S., 2009, p.34):

1) assessment of employability of persons;

2) introduction of an individual employment plan and measures that are most

suitable for activating and raising the employability of young people, and

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 3) mediation in employment or inclusion in active employment policy measures
that can contribute to employment:

◦ Career guidance and counselling on career planning;

◦ Professional Practice Program,

◦ Subsidy for Youth Employment, and

◦ Support to the Development of Entrepreneurship among Youth with the

award of subsidies for self-employment;

◦ Functional education program, etc.

According to the National Strategy for Youth, which was adopted in 2015, for a period
of 10 years, in addition to other strategic goals, two strategic goals and a number of
specific goals are directly related to the employability and employment of young
people:

1) Employability and employment of young women and men:

◦ developed services and mechanisms that promote the employability and

employment of young people through mutual cooperation;

◦ increased harmonization of knowledge, skills and competencies acquired in

the process of lifelong learning, with the needs of the labour market;

◦ provided stimulating conditions for the development of youth

entrepreneurship;

◦ developed functional and sustainable system of career guidance and

counselling of young people;

2) Quality and opportunity for acquiring qualifications and development of

competencies and innovations of young people;

◦ provided conditions for the development of creativity, innovation and

initiative of young people and the acquisition of competencies within
lifelong learning;

◦ improving the quality and accessibility of youth work and ensuring its
recognition;

213
 ◦ improved opportunities for equal access to education for all and support
for young people from vulnerable social groups;

◦ enabled recognition and provided support to the development of the

potential of talented and talented young people;

In addition to these educational measures, cooperation with local governments, youth

offices and civil society organizations, institutions at the regional and local level is
necessary (especially having in mind the socio-economic and environmental aspects
of future development aimed at faster economic growth).

In general, young people believe that they need more practical experience and
programs for its acquisition, which should be organized during and after the
completion of regular schooling. Young people also believe that this service should be
the responsibility of the state and especially the education system, but they also
recognize the role of associations that conduct youth work, which can mediate
between young people and employers, but also organize training for mentors within
companies that offer internships. employers have acquired the skills of mentoring
and transferring knowledge and skills to young people. They believe that additional
training that develops transferable competencies and prepares young people for job
search and employment should be available to all young people through formal
education.

Circular economy as a driver of change

All the differences in a society, countries, cities and organizations have the
consequence that these subjects of one society are more productive, innovative and
competitive. Therefore, states, cities, institutions and individuals need to be prepared
to live and work in different environments and to reap the maximum benefits from
diversity, which is a driver of change at all levels. Countries need to rely on research
achievements, innovation and professional governance. The rapid development of
information and communication and telecommunication technologies is also called
the fourth revolution in technology. In highly developed countries, it has become a
major source of creative destruction and expansion of innovation, especially in the
circular economy. From this aspect, two basic strengths of the global market can be
identified (Milanović, S., Milosavljević, M., Vučković, M., 2017, p.23):

214
 1) the process of innovation dynamics that requires a policy that its process of
encouraging investment in innovation, entrepreneurial capital and start-ups
(new businesses), etc.

2) formation of globally competitive clusters of multinational companies;

Innovative companies, mostly start-ups, in order to develop and grow faster, enter
into informal alliances, but also so-called clusters (Đorđević, B., Milanović, S.,
2015). However, if several firms emerge as spin-offs of the parent firm or more, the
cluster may arise spontaneously. Innovative entrepreneurship, as a combination of
ownership and collective capitalism, is embodied in the functioning of regional
clusters, such as Silicon Valley, which represent the middle ground between local
networks and clusters. It also represents a bipolar innovative dynamism: on the one
hand a cluster of global competitiveness and on the other hand a local
entrepreneurial network, the nexus of which results in the formation of new fast-
growing firms. Information and communication technologies are the main driving
force of outsourcing and offshoring as global processes. Rapid advances in
technology, particularly ICT, and global deregulation and competition in the
telecommunications industry have led to significant reductions in the cost of
adaptation and communication faced by businesses. Experts believe that in the next
medium-term period, to invest close to 15 billion euros in the field of environmental
protection and the adopted negotiating position for Chapter 27 in agreement with the
European Commission, and that further investments will take place continuously.

An example, youth employment can be the company "Sekopak", founded in 2006,

with the aim of helping to organize the process of packaging waste management in
Serbia. In its vision of Serbia, everyone participates in this process - the state, the
economy and the citizens. This company, the Company operator of packaging and
packaging waste management, based on the international categorization and
financial analysis of three business years (2015, 2016 and 2017), fulfilled all the
conditions for issuing the prestigious international Certificate of Creditworthiness
Excellence Rating AA. The company Sekopak is the most successful in its business,
and is ranked among 1.7% of the most liquid companies in the Republic of
Serbia. The certificate, as an international solvency certificate, has been issued by
BISNODE for 30 years in 18 European countries. Another example, in Serbia, the
company "Bisnode" has been performing certification since 2013.through

215
cooperation with the Development Agency of Serbia, NBS, APR, Commercial and
Appellate Courts and the Serbian Chamber of Commerce.

In the international environment, certification is a common practice and in this way

companies further strengthen their reputation and trust in the domestic and foreign
business environment. Having a certificate of creditworthiness excellence is one of
the few recognitions by which business entities prove to their permanent and
potential business partners that they are a responsibly and well-managed company
with which to do business. Above all, this recognition of excellence is a confirmation
of many years of systematic and quality work and approach to this sensitive issue.

A special example, derived from the ecological approach to the circular economy, are
ecological materials. It can be a micro-cement that can "dress" walls, floors, ceilings,
stairs, bathtubs, sinks, wooden tables, chairs, etc., with application in construction
and especially in the hotel industry (ecological material for exterior and
interior). Holders of this recognition rank at the very top of the domestic economy,
side by side with competing companies from the European Union, which is a very
good sign in the treatment of the circular economy in domestic conditions.

Circular economy and eco-design was the main topic of the fourth "Sekopak"
conference held on Wednesday, November 28 in the club "Just & # 38; Lobby" in
Belgrade, and at that, now traditional November conference, those gathered had the
opportunity to summarize the results from In 2017 and 2018, to attend the awarding
of certificates for contribution to saving carbon dioxide emissions, they saw dresses
made from waste and heard the performance of drummers whose instruments were
made mainly from waste raw materials. Such an approach to the issue is expected in
the coming period, despite general crises (whether they are caused by financial
shocks, natural disasters or a global health situation such as a pandemic.

Conclusion

The fourth industrial revolution is a continuation of the third industrial revolution -

the digital industrial revolution and affects all industries around the world. It has a
special impact on the circular industry or economy. This revolution also affects the
socio-economic area of business and living, that is, the ecology not only at the global
and regional level, but also in the area of the Middle Danube. This revolution in the

216
circular economy also refers to a number of applied technologies (artificial
intelligence, robotics, internet, 3D printers, nanotechnology, biotechnology, energy
storage, quantum computing, etc.). Therefore, one of the main effects of the fourth
industrial revolution was increased employee productivity.

The fact is that we live in a world of steady growth in consumption, as opposed to

limited resources, and it is very important to understand that products, before being
fully utilized, have value and can be fully utilized. This means that waste from one
industry can be a raw material for another industry. With the circular economy
model, Serbia would get a chance for development, and its citizens an environmental
security, "green" jobs, new water and air quality, healthy food and a new quality of
life, and most importantly, higher employment. The social capital of a nation is also
an investment without which there is no future. Entrepreneurs, in order to establish
advanced waste management systems, take into account a number of elements such
as legislation, social factors, available technologies, then the financial aspects and
market conditions. The Serbian economy must follow the path of development of
world social and market trends, so it is a new opportunity to reduce the time gap
between technological and economic backwardness (estimated at 15-40 years) by
introducing the latest systems. At the moment, the implementation of the circular
economy is nominally more expensive, but the benefits can be expected much earlier,
since Serbia would join the pioneers in introducing the concept and creating the
circular market, and drastically reduce the necessary transition costs in the
future. Serbia needs a new "smart" development strategy for the future. Serbia can
start the investment cycle in the circular economy by strengthening its energy
security through production efficiency, waste energy, energy buildings, sustainable
transport and organic (natural) agriculture,whose products have not been treated
with chemicals.

It is necessary to reduce the level of water, air and soil pollution in Serbia, to improve
the nature protection system and reduce the exploitation of natural resources,
increase the percentage of energy generation from RES, introduce rules that would
include monitoring the entire supply chain of materials and energy throughout life.
product / service cycle.

In an efficient entrepreneurial economy, there are two basic characteristics of

entrepreneurs (which are also the basis of the recycling process): passive and active

217
reaction, i.e. the environment, which changes over time, in the direction of both
modalities (passive and active). The importance of an approach to entrepreneurship
based on joint action is especially important. Entrepreneurs are the ones who create
and manage a flexible company most suitable for the hairdressing economy, which is
characterized by the following characteristics:

• rapid change of product range, i.e. range of services;

• flexibility becomes condition of survival and its provision becomes dominant

thinking;

• in addition to reducing costs, expected quality and increased speed of

development, it is also characterized by a diverse range that is adaptable to
consumers;

• business decisions are characterized by high speed of reaction, with the

creation of fast feedback;

• communication lines are short and the number of hierarchical levels are
limited;

• innovation becomes the dominant success and necessity in business;

In modern business conditions and acceptance of the principles of circular economy,

the most important task of an entrepreneurially oriented manager is adequate change
management, with a clearly defined business vision.

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Milanović, S., Milosavljević, M. & Vučković, M. (2017). Povećanje zapošljivosti kao

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219
 ORGANISATIONAL AND SECTORIAL COMMITMENT
IN THE DEVELOPMENT OF INLAND WATERWAYS
FREIGHT TRANSPORT: ANALYSIS OF EUSDR
TRANSNATIONAL PROJECTS

Dávid NAGY1
András MUNKÁCSY2
Melinda JÁSZBERÉNYI3

Abstract

The Danube River is an international waterway that forms part of TEN-T Core
Network Corridors, touching eleven countries, including six EU member states.
Significance of inland waterways freight transport in Danube riparian countries has
been decreasing since the 1990s. This is due to geopolitical changes, realignment of
the freight transport market, development of rail and especially road infrastructure
and related services, as well as decrease of the competitiveness of inland waterway
transport (IWT), in line with, e.g., lack of infrastructure developments.

The EU Strategy for the Danube Region (EUSDR) is a macro-regional strategy

addressing the coordination of developments concerning countries in the region.
Although not only the Danube River and its immediate surroundings are in the
territorial focus of the strategy, it contains relevant goals with regard to IWT and
other current challenges of the river. One of the key targets is to increase IWT
volumes in the macro-region. Furthermore, it aims to remove bottlenecks to
accommodate VIb type vessels all year round.

Implementation of the macro-regional strategy has been started and significant

developments have been realised or are ongoing. To achieve the goals, both national
investments and transnational projects are implemented. This article aims to study

1 PhD student, University of Pécs, Doctoral Programme in Earth Sciences, david@info-partner.hu

2Researcher, KTI Institute for Transport Sciences, munkacsy.andras@kti.hu

3Associate professor, Corvinus University of Budapest, jaszberenyi@uni-corvinus.hu

220
concluded and ongoing projects to understand the activity level of organisations in
terms of inland freight transport development in each country. By the analysis of the
EUSDR PA1a public database and information from organisations, it also aims to
evaluate commitments from a sectorial point of view (public, private, non-profit) and
in terms of the field of development (infrastructure, operation, research, etc.).

Previous research of the authors (Nagy et al. 2019) concluded that commitment of
countries in the development of IWT on the Danube is diverse. The present study has
shown that Danube riparian states have contributed substantially to EUSDR
initiatives, however, in terms of their active involvement, there are significant
differences among countries. Conclusions indicate that there are two groups: the
rather active (DE, AT, SK, RO) and moderately active countries (HU, RS, RO, BG).
The success of EUSDR in developing IWT seems to be largely dependent on the
future commitment of all countries, especially on the future efforts by partners
(particularly from the public and for-profit sector) in the moderately active group.

Keywords: Danube, inland waterways transport, IWT, EUSDR, Danube Region

Strategy, transnational projects, sectorial distribution

Introduction

The role of the Danube river in freight transportation diminished largely in the 1990s
in line with the dissolution of the Soviet Union and the Council for Mutual Economic
Assistance (COMECON). In parallel to the new orientation of the Danube riparian
states, including pathfinding initiatives in Western Europe, the Rhine-Main-Danube
Canal was being completed (and opened in 1992), and many stakeholders considered
it a great opportunity to revive IWT on the Danube. Despite having built economic
cooperation with new partners, especially Germany, and joining the EU by most of
them, the development of inland navigation has lagged behind in most of the Danube
states. A single economic area can be fully established along the Danube by the
expected accession of Serbia to the EU (foreseen for 2025). Problems related to
climate change and challenges caused by road transport urge new solutions by
alternative modes. Many deterrents make IWT development slow or ineffectual in the
early 21st century.

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Infrastructure development and management are key, but costly aspects of IWT.
Coordination is also crucial, as, in most cases, waterways and ports are operated and
financed by different parties (Beyer 2008). The international character of the river
makes cooperation of states essential.

One of the deterrents is the lack or complexity of this cooperation among countries
and organisations. Nation states were formed in the 19th and 20th centuries and, in
some cases, national identities fed opposition and not collaboration in transnational
issues. Further changes along the 20th and even the 21st century led to the current
situation of relatively small countries along the Danube. The Danube river was in the
focus of some conflicts between states, such as the case of the Gabčíkovo–Nagymaros
Dam between Slovakia and Hungary (Hardi 2012). In spite of adaptation of the EU
legislation, political tensions and cultural diversity in the macro-region may cause
administrative difficulties.

Furthermore, international cooperation was driven by centralized decisions and

supported by the participation of public bodies and state-owned companies in the
socialist countries before the 1990s. Nowadays, the private sector is ruled by foreign
interests or local companies that are not financially strong enough to efficiently
influence the development of inland navigation. The non-profit sector, established
quickly after the political changes, can be powerful in initiating, promoting or even
hindering developments. Both collaboration and cooperation are increasing, partly
due to cooperation projects co-funded by the European Union, but (achievement
and/or confirmation of) compromises are usually expected from the states.

The European Union seeks to promote the development of inland navigation,

especially to tackle road transport externalities, such as air and noise pollution and
increasing need for extensive and expensive infrastructure. The EUSDR set targets
for the future of IWT in 2010: to increase cargo transport on the Danube by 20% by
2020 and to remove bottlenecks to accommodate VIb type vessels according to
UNECE’s international classification all year round by 2015 (later rescheduled for
2020).4 For this, modernisation of navigation and IT systems, infrastructure

4It is worth mentioning that waterway management experts in the NEWADA duo (Network of
Danube Waterway Administrations – Data & User Orientation, 2012–2014, SEE Programme)
recommended the following minimum level of service related to fairway depth for the Danube:
2.5 m at low navigable water level (LNWL), i.e., on 94% (343 days) of the year. This target is not
valid in some river sections, e.g. in Germany, Slovakia and Hungary, where it is not achievable

222
development of the waterway and ports were foreseen (European Commission 2010).
The macro-regional strategy has been implemented and projects of different scales
have been carried out or concluded so far.

The present study (largely based on Nagy et al. 2019, especially in the introductory
and theoretical parts) aims to provide an overview of the motivation of countries in
contributing to EUSDR projects for IWT development, namely:

• role of individual countries in achieving the aims and targets of EUSDR for
IWT developments;

• level of activity and sectorial (public, private, non-profit) background of

partner organisations in transnational EUSDR (IWT) projects;

• conclusions about the commitment of countries in national and transnational

IWT projects in line with the above aspects.

Theoretical background and brief literature review

EUSDR is implemented in priority areas (PA) coordinated by two countries of the

macro-region. PA1 aims to improve mobility and multimodality, i.e. enhancing the
conditions for sustainable road, rail and inland waterways transport. PA1a is the
specific area for inland waterways (coordinated by Austria and Romania) to
emphasize the role of the Danube both in the cohesion of the macro-region and in
formulating the strategy. As inland waterways are usually considered marginal
elements of the transport system in Europe, this is a symbolic step to underline its
potentials in a region where IWT has long traditions.

Although the TEN-T inland waterways’ core network was completed in nearly all
states by the end of 2016, there are some shortcomings and large differences among
countries in the context of IWT on the Danube. Connected waterways and
multimodal links, performances and competitiveness of freight transport and
navigability are key subjects for further development on the Danube. Volumes and
share of IWT have been decreasing in the past decades and, in spite of ambitious
projects by EUSDR in recent years, after hitting the bottom in 2011, they are
stagnating.

even by stream regulation and maintenance measures, due to physical preconditions.

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As the Danube is one of the ‘most international rivers’ of the world, crossing through
11 countries, IWT development requires coordination and transnational cooperation.
However, there is little evidence about this activity on macro-regional, cross-border
and national level and, in general, about IWT on the Danube. Researchers focus on
concrete technical (waterway management, navigability, vessel modernisation)
aspects (e.g. Beuthe et al. 2014, Habersack et al. 2016, Glock et al. 2019, Anghelu ță et
al. 2019, Kortschak 2019) and only some of them discuss general (political,
administrative, legal etc.) issues (Mihic et al. 2011, Radmilović and Maraš 2011,
Pfoser et al. 2018, Kresojević 2019, Radovanović and Sandić 2019). The same applies
to recent studies about transnational cooperation in the Danube macro-region, i.e.
only a handful of scientific articles have provided evidence about the topic so far (e.g.
Sielker 2016).

Data and methods

The territorial scope of this study is the Danube riparian countries, namely Germany,
Austria, Slovakia, Hungary, Croatia, Serbia, Romania and Bulgaria. In spite of being
states along the Danube, Moldova and Ukraine are not dealt with here, due to lack of
relevant developments through the EUSDR framework in these countries in the
analysed years.

Data of projects for the development of IWT have been accessed at the EUSDR
priority area 1A website (https://navigation.danube-region.eu/) in March 2019 and
March 2020. The portal distinguishes project ideas, ongoing and concluded projects
in 18 thematic areas related to 7 themes (waterway infrastructure; waterway
management; ports & sustainable freight transport; fleet modernisation; river
information services; education & jobs; IWT policies). In the present study, the total
of 100 ongoing and concluded projects are being analysed for the time period, 2007
to 2020, including two complete funding and programming periods of the European
Union (2007–2013, 2014–2020).

The 61 national projects are studied to reveal the range of developments by individual
countries and their share among key development areas (waterway infrastructure,
port investments, information systems, research/study). Project coordinators (lead
partners) and project partners by countries and their sectorial classification (public,
private, non-profit) is reviewed for the 39 transnational projects.

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Basic statistics is applied for this overview. Indicators are calculated per length of the
river (in river kilometres) of the countries, taking into account that the length of
waterways and the number of ports may influence the number and volume of
projects.

Table 1: Length of waterways per countries

Length of the
Country river (river km)
Germany 687.03
Austria 350.5
Slovakia 172.5
Hungary 417.2
Croatia 137.5
Serbia 587.35
Romania 1075
Bulgaria 471.6
Source: Danube Commission, 2004

Infrastructure projects are usually carried out on a national level and may indicate
commitment, as well as motivation of countries. Many transnational projects are for
research, information exchange and cooperation of sectorial actors. Large-scale
infrastructure developments on a transnational level are rare.

Results

Analysis of national projects

Distribution of the 61 national projects is unequal in the Danube states (Fig. 1):
Romania is the most active (16 projects) and Germany, Hungary and Serbia are above
the average of 7.6 projects per country. Croatia, Slovakia and Bulgaria are below the
average and so is Austria, which is the last one on this list with only 3 projects (2 still
ongoing).

In terms of total budget of national projects, Romania as well as Germany and

Austria have implemented projects with large budgets. Fig. 2 indicates that
differences of budgets are much higher than the number of projects per country.

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 Figure 1: Number of national projects (linked to EUSDR) for IWT
development, per country (own edition)

Figure 2: Total budget of projects in line with EUSDR (Own edition)

In light of becoming members of the European Union in 2004, Hungary and Bulgaria
could have had the opportunity to absorb more funds for IWT projects. These
countries, along with Croatia (EU member state since 2013), allocated only little
financial resources to waterway development through EUSDR (Fig. 3). In most
countries, EUSDR funds are not exploited for port investments, despite the
opportunity to strengthen intermodal connections for improving IWT

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competitiveness. Only Romania and Austria have invested large amounts of money in
port developments through EUSDR. Croatia has done so only on a smaller extent.

Figure 3: Distribution of the budgets of EUSDR project, per development areas (own
edition)

Indicators per the length of the river suggest similar results (Fig. 4): three countries
(Germany, Austria and Romania) are above average. Slovakia joins them mainly due
not to large funds allocated to IWT development, but to the relatively short river
section (the 2nd shortest in the analysed countries). From this perspective, the level
of participation of Bulgaria and Hungary to develop the conditions for IWT through
EUSDR projects seems to be even more moderate. Taking into account the length of
the Danube in Croatia, its efforts seem to be large. Romania is not on top of the list
any more (incidentally, the Danube-Black Sea Canal is ignored here, despite
developments there).

Analysis of transnational projects

Project partners in EUSDR projects are mostly seated in the European Union. Lead
partners are all from EU member states. (The UK is considered an EU member state
here.) In the analysis, two groups of EU countries are considered: individual EU
member Danube riparian states (Germany, Austria, Slovakia, Hungary, Croatia,
Romania and Bulgaria) and partners seated in other EU countries. There are two
groups of non-EU countries: Serbia (which is a relevant partner in many EUSDR

227
projects) and other countries. There is a group on international organisations, as well
(in line with the classification of the EUSDR priority area 1A portal).

Figure 4: Budget of EUSDR projects per the length of the river (million EUR / river
km) (own edition)

Projects may be classified in three groups in line with the affiliation of project
partners: 1) projects by Danube riparian countries, 2) EU projects (framework
programmes, Horizon 2020, etc.) and 3) cross-border projects and projects with a
low number of partners. As EUSDR was proposed in 2010 and endorsed by member
states in 2011, the number of EU co-financed projects is larger in the first
programming period (2007–2013) and later the projects by Danube states have
become dominant. Other projects are rare.

Centrally financed EU projects included a large number of participants (Fig. 5),

resulting in a high number of partners from non-Danube states (134 project
partners). The participation from non-EU countries is low, mainly Danube riparian
(Ukraine) and EEA countries (Switzerland, Norway) joined these consortia.

In terms of participation of Danube states, three groups can be identified: the most
active (Austria, Romania), active (Germany, Hungary, Bulgaria) and moderately
active (Slovakia, Croatia, Serbia) countries.

The participation of countries (project partners from individual countries) in each

EUSDR transnational project has also been studied (Fig. 6). Austria is dominant in

228
building up and coordinating project consortia. Cooperation of organisations from
Austria and Romania seems to be strong, thus the latter is also active in transnational
projects above average. Other countries have participated in 50–70% of EUSDR
projects: the lower proportion of organisations from Croatia is due to its later
accession to the EU (in comparison with the higher proportion of countries like
Bulgaria, Slovakia and especially Hungary), as well as the status of Serbia. In spite of
its commitment to improve IWT conditions, only one part of Germany has been
included in transnational programmes related to the Danube area (South East
Europe and later the Danube Transnational Cooperation Programme). However,
Germany has been active in EU research and development projects and, mainly in the
2014–2020 funding period, in some transnational co-operations as well.

Figure 5: No. of project partners in EUSDR transnational projects, per country (own edition)

Project partner organisations in EUSDR transnational projects have been identified

and the number of organisations from individual countries have been studied (Fig. 7),
in order to understand the complexity and comprehensiveness of the participation.
On the one hand, it seems to be crucial to have core partner organisations (e.g.
ministries for territorial planning and policy, national and regional agencies) that –
with growing experience and networks – continuously take part in and occasionally
coordinate projects. On the other hand, if only this handful of organisations join

229
project consortia, key organisations of a sector or whole sectors (e.g. for-profit
companies) may be under-represented in IWT development projects. In light of this,
a good balance of participating organisations may be found in Austria and Romania,
by having a small number of ’promoters’ (that usually become lead partners) and a
wide range of organisations that become project partners on an occasional basis.
Although not very active in coordinating EUSDR transnational projects, the number
of partners from Hungary is also relatively high. The lower number of participants
from Slovakia, Croatia and Serbia may be due to their overall lower participation (see
Fig. 6) and the lower number of interested parties (port authorities or operators,
regional agencies, etc.) are in line with the relatively short river sections in Croatia
and Slovakia.

Figure 6: Proportion of project partners from individual countries in transnational

EUSDR projects (own edition)

The special case of Germany, partly explained above, indicates that there is an
extremely high number of different partner organisations, i.e. it is a highly committed
country without core (regular) participants and project partners from the national
(federal) level.

If compared to the length of the river in each country, the results are different:
Slovakia and Croatia are above average, and Serbia (due to the overall lower
participation) and especially Romania (due to its long river section, even without the
Danube–Black Sea Canal) lag behind.

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 Figure 7: No. of organisations involved in EUSDR projects, by country (own edition)

Figure 8: No. of organisations involved in EUSDR projects, by country, per river km (own edition)

Sectorial distribution of partners in transnational projects

Partners from Danube riparian countries (excluding Moldova and Ukraine) have
been classified into three groups: public (public administration bodies, local
authorities, state-owned companies, public institutions), private (for-profit
companies) and non-governmental organisations (associations, foundations, etc.).

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The sectorial distribution is well-balanced (Fig. 9) in transnational projects, which
explicitly aim to strengthen the dialogue between and cooperation among
organisations from different sectors and countries. Although a dominance by the
private sector would be desirable to improve competitiveness and economic growth,
challenges of infrastructure development as well as high public share in both IWT
companies and port operators make the public participation essential in this macro-
region. NGOs represent social and environmental aspects, as well as professional
advocacy.

Figure 9: Sectorial distribution of project partners in EUSDR transnational projects (own edition)

Sectorial distribution of project partners by country (Fig. 10) classifies Danube

riparian states into two groups: 1) for-profit companies dominate the project
participation (above 50%) in Germany and Austria, 2) public bodies and institutions
are the key players in other countries, i. e., the business sector is less active in IWT
development in post-socialist states. Entering into the details of partner
organisations, this seems to be (partly) due to the fact that there are less private R&D
companies (or companies with intensive R&D activities) and research centres in these
countries.

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 Figure 10: Sectorial distribution of project partners in transnational EUSDR projects by country
(own edition)

Figure 11: No. of project partners per sector in the analysed countries (own edition)

The number of public partner organisations in EUSDR projects (Fig. 11) is similar in
the analysed countries (10.4 in average), being Romania on the top (16 organisations)

233
and Croatia (6) on the bottom of this list. Variability is more significant in terms of
for-profit project partners: in line with what has already been mentioned, Germany
and Austria are above, other countries are below and only Romania is slightly above
average (9.6). Non-profit organisations seem to be very active in Hungary (9) in
comparison to an average of 4.7, suggesting relatively lower levels of commitment of
public and private organisations there.

Discussion and conclusion

Table 2: Motivation and commitment of countries in contributing to the implementation of
EUSDR, own edition

Total budget of Total budget of No. of partners No. of partners

national national in transnational in transnational
projects projects per projects projects per
Country river km river km
**** **** **** **
Germany
*** **** **** ****
Austria
*** *** ** ****
Slovakia
* * *** ***
Hungary
* ** * ***
Croatia
** ** * *
Serbia
**** *** *** *
Romania
** * ** **
Bulgaria

A brief overview of EUSDR national and transnational IWT projects have been
presented in this article, completing a first study by Nagy et al. (2019). In sum, data
about project partner organisations indicate that all the analysed countries have
contributed substantially to EUSDR initiatives. However, in terms of activity and
commitment, there are relevant differences among countries. Table 2 summarizes the
motivation by two categories strongly related to the participation in EUSDR projects,
namely the budget of national projects and the number of partners in transnational
projects. The different contexts and the dimension of challenges are taken into

234
account by the length of the river in each country. In other words, this is the synthesis
of results about the contribution of Danube riparian countries in achieving the
objectives and targets of EUSDR. Although the categories are objective, the
conclusions about motivation and commitment (marked by * to ****) are not, thus it
would be unjustifiable to rank the countries. However, two groups could be formed
here in line with the activity of countries in EUSDR IWT projects:

1) Rather active countries: Germany, Austria, Slovakia and Romania. Slovakia

seems to be active above the average in spite of its relatively short river
section. Romania’s commitment is high, but not above average in line with its
long (the longest) river section.

2) Moderately active countries: Hungary, Croatia, Serbia and Bulgaria. In the

case of Serbia, its status as a non-EU state explains the level of participation in
EUSDR initiatives. Croatia joined the EU in 2013, after the first programming
period that could support the implementation of EUSDR. In Bulgaria and
Hungary, the lack of large investments on a national level could not have been
compensated by a larger activity in transnational cooperation.

The success of EUSDR in developing IWT is largely (but, indeed, not exclusively)
dependent on the future commitment and activity of all countries, especially on
future efforts by partners (particularly from the public and for-profit sectors) in the
moderately active group.

References

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green and efficient fleet. Annals of ”Dunarea de Jos” University of Galati.
Fascicle XI Shipbuilding
http://www.gup.ugal.ro/ugaljournals/index.php/fanship/article/view/2506
European Commission (2010). European Union Strategy for the Danube Region,
Communication From The Commission To The European Parliament, The
Council, The European Economic And Social Committee And The Committee Of
The Regions.
Danube Commission (2004). Kilometeranzeiger der Donau. Donaukommission.
Glock, K., Tritthart, M., Gmeiner, P., Pessenlehner, S. & Habersack, H. (2019).
Evaluation of engineering measures on the Danube based on numerical analysis.
Journal of Applied Water Engineering and Research, 7:1, 48-66

Hardi, T. (2012). Duna-stratégia és területi fejlődés, Akadémiai Kiadó.

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Habersack, H., Hein, T.,Stanica, A., Liska, I., Mair, R., Jäger, E., Hauer, C. & Bradley
C. (2016). Challenges of River Basin Management: Current Status Of, and
Prospects For, the River Danube From a River Engineering Perspective. Science
of The Total Environment, Volume 543, Part A, 828-845.
Kortschak, B. (2019). DANUBE – 20 years of Change. In: Stojić Karanović, E. &
Imamović, E. (Eds.): Compendium of the International Scientific Forum
“Danube – River of Cooperation” – 2019 (Selected paper. 11 p.). ISF “DRC”.
Kresojević, M. M., Bakrač, S. T., Ranđelović, A. J., & Stošić, D. N. (2019). Sustainable
navigation by the Danube: Law regulations, problems and proposals. Vojno delo,
71(5), 135-142.
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inland waterway transport in Europe – Danube River. Renewable and
Sustainable Energy Reviews, Volume 15, Issue 4, 1801-1809.
Nagy, D., Munkácsy, A. & Jászberényi, M. (2019). Impacts of the EU Strategy for the
Danube Region (EUSDR) in light of transport volumes on the Danube river.
Deturope. 11(3), 59-79.
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barriers in the Danube countries. Journal of Sustainable Development of
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Region. In: Stojić Karanović, E. & Imamović, E. (Eds.): Compendium of the
International Scientific Forum “Danube – River of Cooperation” – 2019.
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3(1), 88-95.

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THE EFFECTS OF TOURISM DEVELOPMENT IN THE
DANUBE DELTA

Cipriana SAVA1

Gheorghe PINTEALĂ 2

Abstract

Tourism is one of the economic activities that has experienced significant growth
every year, but, like any other activity, it has positive and negative effects. A
sustainable development of tourism diminishes the negative effects and offers the
opportunity for future generations to enjoy the existing tourist resources. At the same
time, it contributes to the increase of the standard of living of the local population,
and to the economic development of the area.

The Danube is the second longest European river flowing for 2850 km. From its
sources until it flows into the Black Sea, it attracts numerous tourists on its banks and
waters. In Romania, the Danube ends its way by flowing through a delta in the Black
Sea. The Danube Delta is the second largest and best-preserved delta in Europe. Ever
since 1991, the Danube Delta has been part of the UNESCO heritage, being
considered a national park (in international taxonomy) and a wetland of
international importance (by Ramsar Convention).

In this wonderful and protected area on Romanian territory, the Romanian

Government supports the development of sustainable tourism through a targeted
strategy and legislation. The number of tourists registered in the Danube Delta has
increased annually, and the largely positive effects are already visible.

Keywords: sustainable tourism, ecotourism, protected area, economic and

ecological effects, legislation

1 Associate Professor PhD, Faculty of Management in Tourism and Commerce Timişoara;

cipriana.sava@gmail.com

2 Lecturer PhD, Christian University “Dimitrie Cantemir”, Bucharest, Romania

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 Introduction

Tourism is the economic activity that attracts like a magnet more and more people
every year. The motivations are multiple, often related to a person's current state, but
also to the profession, health, curiosity, desire to practice a sport, or anything else
that causes this person to leave the basic residence temporarily.

The evolution of the number of tourists worldwide has followed an increasing trend.
Hence, in the last five years a staggering number of over 1,4 billion tourists was
reached (Table 1).

Table 1 Evolution of the number of registered tourists worldwide (millions of people)

Indicator 2015 2016 2017 2018 2019

Number of 1196 1235 1329 1407 1461
tourists
Source: www.unwto.org. UNWTO world tourism barometer and statistical annex January 2020

The large number of tourists has led to the congestion of some tourist destinations,
which has led to negative effects such as pollution, stress for locals and tourists,
longer waiting time to benefit from some services, increased rates and prices for some
products or services.

These realities have led to the orientation towards a sustainable, responsible tourism
development. Sustainable tourism involves the use of tourist resources in the most
efficient way and their preservation for future generations, but also the well-being of
the local population.

Tourism development is linked to the environment and the natural and

anthropogenic resources, that is why pollution in any form influences this economic
sector now, but also in the long run.

According to the World Tourism Organization (WTO), “sustainable tourism

development meets the needs of present tourists and host regions while protecting
and enhancing opportunity for the future. It is envisaged as leading to management
of all resources in such a way that economic, social, and aesthetic needs can be
fulfilled while maintaining cultural integrity, essential ecological processes, biological
diversity, and life support system.” (WTO, WTTC, 1995.)

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In order to achieve a sustainable development, the main actors, directly involved are
considered:

• the civil society;

• the business environment;

• the government.

The main principles of sustainable tourism can be considered:

• the environment is the main element and it is imperative to keep it unaltered

for future generations;

• tourism must be perceived as a positive activity for the environment, the local
communities and the tourists;

• a long-term environment-tourism support relationship must be created;

• cultivating respect for the characteristics of the place;

• finding a balance between the needs of the participants (tourists, hosts and
destination);

• observing all principles by all participants and accountability.

The development of sustainable tourism is a time-consuming process and can take

place in different areas, but also in all forms of tourism.

The Danube on the Romanian territory

“Considered a wealth of Europe, the Danube starts its journey in Germany, from a
spring from the Black Forest, and ends its journey in the Black Sea through a delta,
the point of shedding being Sulina. The watercourse length is 2875 km, the
catchment of 817 000 km2, and the average flow of 6500 m3/s. The countries crossed
by the river are Germany, Austria, Slovakia, Hungary, Croatia, Serbia, Romania,
Bulgaria, Republic of Moldavia and Ukraine…… The lower Danube course measured
between Baziaş and Sulina stretches around 1075 km and is divided into the following
sectors:

• Carpathian Gorge (144 km);

239
 • South-Pontic (566 km);

• Pontic oriental with ponds (195 km);

• Pre-Dobrogean (80 km);

• Deltaic (90 km)”. (Sava, Pinteală, Goloşie, 2014, p.163.)

Fig.1 Map-course of the Danube on the Romanian territory and the bordering countries
Source: https://www.afdj.ro/ro/content/hyq-danube

The course of the Danube on the Romanian territory is mostly smooth, without
obstacles. The Carpathian Gorge of the Danube is comprised between Baziaş (the
place of entry of the Danube in Romania) and the Iron Gates (in the immediate
vicinity of the city of Drobeta Turnu Severin), more precisely Gura Văii.

The second South Pontic portion that stretches between Gura Văii, the Iron Gates and
the city of Călăraşi (the depression Bra țul Borcea) is the meadow sector, in which the
river has a smooth flow and a considerable width.

Sector three, the eastern Pontic that stretches between Călăraşi and the city of Brăila-
Smârdan, is also known as the pond sector, because in this area the Danube separates
and forms the Great Pond of Ialomiţa between Brațul Borcea and the Old Danube, to
later form the Great Pond of Brăila between the New Danube and the Old Danube.
Here the Danube changes its direction of flow to the north, crossing the country

240
through the Romanian Plain and separating the two provinces of Romania, Muntenia
from Dobrogea.

The next sector of the Danube, the pre-Dobrogean one, includes the portion between
Brăila and the entrance to the Danube Delta, at Ceatal Chilia, upstream of Tulcea. In
this sector, the river changes again its direction of flow to the east through the
Romanian Plain, towards the Black Sea.

The last sector of the river, the Deltaic sector includes the three branches Chilia,
Sulina and Sfăntul Gheorghe and the delta itself.

Along its course in Romania, the river receives the waters of the following primary
tributaries:

• Nera - the confluence area of the river with the Danube, is declared a protected
area and forms a small delta;

• Cerna - flows into the Danube at Orşova through a large bay, due to the
penetration of the Danube into the mouth of this river;

• Jiu - its confluence area with the Danube is declared a special avifauna
protection area;

• Olt - flows into the Danube at kilometre 604, upstream of Turnu Măgurele,
where a special protected avifauna area was declared;

• Vedea - not a special landscape at the mouth of the Danube;

• Argeş - flows into the Danube in the area near Olteniţa;

• Ialomiţa - flows into Braţul Borcea of the Danube, in the area of Vlădeni;

• Siret - its confluence with the Danube takes place near the city of Galați;

• Prut flows into the Danube, in the eastern part of Galați, where the island of
Ostrovul

Prut is located, near Reni. The Prut is the river that forms borders with the Republic
of Moldova and partially with Ukraine.

Along the course of the Danube in Romania, a series of protected areas have been
declared, which attests to the biodiversity of the river and raises awareness on its
importance. Thus, there are 134 partially or totally protected natural areas, out of

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which: 31 sites of community importance (SCI) according to the Order of Minister
776/2007; 43 areas for special protection (SPA) according to the Government
Decision 1284/2007; 51 scientific and natural reserves; 6 national and/or natural
parks and 3 special conservation areas.

Table 2 The main protected areas along the Danube

Name Establishment act Area

Iron Gates Natural Law no. 5/2000 on the approval of the 115 655 ha
Park National Spatial Planning Plan - Length around 140km
Section III - Protected Areas

Little Pond of Brăila Law no. 5 of March 6, 2000 (on the 17 529 ha , length 149 km
Natural Park approval of the National Spatial
Planning Plan - Section III - protected
areas) GD 230/4.03.2003 on the
delimitation of biosphere reserves,
national parks and natural parks and
the establishment of their
administrations (OJ 190 /26.03.2003)

Danube Delta The Government of Romania in 1990, 580 000 ha, of which 312
Biosphere Reserve biosphere reserve, decision confirmed 440 ha are ecosystems
by the Parliament of Romania, by Law included in the list of areas
no. 82/1993; with universal heritage
-entered the UNESCO heritage in value and those of
1991. ecological reconstruction

Crossing the river from one bank to the other can be done by road, rail or by ferry
(Table 3).

Table 3 Crossing points of the Danube

Crossing points Route

Giurgiu – Ruse bridge, border crossing Road + rail
point Romania – Bulgaria
Feteşti – Cernavodă bridge Road + rail
Calafat – Vidin bridge Road + rail
Giurgeni - Vadul Oii bridge road
Iron gates I Dam, border crossing point road
between Romania and Serbia
Moldova Veche, Sviniţa and Orşova- for waterway- by ferry
Serbia
Calafat, Bechet, Turnu Măgurele, waterway- by ferry
Giurgiu, Olteniţa and Călăraşi – for
Bulgaria
Brăila, Galaţi and Tulcea – in Romania waterway- by ferry

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The Danube ports in Romania satisfy the economic needs of the country, including
desires of tourists for visiting more sites on the Danube, that especially characterized
the yachting tourism, as ports are distributed along the entire length of the Danube
(Table 4).

Table 4 Danube ports in Romania

Port name Location Type

Moldova Veche Left bank Loading/unloading point

Orşova Left bank Loading/unloading point
Drobeta Turnu Severin Left bank Loading/unloading point
Gruia Left bank port
Cetate Left bank port
Calafat Left bank Loading/unloading point
Bechet Left bank Loading/unloading point
Corabia Left bank Loading/unloading point
Turnu Măgurele Left bank Loading/unloading point
Zimnicea Left bank Loading/unloading point
Giurgiu Left bank Loading/unloading point
Olteniţa Left bank Loading/unloading point
Călăraşi Left bank port
Cernavodă Right bank Operating terminal
Hârşova Both banks port
Turcoaia Both banks Loading point
Gura Arman Both banks Loading point
Măcin Both banks port
Smârdan Right banks port
Brăila Both banks port
Galaţi Both banks port
Isaccea Right banks port
Chilia Veche Right banks port
Tulcea Both banks port
Mahmudia Both banks port
Source: Hasenbichler, H.P., Soare,R., (2014), Manual of navigation on the Danube (Manual de navigaţie pe Dunăre, as original
in Romanian), Arvin Press, Bucureşti , pp. 93-95- adapted by the authors

Along the Danube, on the Romanian territory we can talk about the possibility of
developing sustainable tourism. There is a great variety and diversity of tourist
resources, both natural and anthropogenic.

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 Table 5 Important tourist resources of the Danube - Romanian territory

Natural tourist resources Anthropogenic tourist resources

The impressive relief in the gorge The Face of Decebal - located between
sector Eşelnita and Dubova - a bas-relief 55 m high
and 25 m wide - carved in rock between 1994
and 2004;
Nera’s Delta -
Cazanele Mari şi Cazanele Mici Including desires of tourists for visiting more
( “Cazanele Dunării” Natural sites on the Danube,at Grad point are the
Reserve) vestiges of the Dacian fortification Divici,
between river km 1065 - 1066 on a triangular
rocky hill. The fortress dates back to the
centuries 1 BC - 1 AD.
Caves Gaura cu Muscă, the water In Drobeta - Turnu Severin - the ruins of the
cave from Valea Polevii, Gaura Roman camp and the Roman baths (2nd -
Chindiei II, Gura Ponicovei; 5th centuries), the ruins of the Trajan Bridge
(2nd century) and - the ruins of the Severin
Fortress (13th century)
Rocks with bizarre shapes: in Orşova: the fortress of Dierna, founded by
Babacaia, Stânca lui Iorgovan Trajan;
The fossil site from Sviniţa; in Sviniţa commune, the ruins of the Tri Cule
fortification (Tri Kule or Triculi), built in the
17th century, between 1437-1439, old bastion
to stop the Ottoman expansion
The confluence of the Confluenţa Mraconia Romanian Orthodox Monastery -
Jiu with the Danube near Dubova - the current monastery was
built between 1999-2000, but its initial
construction was in 1523-
Depression basins and lakes, canal The Iron Gates reservoir
networks, ponds, marshes and
swamps
The temperate climate with sub- - folkloric and gastronomic diversity
Mediterranean influences,
transitional, arid or pontic,
depending on the sector is
favourable to tourism
Hardwood forests in the first Turkish remains on the island of Şimian
section with the presence of manna
ash, wild lilac, fig, wild vines,
meadow forests, reeds
Banat tulip (Hungarica tulip) - In Giurgiu there is the Clock Tower dating
unique in the world from 1777 and the Greek Catholic Church
"Buna Vestire" - built between 1863-1865
with the approval of Alexandru Ioan Cuza
and the interior painted by Ghe. Tăttărescu.
The rock partridge, the Egyptian In the town of Cernavoda, the “Anghel
eagle and the multitude of wild Saligny” Bridge, built by engineer Anghel
birds Saligny - inaugurated on September 14, 1895,
has an opening of 4088 m between the left
and right banks of the Danube Valley and the

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 Museum of History and Archaeology
Species of worms, molluscs and Panait Istrati memorial house in Brăila
crustaceans considered
"pontocaspic relics", the Dobrogean
newt, the land tortoise, the horned
viper, the beetle (Duvalis milleri)
and the scorpion (Euscorpius
carpathicus)
Sturgeons The fortified church “Sf.Precista” (1647) and
the Museum of Natural Sciences from Galaţi
Danube Delta Reserve - its North-Dobrogean Cultural Heritage Museum
biodiversity Complex, "Danube Delta" Museum of
Natural Sciences, Azizzie Mosque, a
foundation of Abdul Aziz, a Sultan of the
Ottoman Empire, and the largest mosque in
Dobrogea, all located in Tulcea

Fig.2 Pictures of tourist resources along the Danube

The Face of Decebal

Mraconia Monastery

Cormorants on the Danube

Source of the photos: Sava Cipriana, own photo album

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The multitude and variety of existing resources along the Danube offer the possibility
to develop sustainable tourism and economic and social development, especially in
the mountainous and deltaic areas.

Danube Delta

The Danube Delta is the place where the river flows into the Black Sea, and because
its journey was long and full of charm, the terminus could not be any less. It was
formed by the action of several factors:

• the lack of tidal oscillations in the Black Sea basin;

• the high flow of alluvium brought and deposited by the Danube at the
discharge;

• the presence in the discharge area of a coastal alluvial sea current, with general
direction north-east – south-west, predominant to the north-east winds;

• the existence of a well-developed continental platform and the presence of

shallow depths in the maritime sector in front of the mouths of the Danube.

“This area is located in the south - east of the country and north - western Black Sea
along the Danube, with the following geographical coordinates: 28°10'50" (Cotul
Pisicii) and 29°42'45" (Sulina) longitude east; 45°27 '(Chilia, km 43) and
44°20'40"(Capul Midia) north latitude. The Delta’s area is crossed by the three
branches of the Danube:

• Chilia, the northernmost, is the border (a sector) with Ukraine and has a
length of 104 km;

• Sulina, which measures 71 km and supports shipping;

• Sfântu Gheorghe, located in the south, has a length of 112 km” ( Sava, 2015).

The Danube Delta has been a UNESCO World Heritage Site since 1991, and according
to The Ramsar Convention on Wetlands, it is a wetland of international importance,
and in the IUCN taxonomy it is a category II protected area (national park). At
national level, the Danube Delta is classified as a biosphere reserve. The Danube
Delta Biosphere Reserve is part of the European Ecological Network Natura 2000.

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The physical-geographical units of the Danube Delta Biosphere Reserve (fig. 3) are:

• the delta itself– the Romanian sector (351000ha);

• Razim - Sinoie lake complex (114500ha);

• marine waters up to 20 m isobath (103000ha);

• the Danube riverbed between Cotul Pisicii and Isaccea (on the Romanian
territory 1300ha);

• the floodplain of the Danube between Isaccea and Tulcea (10200ha).

Fig.3 Map of the Danube Delta Biosphere Reserve

Source: http://www.ddbra.ro/harta-rbdd

The Danube Delta presents a functional zoning in which the strictly protected areas,
the buffer, the ecological reconstruction and the economic areas are distinguished.
The strictly protected areas are those in which the natural evolution of the area is

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followed with the least possible human intervention and are representative for the
natural, terrestrial and aquatic ecosystems within the reserve. The buffer areas are
located around the areas with full protection regime. The ecological reconstruction
areas are the portions of land within which the Reserve Administration carries out
activities to restore the ecological balance and to re-naturalize the affected area. As
for the economic areas, they are lands for agricultural, fish and forestry use, floodable
or dammed, as well as lands on which human settlements are located.

There are twenty strictly protected areas, and they account for 8.7 %% of the total
reserve area (Table 6).

Table 6 Strictly protected areas of the Danube Delta Reserve

Name of the strictly protected area Area ( ha)

Roşca -Buhaiova 9625
Letea Forest 2825
Răducu 2500
Nebunu 115
Vătafu- Lunguleț 1625
Caraorman Forest 2250
Sărături Murighiol 87
Arinişul Erenciuc 50
Popina Island 98
Sacalin Zătoane 21410
Periteaşca- Leahova 4125
Capul Doloşman 125
Grindul Lupilor 2075
Istria- Sinoie 400
Grindul Chituc 2300
Rotundu 228
Potcoava 625
Belciug 110
Ceaplace Island 117
Prundu cu păsări 187
Source: http://www.ddbra.ro/rezervatia/delta-dunarii/prezentare-generala/zonare-functionala-a19

The relief is one of accumulation characteristic of a delta, a plain in formation made

up of positive relief (ridges) and negative relief (Danube branches, canals, ravines,
lake depressions). The climate of the area is temperate, semi-arid continental, with
pontic influences.

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The flora and fauna biodiversity of the Danube Delta is impressive, influenced by
relief, climate and river waters. Therefore, the flora is represented by 2391 taxa (reed,
rush, water lilies, willows, oaks, floating plants, etc.), and the fauna is represented by
6197 species out of which 5622 invertebrates and 575 vertebrates. There are 362
species of birds in this reserve (egrets, pelicans, great bustards, herons, spoonbills,
etc.) and 55 species of mammals (otters, European minks, ermines, raccoon dogs,
wild cats, etc.).

The ethnic structure of the population shows the multi-ethnicity of the area, with
Romanians, Lipovan Russians, Ukrainians, Greeks, Turks, Gypsies, Hungarians,
Bulgarians, Germans and Armenians living in this area. There are 32 localities out of
which 25 are located inside the reserve and which, for the most part, retain the charm
of fishing villages. The traditional houses are built with a lot of good taste, mostly
made of earth, covered with reed, with side pediments and perforated plank
ornaments.

The points of entry into the Delta are Tulcea, Jurilocva and Murighiol, and the traffic
in the Delta is made on channels, or on dirt roads, which are located on ridges or on
the canopy of existing dams.

“Economic activities that are carried out in the area are: agriculture, forestry, fishing
and fisheries, industry, constructions, trade, tourism, transport, communications,
education, culture, health and public administration. As shown, tourism is one of the
activities practised in this protected area. Its main forms are for rest and recreation,
travelling, science, ecotourism, rural tourism, sport fishing and for practising water
sports”( Sava, 2015, p 155) .

The main tourist motivations that determine the movement of tourists to this area
are:

• knowledge of an original natural setting with a unique character in the world;

• spending several days in this special living environment;

• spending several days in the seaside-delta area;

• undergoing the balneo-medical cure;

• practising water sports in the special conditions of the Delta;

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 • knowledge of local traditions, crafts and specific gastronomy;

• practising fishing and sport hunting, within the limits stipulated by the law.

Within the concept of organizing Delta tourism and taking into account the main
tourist motivations, the need to increase the economic efficiency of this activity and
maintaining the ecological balance, the tourist offer of this area was oriented towards
the following forms of tourism:

Knowledge tourism - is the particular form of tourism practised that will continue to
hold the main share in the tourist flow, visitors seeking to see, in a short time, the
beauties of nature, places and people in this area, their history and customs. In this
sense, short excursions are organized to visit the Delta lasting one, two or more days
with Romanian and foreign tourists resting in seaside resorts or with those who travel
to Tulcea by various means of transport, as follows:

• day trips to visit the Delta - include visiting the "Danube Delta" Museum
Tulcea and then by boat, visiting canals, lakes and picturesque places of the
Delta, to form an image of this completely original living environment.
Excursions by hydro-buses are very interesting because they also depart from
the village of Murighiol, since from this locality you enter the canals, ravines
and lakes of the Delta, on much shorter routes, allowing tourists to visit a
much more picturesque sector than the one presented in the trips with
departure from Tulcea and without crossing the Sulina Channel twice;

• excursions for visiting the Delta lasting two days, which include visiting the
"Danube Delta" Museum Tulcea and then visiting some picturesque places in
the Delta, boat rides on the canals and ravines around the accommodation;

• excursions for visiting the Delta lasting several days allow a more intimate
knowledge of this area.

Leisure tourism, promoted in the localities of the Danube Delta and on the Black Sea
coast, is much preferred by tourists, especially Romanians, due to the natural
conditions offered by the area. This form of tourism is not coordinated by tourism
organizations, which is why no rigorous registration of tourists can be made.
Accommodation is made in hotels, tourist inns, guest-houses and with the locals. For
the access of tourists in the preferred localities, fast ships are mainly used, while for
the navigation on canals and lakes, the locals use their own boats.

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Health and wellness tourism is achieved by capitalizing on the healing properties of
sapropelic muds from Murighiol, recommended especially for chronic rheumatism.

Sports tourism is the one that confers the specificity of the tourist activities in the
Delta, by organizing the nautical tourism and the hunting and sport fishing parties, as
follows:

• nautical tourism - is a very interesting and instructive form of tourism, which

gives the possibility of a better knowledge of the Delta, but which requires
tourists a better sports training to travel around the Delta with small boats;

• photo-safari and birdwatching - either free or from specially arranged towers;

• sport fishing is an interesting form of tourism for Romanian and foreign

tourists, generated by the multitude of fish of the Delta. In order to practice
this form of tourism, the means of transport and the existing accommodation
facilities in the Delta were used through the measures taken to improve their
comfort conditions;

• sport hunting is a form of tourism that is of interest not only to Romanian

tourists, but also to foreigners, and is organized in accordance with the law
(LAW No. 82 of November 20, 1993 on the establishment of the "Danube
Delta" Biosphere Reserve, ART. 15^4, -Carrying out hunting activities on the
territory of the reserve is prohibited and constitutes a poaching offence,
sanctioned according to the law) on the economy of hunting on the hunting
grounds Razim, Caraorman, Uzlina, Gorgova, Crişan, Sulina, Mila 23, where
hunting wild birds and animals is permitted in spring, autumn and winter,
which contributes to the use of means of transport and accommodation in the
Delta and outside the summer tourist season.

Technical-scientific tourism - as a result of the natural setting of the Delta and

especially of its natural, floristic reserves and natural monuments. Of course, for this
purpose, the research facilities, and at the same time the conditions for the
development of national and international scientific events have been developed.

Ecotourism is the one that can support all the forms presented and practised in the
Danube Delta. By ecotourism we mean a variety of sustainable tourism, which takes
place in protected areas, its purpose being the knowledge and protection of the

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environment, of the local culture with the increase of the living standard of the
population.

The characteristics of ecotourism are (Honey, 1999, p.22):

• it involves a trip to natural destinations;

• minimal impact;

• it raises awareness on environmental issues;

• it offers direct financial benefits for conservation;

• it offers financial and emancipation benefits for the locals;

• it respects the local culture;

• it accepts human rights and democratic movements.

The variety and uniqueness of the natural resources of the Danube Delta (lakes,
beaches, biodiversity, special landscapes, ridges, etc.) can be more than enough for
any tourist, but there are also valuable anthropogenic resources (traditions, crafts,
gastronomy, historical relics).

Historical vestiges worth visiting in the area are:

• Troesmis Fortification - (3 km away from Turcoaia commune), Thracian-Getic

fortress;

• Noviodunum - Isaccea Fortress, Roman-Byzantine fortress with Celtic name,

built in 369 AD;

• Arrubium-Măcin Fortress, camp and settlement with Celtic name, mentioned

in documents in 100 AD;

• Dinogeţia - Garvăn Fortress;

• Chilia Veche Fortress;

• Salsovia Byzantine Fortress, Mahmudia (3rd century AD)

Currently, there is already a number of routes that tourists can choose from (Table 7).
Those on land are fewer, numbered D1-D, while those on water are numbered T1-T15.

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Table 7 Tourist routes in the Danube Delta

Land routes – trips Waterway routes

Letea (Sfiştofca) – Nebunu Lake- Letea Tulcea – Gârla Şontea – Mila 23 – Crişan –
Tulcea; this route can also be done as: Tulcea
– Gorgova – Mila 23 – Crişan – Tulcea

Caraorman – Caraorman Forest Tulcea – Litcov Channel – Crişan – Tulcea

Murighiol – Sărături Lake – Murighiol Tulcea – Stipoc Channel – Chilia Veche –

Tulcea

Tulcea (Tudor Vladimirescu) – Sireasa Tulcea (Câşla Lake) – Gârla Somova – Saon
Channel – Mila 35 Channel – Tulcea Monastery (Telincea Lake) – Tulcea

Nuntaşi – Histria Fortress – Nuntaşi Murighiol – Dranov Channel – Gura Portiţei

– Dunavăţ Channel – Murighiol

Sulina – Sulina Beach Murighiol – Dunăvăţ Channel – Cocoş

Channel – Mustaca Channel – Centură
Channel – Dranov Channel –
Murighiol (extension on Centură Channel
towards Lipoveni Channel and on Mustaca
Channel to Razim Lake, from where the route
can continue Gura Portiţei)

Sulina Beach Murighiol – Uzlina – Uzlina Lake – Isac Lake

– Gârla Perivolovca – Murighiol
Natura Trail (Sf. Gheorghe) Murighiol – Uzlina – Litcov Channel – Crişan
Channel – Puiu Lake – Erenciuc Lake –
Murighiol
Sfântu Gheorghe- Câşla Vădanei Crişan – Roşu Lake – Sulina – Crişan

Crişan – Mila 23 – Trei Iezere Lake – Crişan

Crişan – Magearu Channel – Sulina – Crişan
Chilia Veche – Sulimanca Channel – Matiţa
Lake – Rădăcinoasele Channel – Chilia Veche
Sulina – Cardon Channel – Periprava – Golful
Musura – Sulina
Sulina – Busurca Channel – Roşu Lake –
Erenciuc Lake – Sf. Gheorghe – Cordon
Litoral Channel – Sulina
Sf. Gheorghe - Gârla Turcească, till the
entrance to Meleaua Sf. Gheorghe – Sf.
Gheorghe
Source: http://www.ddbra.ro/activitati/turism/traseele-de-vizitare

The public institution under the Ministry of Environment (Law 82/1993, as amended
and supplemented), dealing with the environmental management of the protected

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area is the Danube Delta Biosphere Reserve Authority (ARBDD). For its good activity
there is the Government Decision no. 1217/2012 regarding the approval of the
Regulation on organization and functioning and of the organizational structure of the
DDBRA, with the subsequent modifications and completions. “Therefore, tourism
activities are also pursued by this institution. In this respect, its goal is to sustainably
exploit the wealth of natural and anthropogenic tourist resources, to preserve
biodiversity and give the resident population the opportunity to increase its revenues.

Some regulations were issued for the activity of tourism, namely:

• Access to the Danube Delta is conditioned by a fee in accordance with a permit

obtained from ARBDD Tulcea;

• Tourists have access only along the approved routes and under no
circumstances in the strictly protected areas;

• There are guides to accompany tourists on approved routes;

• In order to transport groups of tourists people will use small boats with electric
propulsion;

• Access to secondary routes is allowed only with row-boats;

• Camping is allowed only in established places;

• Floating hotels and transport vessels must be equipped with tanks for liquid
waste and garbage bins;

• Every tourist arrived on his own is to collect all packaging and remove them
from the perimeter of this reserve;

• Access to the bird colonies, cutting trees and gathering any kind of plant are
prohibited;

• Bird watching is done from special high towers;

• Sport fishing and hunting are permitted in approved areas and will be
organized by sport associations.

Besides these rules developed by ARBDD members there is a number of orders,

decisions and laws that support sustainable tourism, the protection and the
conservation of the Danube Delta. Among them we can mention:

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 • Government Decision no. 763/2015 for the approval of the Management Plan
and the Regulation of the “Danube Delta” Biosphere Reserve.

• Decision no. 538 of July 8, 2015 approving the rules on ships and boats access
and movement along the canals and inland lakes of the Biosphere Reserve
"Danube Delta";

• Order no. 43/ /310 from February 2020 regarding the establishment of
prohibition periods and areas of fishing, and of protection areas of living
aquatic resources in 2020;

• Law no. 82 of 20 November 1993 on the establishment of the Biosphere

Reserve "Danube Delta" (with the subsequent completions);

• Decision no. 1066 of 20 October 2010 on the creation of the protected area to
some areas of the Biosphere Reserve "Danube Delta" and including them
under the scientific reserve category.

• GEO no. 23/2008 on fishing and aquaculture with subsequent amendments

and completions;

• WATER LAW no. 107 of September 25, 1996, with subsequent amendments
and completions;

• Annex. 1 to Tulcea County Council Decision no. 8 of 30 January 2009 -

REGULATIONS of organization and development of economic, tourist and
leisure activities in the Danube Delta Biosphere Reserve;

• ORDER of the Ministry of Environment and Water Management no. 111 of

January 30, 2007 for the approval of the Guidelines regarding the access and
circulation on the inland channels and lakes in the perimeter of the "Danube
Delta" Biosphere Reserve;

• Decision of the Governor no. 236/23.06.2016 for the approval of the

Guidelines regarding the access and development of activities in the coastal
areas of tourist interest within the perimeter of the "Danube Delta" Biosphere
Reserve.

The actions taken to develop and promote sustainable tourism are:

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• Management Plan for the Danube Delta Biosphere Reserve which contains a
section on tourism (Theme D - Tourism and leisure with the objectives:
Promoting traditional local tourism and Visitor management in the Danube
Delta Biosphere Reserve);

• The Integrated Management Plan for the Danube Delta area (PMIDD),
financed by the SOP Environment Program, Priority Axis 4, at session 5.

• Strategic Plan for the development of sustainable tourism in the Danube Delta
- a document initiated within the project "Developing the potential for
sustainable tourism in a wetland Natura 2000: Case study Danube Delta ROE
041/06 (implemented in 2009);

• September 1 - Danube Delta Biosphere Reserve Day (Order no. 539/9 May
2008 issued by the Ministry of Environment and Sustainable Development);

• Opening information and environmental education centres in various places in

the area (Tulcea, Sulina, Crișan, Sf. Gheorghe, Murighiol, Chilia Veche);

• Establishing the non-profit organization Association of the Danube Delta

Tourism Employers;

• "Lotca Habitat: Pescaturism in Danube Delta" project implemented between

2014-2015 by the "Ivan Patzaichin - Mila 23" Association in partnership with
the Danube Delta Biosphere Reserve Authority, Slow Tourism Company
(CTL), is financed by the German International Cooperation Agency (GIZ)
through Danube Competence Centre (platform for cooperation in tourism in
the Danube region);

• "Reed is awesome!" - campaign to promote traditional crafts in the Danube

Delta (2014);

• Dining with the people of the Delta – Researching the traditional cuisine of the
Danube Delta;

• Opening the Information and Promotion Centre for the eco destination
Danube Delta in Tulcea (2015);

• International Folklore Festival "Golden Fish" - Tulcea (annually in August);

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 • International Independent Film Festival "ANONYMOUS" - St. Gheorghe
(annually in August);

• 15 tourist destinations of the Danube Delta entered the portal of TUI Travel
Hotelbeds after signing a partnership (2013);

• "Tulcea’s Days " and the International Danube Festival - Tulcea (annually in
August);

• "Celebrations of the Delta" Festival - Sulina (annually in August);

• "Ivan Patzaichin" fishermen nautical competition - Tulcea - Maliuc - Crisan -

Sulina (annually in August);

• Crișan + Caraorman + Mila 23 project - ecotourism for the future,

implemented by the “Ivan Patzaichin - Mila 23” Association in partnership
with the Romanian Ornithological Society (SOR)

• Awareness campaigns “I want to live. Help me!" and "Keeping the Danube
Delta Clean";

• 2020- The National Contest for Ecological Poster Projects entitled "A
CHANCE FOR THE BLUE DANUBE".

We can state that there is an ongoing concern of the authorities, NGOs, personalities
and local people regarding sustainable tourism in the area.”( Sava, 2015).

Under the current conditions of the coronavirus pandemic, tourism in natural areas
offers tourists enough space and an acceptable social distance, where they can enjoy
landscapes, fresh air and breathing space.

The Integrated Strategy for Sustainable Development of the Danube Delta (2030)
also takes into account tourism, so the sectoral objectives are:

• Development and promotion of the Danube Delta as a sustainable tourist

destination;

• Establishment of a local management of destinations;

• Supporting the local population to open small tourist businesses.

• In order to achieve these objectives, the following are taken into consideration:

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 • Improving transport to the area;

• Better information for potential tourists;

• Offering quality, classified accommodation services;

• Staff training (training locals);

• Ensuring the safety and health of tourists;

• Integration of tourism in the local economy;

• Good management of the Danube Delta.

All these can be achieved by accessing European funds through the following
programs:

• Regional Operational Program (ROP);

• National Rural Development Program (NRDP);

• Large Infrastructure Operational Program (LIOP);

• Administrative Capacity Operational Program (ACOP);

• Human Capital Operational Program (HCOP).

The effects of tourism development in the Danube Delta

The Danube Delta is a tourist attraction that grows from year to year. Existing
accommodation facilities in the analysed area are designed so as to meet the needs of
tourists without significantly affecting the environment.

Table 8 Evolution of existing accommodation facilities and capacity

Year Accommodation Existent accommodation Functioning

facilities capacity (number of beds) accommodation
(number) capacity (beds-days)
2015 138 3907 560259
2016 136 3690
606684
2017 125 3890
674955

258
 2018 286 7645 1126170
2019 254 7205 1160026
Source: www.insse.ro TEMPO- Online- Turism-

The indicators presented (Table 8) have evolved according to the needs of tourists
and the rules and criteria for classification and operation of accommodation
establishments in force, as well as the principles of sustainable tourism development.

The evolution of the number of tourists has fluctuated and is influenced by weather
conditions in the year under review.

Table 9 Evolution of tourist arrivals, overnight stays and average stay

Year Tourist arrivals (no. of Overnights (number) Average stay (days)

tourists)
2015 69076 138177 2,00
2016 73114 149798 2,05
2017 100423 210334 2,09
2018 165431 371797 2,24
2019 166411 380375 2,28
Source: www.insse.ro TEMPO- Online- Turism (processed data)- latest update 20.03 2020

Generally, tourists arrived in the Danube Delta opt for short visits, for the weekend or
participation in an event rather than for long stays, which is seen from the average
stay registered in the years taken into account. Of the total tourists accommodated in
the area, the majority are Romanians, as shown in Table 10.

Table 10 Share of tourists arriving in the Danube Delta according to origin

Year Romanian tourists Share of Romanian Foreign Share of foreign

(number) tourists in total tourists tourists in total
tourists (%) (number) tourists (%)
2015 53384 77,29 15692 22,71
2016 55747 76,25 17367 23,76
2017 76281 75,96 24142 24,04
2018 140077 84,67 25354 15,33
2019 146006 87,74 20405 12,26
Source: www.insse.ro TEMPO- Online- Turism (processed data)

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The increase in the number of Romanian tourists in the last analysed years was
significant, compared to the evolution of the number of foreign tourists. They were
attracted by the local gastronomy and sport fishing. The tourist centres in the region,
where most tourists go, are Tulcea, Sulina, Măcin, Sfântul Gheorghe, Murighiol and
Jirilovca.

The effects of tourism development in a sensitive area such as the Danube Delta must
be carefully monitored, and activities must respect the principles of sustainability to
be mostly positive.

Table 11 The effects of tourism development in the Danube Delta

Positive effects Negative effects

Preserving traditions and crafts, authentic folkloreChemical and physical pollution of
waters and destruction of ecosystems
Stopping young people from leaving the area Extinction of some species of flora
and/or fauna
Reducing unemployment The emergence of the kitsch in local
architecture
Increasing the income of the local population and Reeds deforestation
the quality of life
Increasing the knowledge and training of the locals Sound pollution
Awareness of the importance of maintaining Fishing during prohibition periods
ecosystems by locals
Attracting European funds for biodiversity Hunting protected species
conservation
Development of certain economic activities Excessive use of motor boats
Avoiding the entry of tourists in the strictly The emergence of investors from other
protected areas areas
Empowering the population and tourists The desire to make a quick profit

The effects of tourism development in the Danube Delta are economic, social and
ecological.

Conclusions

Global tourism is currently suffering from the pandemic caused by the new SARS-
CoV-2 coronavirus. This will generate a number of changes in the behaviour of
tourists and the choice of holiday destinations.

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Friendly destinations will be chosen at the expense of crowded and established ones,
thus, ecotourism and agritourism will attract more and more people.

The Danube Delta, an oasis of peace and enviable biodiversity, the youngest land in
Europe, internationally recognized by the United Nations Educational, Scientific and
Cultural Organization (UNESCO) since 1991 may become increasingly interesting for
potential tourists, especially for Romanians, but not exclusively.

At present, the number of tourists arriving in the area is quite small, the vast majority
of them being passionate about gastronomy and fishing.

National and local authorities together with various environmental and tourism
associations, sports associations support the sustainable development of tourism in
the Danube Delta. The adoption of a specific legislation, of a development strategy
and the implementation of some programs and projects in the area generates
economic, social and ecological effects. Respect for nature, the locals and their
traditions by tourists, but also awareness and responsibility of locals for the
environment, local culture and tourists can generate positive effects.

References

Administratia Fluviala a Dunarii de Jos R.A. Galati. (2016). HyQ DANUBE.

https://www.afdj.ro/ro/content/hyq-danube
Administraţia Naţională “Apele Române” (2015). Planul de management al riscului
la inundaţii fluviul Dunărea. http://www.rowater.ro
Administrația Rezervației Biosferei Delta Dunării. (2020, Apr 9). In Wikipedia.
https://ro.wikipedia.org/wiki/Administra%C8%9Bia_Rezerva
%C8%9Biei_Biosferei_Delta_Dun%C4%83rii
Delta Dunării. (2020, May 20). In Wikipedia.
https://ro.wikipedia.org/wiki/Delta_Dun%C4%83rii
Dunărea. (2019, Oct 13). In Wikipedia. https://ro.wikipedia.org/wiki/Dun
%C4%83rea

Hasenbichler, H.P. & Soare,R. (2014). Manual de navigaţie pe Dunăre. Arvin Press.
Honey, M. (1999). Ecotourism and Sustainable Development: Who Owns Paradise?
Island Press.
Info-Delta. (2019, Jan 23). Redescopera Delta Dunarii si Dobrogea de Nord.
http://www.info-delta.ro/

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Legea 14/1995 – ratificarea Convenției privind cooperarea pentru protec ția și
utilizarea durabilă a fluviului Dunărea.
Legea 30/1995 – ratificarea Convenției privind protecția și utilizarea cursurilor de
apă transfrontiere și a lacurilor internaţionale.
Monitorul Oficial 179 din 4 martie 2020 -ORDINUL nr. 43/310/2020 privind
stabilirea perioadelor și zonelor de prohibiție a pescuitului, precum și a zonelor
de protecție a resurselor acvatice vii în anul 2020.

RAPORT 2.2, (iunie 2015) Strategia Integrată de Dezvoltare Durabilă a Deltei

Dunării (2030). https://www.fonduri-ue.ro/images/files/studii-
analize/48101/6._Raport_Strategie_ro.pdf

Rezervatia Biosferei - Delta Dunarii. (n.d.). Delta Dunării.

http://www.ddbra.ro/rezervatia/delta-dunarii
Sava, C. (2015). Aspects an the development of sustainable tourism in the Danube
Delta. In Proceeding, X International Symposium on Recycling Technologies
and Sustainable Development (pp.152-158). Bor, Serbia: Tercija.
Sava, C., Pinteală, G. & Goloşie, M. (2014). Tourism and pollution versus Danube
legislation (Example Cazane, Romania area). Journal of Danubian Studies and
Research Vol.4 nr.1, 162-169. http://journals.univ-
danubius.ro/index.php/research/article/view/2575/2238
TEMPO- Online (2020). Turism. http://www.insse.ro
UNWTO. World tourism barometer and statistical annex January 2020.
https://www.unwto.org
WTO, WTTC, (1995). The Earth Council-Agenda 21 for the Travel an Tourism
Industry: Towards Environmentally Sustainable Development.

262
 GASTRONOMY OF BOSNIA AND HERZEGOVINA IN
THE FUNCTION OF REGIONAL TOURISM

Biljana KOZIĆ – RAĐ ENOVIĆ , PhD1

Marija KNEZEVIĆ , PhD2

Abstract

The geographical position of Bosnia and Herzegovina (hereinafter B&H) is very

favourable for the development of tourism. B&H is a traditionally agricultural country
of pleasant climate and unspoiled nature. Its potential to expand organic food
production is an important factor in modern rural, agritourism, sports and
recreation, health and culinary tourism. Already recognised for the genuine
hospitality of its people, B&H could develop into a desirable tourist destination. For
that to happen, more focus should be put on tourism as a generator of development.

The importance of social entrepreneurship is inversely proportional to the country's

current underdevelopment compared to western EU countries. Agriculture, food,
food production and distribution industry hold great potential in B&H, but only with
the state backing by recognizing the importance of social entrepreneurship for its
development.

Key Words: hospitality, gastronomy, holistic management, tourism, social

entrepreneurship, Bosnia and Herzegovina

Introduction

Global tourist trends and predictions bring South-East Europe and the Balkans into
focus, which also increases the importance of B&H in the regional tourism. B&H is a

1University of Business Studies Banja Luka, Faculty of Tourism and Hotel Management, Banja
Luka, Bosnia and Herzegovina. E-mail: biljana.radjenovic@univerzitetps.com

2University of Business Studies Banja Luka, Faculty of Tourism and Hotel Management, Banja
Luka, Bosnia and Herzegovina. E-mail: marija.knezevic@univerzitetps.com

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point between the East and the West, at the crossroads of the Mediterranean and
continental climates with a varied relief, rich history, demographic, ethnic and
cultural diversities of the people who have lived in it. Tourism in B&H is becoming a
factor that breaks all barriers and boundaries, be they historical, ethnic, cultural,
religious, or demographic. In the process, gastronomy is gaining in importance, as all
tourists have to eat, no matter what their main motivation for travel is. However, the
rich gastronomy in B&H has not been promoted enough. It has to obtain its proper
place and treatment in the tourist offer of the wider region. B&H gastronomy
incorporates tradition, culture and customs of the peoples who lived or live in this
area. Tourists like home-made, local and regional food and drinks, 3 and that interest
is an important motive for visiting a tourist destination, especially if a gastronomic
offer is linked to other tourist attractions. What to eat, how to prepare and present
food is a poorly studied field, but a very important one for receptive tourism.

Thus, the initial assumptions are the following:

1. Gastronomy is an important factor in tourism, especially culinary, agricultural

and agritourism,

2. Gastronomy can significantly improve receptive B&H and regional tourism

with better culinary and service management and cross-border cooperation
and connectivity.

Since these points have not been explored much, the paper should be beneficial to all
stakeholders in the tourism industry, as it points to the importance of gastronomy in
tourism, and on the gastronomic richness of B&H.

The methods used in the paper are observation, comparative analysis, a survey of
hotel guests, interviews, analyses of guest books and other forms of communication
with guests in fifteen years’ time.4 Only a few papers have been published in this field,
thus the results of surveys from the neighbouring countries were also used, especially
from Serbia and its province Vojvodina. Scientific research in this area began in the
late twentieth century (Gummesson, 1991), as the methods used in goods sector could
not be applied. Courtesy, personnel appearance, the impact of education and

3Here gastronomy includes drinks.

4 Main source of guests’ opinions are room questionnaires in family hotels which have been in
business for 15 years now (Hotels: IDEJA, ZAMAK and Motel DRAGANA in Banjaluka), Book of
impressions and Book of complaints.

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communication on the one hand and guests impressions on the other , and only on
the third side is the quality of food produced with important elements: way of
preparation, serving, in what sort of environment; all these are important elements of
service which is hard to measure and number.

Gastronomy In Tourism Function – Global Trends

Tourism is becoming an increasingly important factor in development of global

economy, especially for small countries in crisis and transition such as B&H. These
changes can also be seen in the tables 1 and 2.

Table 1. Flow of special distribution of international tourist turnover

Difference
% share in tourist arrivals
Region

1990 2000 2010 2015 1990/2015

World (totally) 100 100 100 100

Europe 61.8 57.8 50.14 48.90 - 9.2

America 20.3 18.6 14.40 13.90 - 4.5
Eastern Asia and Pacific 11.9 15.7 17.70 18.70 + 4.4
Africa 3.3 3.9 3.8 3.90 + 0.4
Australia and rest of the world 0.2 6.9 14.40 17.90 +11.3
Source: Maric, R. (2007), p. 81.

Table 2. Arrivals of tourists in B&H per year (domestic and foreign)

Tourists 2003 2005 2007 2009 2011 2013 2015

Domestic 67% 63% 66% 69% 60% 59% 57,14

%

Foreign % 33% 37% 34% 31% 40% 41% 41,80

Total: 354.441 351.280 450.526 491.934 522.729 555.33 577.300

2
Source: B&H Agency for Statistics, http://www.bhas.ba/

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The tables show that contemporary tourists are more and more interested in
developing countries, countries which are “not spent” in touristic sense. This should
be taken into account by local touristic experts as well as a message from the Miločer
economic forum (Miločer, 2008) “Wearing global uniforms is not the only chance for
small countries”.

Tourism, as one of the fastest growing industries of the modern age, strongly
influences the development of the hospitality industry. Hospitality is a sector of the
economy in which, more than in other sectors, personnel training is important. Thus,
the education of personnel is one of the most important tasks of hospitality
management. Hospitality industry personnel greatly influence the quality of products
and services, and consequently the success of a business (Littlejohn and Watson,
2004, and Connolly and McGin, 2006). The level of education, innovativeness and
ability to adapt to changes in the turbulent tourism market are the most important
success factors of hospitality today. Only educated and trained staff can establish a
high nutritional, health and safety system of serving and ensure overall guest
satisfaction. Important factors of satisfaction for modern guests/tourists include: the
restaurant location, interior, service effectiveness (Pratten, 2003), price, staff
appearance and their physical and mental preparedness to see every guest as an
individual with their specific needs and habits. Furthermore, tastes of guests are
different, as well as their perception of food (Ristić, 2009). In addition to this,
hospitality is increasingly important for modern tourists (Gagić, Knežević, 2013).

Importance of Local and Regional Gastronomy for Tourism

Development

Food is an important element of tourism (Henderson 2004), whether we see it as a

physiological (necessity) or hedonistic (pleasure) factor. The research shows that
tourists spend one-third of the money (travel arrangements) on food, which means
that gastronomy is an important factor in the tourism business (Tešanović, 2013).
Through a gastronomic offer, historical, ethnic, cultural heritage of a destination is
promoted. Bosnia and Herzegovina is famous for the diversity of all kind, as well as
for the potential to develop a variety of culinary offers. These, based on the origin of
goods and preparation techniques, are divided into:

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 • Domestic – local meals: meals related to a household or a restaurant, most
often it is a recipe of the chef, but the meal is made from groceries from the
nearest market;

• National – regional: meals from the wider region, made of groceries from the
region and

• International –well- known meals, from all over the world (Tešanović, 2010).

Traditional food has always been an element of a national cultural heritage or a

tourist destination, reflecting the lifestyle in that region. Types of food, cooking and
serving techniques speak about the history and the people who ruled Bosnia and
Herzegovina, which was, as opposed to most European countries, for centuries a
country for which imperial governments of Turkey, Germany, Austria-Hungary
fought. The dishes such as Bosnian Pot, tufahije, baklava (Turkey), Wiener schnitzel,
various stews (Austria-Hungary) are indicative of those periods. Furthermore, the
significance and importance of a gastronomy offer goes in two directions:

1. Authentic food as a unique experience the tourists want and

2. Possibility of extra earnings through branding and sales of the food from a
destination, whether tourists eat it or buy it to go.

McKercher and associates (2008) point to the importance of authentic dishes for the
creation of a unique and genuine gastronomic offer. This offer can increase tourist
motivation and can be a significant factor in the economic development of a
destination at all levels: local, regional and national. The research on the example of
Vojvodina (Serbia) provides the structure of the food offered in the sample of 147
catering facilities (Tešanović et al. 2012), as shown in Figure I.

This research can be used in the case of Bosnia and Herzegovina, as there are great
similarities in the culinary habits, history and culture with some differences ( climate,
invaders and lifestyle). For a comparative analysis, the share of certain types of food
is important: local, regional and international. Where the participation of local food is
less than 1/3, and international foods have a large share. This study in the province of
Vojvodina shows another disadvantage: the overall representation of authentic local
and regional food in catering-tourist facilities in Vojvodina: local - domestic food
accounts for only 10%, while the share of international dishes is too high (46%) and
44% of national dishes, which is satisfactory. (Tešanović et al. 2012).

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 Figure 1. Structure of offered food according to the preparation and groceries
authenticity

Figure 2 Average structure of food offer in Vojvodina (Serbia)

Simple look at the menus in restaurants in B&H shows that the ratio is similar, which
means that there are too few local dishes and too many international dishes. This is
unfavourable from our point of view i.e. receptive tourism development. The global
trend in tourism is a growing demand for local or national dishes (Tešanović, 2012).
This should be an important reference to local governments, as well as to tourism and
professional associations to pursue the policy of tourism development in the direction
of enhancing participation of local and national food.

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 Analysis Of The Guests Experiences “EkoHotels” Regarding
Gastronomy Offer

In the analysis we used room and reception questionnaires, as well as books of

impressions and complaints. Throughout more than 10 years, the forms were filled by
9,745 guests of all three hotels, whereas the part which refers to gastronomy and
hospitality was filled by 6,015 people.

Table 3. Number of guests in facilities of „EKO HOTELS“, from 1999 to 2015 5

Number of Local Foreig Motel DRAGANA Hotel IDEJA Hotel ZAMAK

guests guests6 ners
1999-2015. 2450 3565 3880 1662 473
local foreign local foreign local foreign
1999-2015. 1610 2270 483 1179 120 353

Our research questioned how important food is in selecting a restaurant or a hotel. It

showed that food played role as a motive in 22.67% in relation to other factors.

Table 4. Motives for selection of a restaurant or a hotel

Motel DRAGANA Hotel IDEJA Hotel ZAMAK

Closeness to the city centre 6% 44% 26%

Personnel Courtesy 33% 35% 18%

Good food 38% 8% 22%

Big and comfortable rooms 12% 15% 34%

Other, add 11% 6% 2%

The figure shows some important information:

5Number of guests is different also due to other factors: Hotels Ideja and Zamak are in the centre
of the city, while motel DRAGANA is a facility outside the city, closer to nature, on the banks of
Vrbas river. Motel DRAGANA and Hotel ZAMAK were openned in 1999, whereas hotel IDEJA
was opened in 2003.

6Local guests are guests from B&H and from Serbia and Montenegro (as they were then treated
as local guests).

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 • Foreign guests prefer local food, while local guests want to try international
specialities7

• Guests like to try local dishes and that should be an important incentive for
hospitality managers to increase the percentage of local dishes.

Figure 3. Opinions of guests of "EKO HOTELS" on food in restaurants

Thus, in B&H restaurants both local and international food should be represented,
but local food should be more dominant. Along with this, there is an increasing need
to eat according to the "Slow Food" system from the production to final consumption.
B&H is an ideal destination for this new concept of return to nature because it has
"slow" in the system of life, work, leisure time and of course the preparation and
consumption of food. Some regions in B&H are famous for their specialities: Banja
Luka ćevap, Sarajevo tufahije, Mostar baklava, Jablanica lamb. This food is
accompanied with other special dishes, serving techniques, customs and local drink
e.g. the famous local brandy rakija and wines from Herzegovina).

Based on the opinions of the guests in "EkoHotels" expressed through the guest book,
the book of impressions and complaints, it can be concluded that a good service and
communicative staff can significantly reduce possible mistakes in food preparing and
arranging (Knežević, 2009). Also a good management, a pleasant environment and
communication can reduce the effect of bad furnishing, interior or exterior, as the
guests emphasised food quality even over the cleanness and price when it comes to
visiting again. Guests who are returning, in most cases emphasise: the courtesy of the

7B&H has no tourism tradition and a newer tendency is an increased number of foreign guests.

270
staff, friendly environment and delicious food, and then they mention the price. So,
all these factors can significantly strengthen a brand of a catering facility, a tourist
destination and a country.

B&H Gastronomy is included in the "Slow Food" European network with over one
hundred thousand members in 160 countries and over 1300 convivia, 2000 food
communities, over 1000 cooks, 400 scientists and similar institutions and individuals
working on this idea. "Slow Food" is the general orientation of B&H gastronomy
which promotes, through convivia, food produced locally and thus favours its
producers. This is important for small countries in transition where there is potential
for production of relatively healthy food which was totally neglected. In B&H there
are several convivia who organize activities such as wine tasting, workshops, visits to
farms, screening, school gardens and food workshops for children, occasional
promotional and sales markets (Agrojapra and Promotour Prijedor). 8 These are
organizations that defend our right to enjoy the food, thus promoting good and clean
food, and achieving a broad social interest: supporting the local community,
connecting food producers and co-producers, educate consumers, protect the
biodiversity of the local environment and promote networking and exchange of
experiences. B&H has a close cooperation with the TERA MADRE and Slow Food
network in Italy, working with them on several joint projects in the field of safety and
survival of traditional sustainable methods of production of indigenous varieties,
species and varieties of food preserve and protect local landscapes and regionalism,
fix existing and create new strong connections among food producers, consumers and
all the relevant institutions. The ultimate goal is to create a strong and effective local
community that is self-sustainable. In this direction, there are also some activities
such as the promotion of short production chains with short transport “from a farm
to a table”, convergence of producers and co-producers, creation of educational farms
where workshops are carried out in accordance with the principles of Slow as well as
training programmes on food production and flavours, including "Journey to the
beginnings of taste". In these activities the Presidiums are formed and they include
support projects for small groups of manufacturers of selected products.

8 www.agrojapra.com, www.promotourprijedor.com

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 Sustainable development and social entrepreneurship in
Bosnia and Herzegovina

B&H and its entity Republika Srpska are dominated by small, private, mostly family
businesses, with their own mission, vision and strategy, created by the owner or
manager and relatively successfully withstand shocks from the environment.
However, their business is questionable in the long term, because they may fail to
resist all the shocks of globalization if they do not connect or network in time, i.e.
connect to systems based on competitive advantages, the attractiveness of the
destination or the specifics of management. This connecting may enable many
opportunities, or alleviate the weaknesses, errors and omissions. In particular, it is
possible to carry out research and control of prices, promotion, open new distribution
channels, work to increase service levels, improve staff through training in the
centres of larger systems or establishing new centres and the like. Thus, economic
activity can flourish for management of "total quality", formulated by Deming (1996),
which can be a guideline for managers to do more in terms of professionalization of
management. The main guidelines are:

• insisting on quality, not quantity of products and services,

• the importance of human resources and their intimate connection with the
management,

• the need for lifelong learning in all sectors and at all levels,

• increasing the motivation of employees to achieve better results,

• monitoring trends in the environment

There are various styles of management and leadership, with more or less success,
depending on how manager is able to choose the model that corresponds to a given
system or stage of development with his/her knowledge, imagination and intuition.
In general, smaller companies have a more authoritative style if there is one owner or
if the owner and manager is one person, and more democratic in situations where
there is a larger system, more units of the company, more owners and managers, and
if the system is spatially dispersed, and the communication within the system is less
frequent.

272
It may be noted that senior staff prefer authoritative management methods, while
younger managers prefer to delegate responsibilities to employees, encourage them
more to create and are less vain in respecting the views of workers. Research shows
that the choice of mode of governance and leadership in our economy is greatly
influenced by: time, place, destination advantage, and proximity of competition,
conditions and way of life in the region, level of standards and education of
employees, culture and way of education. Given all this, in our conditions, theorists
recommend democratic and other various kinds of mixed style of management, as
they can satisfy the mentality of our employers and our employees, level of education
and the education system and opportunities for further training, and finally the moral
characteristics of our workers and managers.

The Japanese model that has proved to be highly productive. It is based on the thesis:
"live to work and continually learn", "senior work - more modesty", "encouraging
innovation, total quality control, time accuracy and quality." The orientation towards
social entrepreneurship is a key category of the Eastern model of business ethics and
leadership.

Whatever model is used, tourism is an industry that must rely on the concept of
holistic marketing and cannot count on growth and development if holistic marketing
is not applied consistently (Rađenović Kozić, 2013.). This is important for the tourism
of Bosnia and Herzegovina, yet does not seem to be understood. Understanding the
market of the 21st century is the starting point for competitiveness and therefore this
paper stresses a holistic approach to the issue.

The importance of social entrepreneurship in the economy of

B&H

“There are many creative, altruistic, ethical people with innovative ideas. But only
one in a thousand possesses entrepreneurial qualities required to run large-scale
social change “ W. Drayton

Entrepreneurship is often identified with starting own business, although it can be

applied to all levels of entrepreneurial thinking and action: the individual level, the
enterprise level – organizations or at the level of society or the wider community.
Social entrepreneurship is still unknown to many people in our country, especially

273
those who have not had the opportunity to meet with this phenomenon in earlier
experiences.

What is social entrepreneurship?

Every enterprise aims to create new value. Social entrepreneurship is a unique in that
it deals with identifying and solving social problems such as social exclusion, poverty,
unemployment, environmental pollution and others. The focus of social
entrepreneurship is to meet social needs. Therefore, social entrepreneurship is an
important driving force for social and economic development of each country, and its
importance is increased when an economy is declining.

Muhammad Yunus (Muhammad Yunus, 2006), founder of the Grameen Bank

(Village Bank) and other social enterprises that have changed the lives of millions of
people around the world, the winner of the Nobel Peace Prize for 2006, in his book
"For a world without poverty" (2009 ) defines social entrepreneurship as "any effort
to help other people." This initiative can be economic and non-economic, profit and
non-profit.

The importance and power of social capital and its impact on the improvement and
development of the life standard is a big and yet often in science and theory
underestimated. It is particularly important for countries in transition, developing
countries and former socialist countries. The phenomenon of social entrepreneurship
arises from the very beginning of the development of private entrepreneurship, and
its importance has increased in the last twenty years.

Drucker (Peter Drucker) favours this phenomenon in the future compared to

traditional entrepreneurship. Increasing social business arises from the incapability
and the inability of many governments to the humanitarian activities to fulfil social
expectations and improve the standard of the majority of the population. The
importance of social entrepreneurship is growing due to the fact that the gap between
rich and poor is constantly increasing and countries show an inability to influence the
deepening of the gap. This has, as the greatest consequence, the disappearance of the
middle class of the society, which is the basis of any future plan for the development
of both manufacturing and services.

274
The eighties of the 20th century were viewed as an industrial society in which science
became a direct productive force of society, technology and knowledge. Thus, its
imperative was "change based on creativity". Of course, any change carries the risk,
which is increased along with the size and speed of change. In such an environment,
entrepreneurship becomes a key production factor and a development factor at a
community, organization or individual level. The importance of entrepreneurship
grows because it creates new jobs, employs workers, develops personal potential and
thus enables the realization of social goals. According to the definition the
entrepreneurship is "the mindset, i.e. the process of creating and developing
economic activities by combining risk, creativity and innovation with sound
management structure within a new or existing organization."

Basic types of entrepreneurship exist even today:

Traditional entrepreneurship is practised in micro, small and medium enterprises

with the fundamental aim of making a profit for the owner of capital. This was a
dominant form for a long time, given that we have an economy that has a tradition of
capitalism only a few decades long.

Corporate entrepreneurship is in large corporations and organizations, where the

goal to profit or increase the capital of owners is combined with the objective to
develop individual skills and creativity of young people employed. The workers may
one day establish their own small businesses, after they gain certain skills and
develop their creativity in the framework of the corporation.

Social entrepreneurship is the application of the entrepreneurship principles in the

social sector with the aim of improving the quality of life. It strives to achieve both
social and financial objectives. Social entrepreneurship is related to the development
of social economy and this economy encompasses the area of economic activities
between the market, state and non-market sectors, in order to achieve certain social
and economic activities for citizens. Here companies that are not only guided by the
interests of capital; representatives of civil society join to create companies that
would meet the needs of target social groups or communities.

Social entrepreneurship is not the same as community entrepreneurship, since

community is somewhat broader concept of social categories. It is not non-profit,
because it is backed by financial effect. Institute for Social Entrepreneurship defines
it like this: "Social entrepreneurship is an art of simultaneous pursuit of financial and

275
social return of investment" (The Institute for Social Entrepreneurship in 2005). This
definition comprehensively explains the relations of commercial and social
entrepreneurship, without giving importance to the creation of new values.
Characteristics of social entrepreneurship are given by Hibbert and Hogg (Hibbert
and Hogg 2011), arguing that social entrepreneurship is the use of entrepreneurial
behaviour to achieve social objectives, as opposed to commercial entrepreneurship
whose goal is profit. Through social entrepreneurship we come to the idea of the
social economy, where profit is also present, but not in the first place and not as the
main goal, while the main goal is: sustainability of the organization, job creation,
employment of marginalized groups, and of course profit.

Social entrepreneurship is important for countries in transition, such as ours, given

that the state still has no built mechanisms to protect those social categories. If there
are laws about this, they might not be implemented because due to the lack of
funding. Therefore, the aim of this entrepreneurship is the creation of new social
values. The first and most important power of this entrepreneurship (and other as
well) is an entrepreneur. He/She must have certain personal qualities, but also be
ready to invest capital to start such an enterprise. The definition of such an
entrepreneur is different, depending on what theorists focus on. The entrepreneur
usually had a passion for the business, focus on the product and the consumer,
persistence despite the failure and executive intelligence. He/She is innovative,
creative and willing to take risks, but also has modern managerial skills. It is a
person who promotes achieving social goals, and who reinvests his profits (excess of
revenues over expenditures) in further development of the activities specified in the
statutes or in the wider community. The entrepreneur takes the economic risk for his
initiatives aimed particularly at vulnerable or marginalised groups. Thus, providing
opportunities for these groups to show they can be of use, regardless of their
disability on any grounds. Entrepreneur realizes surplus of product by the
combination of voluntary and paid work. Social entrepreneurs are people who
recognize social problems using traditional entrepreneurial principles to organize,
create and manage ventures that bring social change. Social entrepreneurs combine
opportunism, optimism and resourcefulness of business entrepreneurs, with
dedication and aim to achieve a "social profit" prior to "business profit". These social
entrepreneurs are needed for small countries in transition, as they play the key role as
"agents of change" within the social sector in a way that they:

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 • adopt a mission to create and sustain social value (not just personal and
private!)

• recognize and passionately follow new opportunities in order to fulfil the

mission and develop new businesses,

• include the continuous process of innovation, adaptation of existing facilities

and the acquisition of knowledge,

• are dedicated to their goal, regardless of the limitations of currently available

resources,

• show great responsibility towards an investment and the results created.

Thus, in social entrepreneurship ethics is the most important, business ethics and
morality in the economy, both among people and in people's attitudes towards the
natural and social environment. Social entrepreneurship is the use of entrepreneurial
behaviour to achieve social objectives as opposed to commercial entrepreneurship,
where the aim is to achieve profits. If there is profit in social entrepreneurship, it
goes in favour of satisfying the needs of specific vulnerable groups of the population.
(Hibbert, Hogg, 2002).

Bill Drayton (Bill Drayton 2007) characterized social entrepreneurs as follows:

“Social entrepreneurs are not satisfied by giving the fish or teaching others how to
fish. They will not calm down until they carry out a revolution in the industry.”

Social entrepreneurs have a strong, new idea that can change the system, creativity,
"revolutionary" potential, entrepreneurial qualities and morality, all in order to
achieve their vision of society. Social entrepreneurs are driven by the desire to help
other people and improve living conditions in their community or the world. These
are people who by their moral and ethical characteristics rise above the average,
visionaries dedicated to solving social problems. Social entrepreneurs are people who
concentrate their ideas and energy on solving the problem of neglected and
vulnerable groups in society, who do not have the financial resources nor the political
power to change their own socio-economic situation.

The importance and relevance of this issue is therefore even greater, since there is
little research on it in our region and it provides few examples of good practice for

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potential entrepreneurs. On the other hand, the concept of social entrepreneurship is
often wrongly misunderstood and interpreted, while a number of socially excluded
and unemployed continues to grow, not only in our country but also globally. Public
policies circumvent this problem and just touch it in election campaigns, where it is
clear that they do not understand this problem. The first study in the field of social
entrepreneurship for disabled persons, with recommendations, was made in Banja
Luka in 2008. The person who is more concerned with this problem in our country is
Anita Šimundža, who devoted her doctoral thesis to this problem. (A. Simudža,
2016). The initiative to develop a strategy for the development of social
entrepreneurship in RS was launched in 2009, while in 2012 the initiative for the
formation of the NGO Coalition for Social Entrepreneurship Development of
Republic of Srpska was formulated.

Among the most common organizational forms of social enterprises are: civic
associations, foundations, cooperatives, companies established by NGOs, mutual aid
associations and others.

At the EU level, there is evidence that out of the total number of enterprises 10% is
socially-oriented with 6% of such employees, which indicates giving the importance
to this problem. Most micro, small and medium-sized enterprises are socially
oriented, and fact that in B&H 92% of enterprises are small and medium-sized, says
that this type of entrepreneurship is indispensable for the B&H economy. Social
enterprises can exist in all sectors of the economy: banking, insurance, agriculture,
various commercial services, health and social services and so on.

The specificity of social entrepreneurship in gastronomy as a sector is in the

variability of conditions for the cultivation and production of food, which largely
depends on nature. Existing uncertainties and changes in nature lead to a strong need
for state intervention, as farmers do not have the financial means to respond to
negative changes in nature, such as environmental disasters, global warming and
adaptation to new pandemics.

B&H Gastronomy Tourism As A Perspective Form Of Tourism

Food is an essential element of travel, but it may also be its goal. For some tourists
local food has the capacity of the primary attraction and the reason why they decide

278
for a particular destination. These are gastronomic or culinary tourists who travel to
try the local cuisine products specific to a country or a region. For such tourists, food
is a tourist attraction. While the mass tourists see food on the trip as an "episodic
travel experience", gastronomic tourists expect it to meet "the ultimate tourist
experience" (Rabotic, 2013).

Research shows that in the restaurant industry drinks and food are as important as
the services. Physical environment and serving techniques also have a great impact
on guest satisfaction. There is a recognizable trend in B&H gastronomy -
strengthening of the staff education. The existence of unemployed personnel in
hospitality, on one hand, and the need for adequately educated labour force, on the
other hand, is a general picture of the education situation in B&H. In fact, only a fully
connected system, meaning the quality of food, services and physical environment,
provide successful results in the end (Gagić, Tešanović, Jovicic 2013).

A guest brings an overall impression defined as the satisfaction. Only guest

satisfaction can make profits. It is well known that globally food is of poor quality and
it is a chance for B&H. Due to the relatively clean water and environment, it can
produce food of high quality in terms of taste, colour, aroma, freshness, and
nutritional properties. The diversity of climate and terrain allows the production of a
large range of foods. The service is a problem, because it is immeasurable, intangible
and difficultly standardized category. Yet, this is a great chance for B&H, as an
important part of service is hospitality, and the people from our region are generally
recognized as a people of high hospitality and as a nation that originally loves the
guests. This hospitality cannot be taught in formal education, but education can
significantly modernize it and make it even more productive. The competence of staff,
speed, courtesy, enthusiasm and friendly approach can significantly reduce some
other weaknesses of the services (Krasavčić et al. 2012).

The Covid – 19 is NOT the cause of the recession, it is not a blow to our well-being,
whose well-being? Those two-thirds of humanity who don’t have drinking water every
day? Those 24,000 children who die of hunger DAILY? Our way of life is a problem,
ours - human, but not of all people, just of us who are privileged, who have food every
day, a roof over our heads, access to schools and hospitals, courts. We drive cars, we
produce C02 in enormous quantities on our flights, we produce tons of garbage.
That's the problem.

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The Covid 19, however, seems to be a test, a challenge, not too dangerous, but very
fast, jumpy, with a talent for choosing a landlord. An opportunity to reorganize.
Which of course we won’t because we are human, we are comfortable, inert and
stupid.

But now we have the opportunity to be different, to live differently, to take care of the
"unproductive" - the elderly, the sick, the children. A window is open for us to see
mass tourism as harmful, as a way of escaping from ourselves that we do not even
enjoy - the main goal is to let others know through social networks that we are on the
road, that we have succeeded, that we enjoy ourselves hoping that they will believe
that we really enjoy taking millions of selfies in the middle of Venice without any
interest in anything that it could tell us, what it witnessed, who trampled on it, in
what roles, moods.

There is a strong need for state intervention, as farmers do not have the financial
means to respond to negative changes in nature, such as environmental disasters,
global warming and adaptation to new pandemics. This is waiting for us in the
future, too, because the problem of population nutrition, health population remains
the greatest global problem of mankind.

Conclusion

The importance of B&H gastronomy in the development of regional tourism is based

on two main assumptions: (1) Food is becoming an important motive for travel and
destination choices. (2) How food is produced, the related cost and guest satisfaction
should be taken into account.

There are different forms of culinary tourism, such as wine and culinary tours. Since
tourist might be worried about the food safety in developing countries, more
information and promotion of local food is needed in B&H. Foreign tourists often
want to see how the food is produced and prepared and take cooking courses. Now
these tourists make up only a few percent of the receptive tourists in B&H, but their
number is constantly growing. In the case of B&H, the globalization of gastronomy is
a great danger. Therefore, it is necessary to work on the preservation of B&H
gastronomic identity.

280
Entrepreneurship is differently understood and interpreted, and is usually recognized
as an economic phenomenon, although it is applicable to all areas of human
behaviour and action. Entrepreneurship is the mindset and process of creating and
developing economic activity by combining risk, creativity and innovation with sound
management within a new or existing organization. Thus, entrepreneurship has a
multidisciplinary character, which is why during the study of this phenomenon it is
inevitable to look for the answers in the field of psychology, philosophy, management,
ethics and others. Entrepreneurship is associated with companies in all sectors of
economy, as well as with the self-employed, from the preparation stage to start of a
business, growth phase, transfer or termination, and restart of operations. Given that
there is no single definition of social entrepreneurship, it is important to stress that it
includes business ventures aimed at creating a social benefit or solving a specific
problem. The most important feature of these ventures, unlike in conventional
entrepreneurship, is the mainstreaming of social benefits as the target. In Bosnia and
Herzegovina, the concept of social entrepreneurship is still in the initial stage of
recognition. Social entrepreneurship is a relatively new phenomenon in social and
economic activities, which covers the different areas of the human, economic and
social activity. For this type of action, the term "social entrepreneurship" is often used
though this concept is most commonly identified with activities related only to
provide social assistance. It is important to bear in mind that the social services
sector is only one of the possible areas of social entrepreneurship. Due to lack of
awareness and familiarity with the concept, in our conditions, it is more appropriate
to use the term social entrepreneurship, in order to point to a broader range of
activities and opportunities it opens up. Social entrepreneurs are humane people in
civil society organizations, in the private and public sector, who create a significant
impact on society. Often they start social enterprises where they find space to realize
their ideas and to include marginalised groups of people. Such initiators should be
role models for young people and new entrepreneurs with their experience and
examples of good practice.

It seems that we have forgotten and removed life lessons from human sciences:
sociology, philosophy, economics, biology, history and geography:

• Many factories are closed, the air is cleaner, and it seems that we will continue
to live without the products of those factories,

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 • International communication and cooperation against the common (external)
enemy has bettered, so national, religious, political and other tensions will
subside.

• Mass tourism, one of the leading destructive branches of the modern economy,
has reconciled,

• We return to the family (as the "basic cell of society"), love, hygiene and health
care.

• We applaud the doctors, realizing that the most important thing is that we are
"alive and healthy", realizing that diseases do not choose a class, nation,
property status, political position, quite the opposite: the rich and people in
authority seem to die more.

Covid – 19 might be killing us because we destroy everything in front of us in order to

live in abundance and because we do not care about other beings who do not seek
abundance, but only the right to ordinary life and the minimum conditions for life:
water and food. We don’t even think about our own children and their children,
leaving them with the impossibility of that ordinary life. Nevertheless, this is also an
opportunity, a challenge and a chance: to stop and think.

And decide: “To be better, to make everyone better”, to sow that seed everywhere we
go under the "cap of heaven", and to be guided on that path by the words of one
healed: "The hardest thing for me was the thought that one of my people could get
infected “. This statement is a serious step forward, a step that condemns anyone who
kills his household members by smoking and persistently claims to love them, what
hypocrisy in the morals of today's man!

The current situation is another warning to reset our life, its meaning and content! If
we do nothing, we will not fix anything, we will only, for a short time, delude
ourselves that the danger has passed.

It follows us, it is Nature, it becomes our life partner, who has a natural right just like
us humans to live . If we are not ready for that coexistence, for nurturing and
preserving their habitats, as well as our own, our survival may be certain, but the
survival of our children and our grandchildren is certainly not. And since we love
them too (and not only ourselves!), The crown is our teacher, mother of conscience,
our subconscious, our friend in trouble, but the enemy in arrogance, glamour,

282
globalization, greed, hatred, inhumanity and similar moral "epithets". of modern
civilization.

B&H and the countries around it, are still countries with a relatively healthy
environment in which healthy foods for future humanity can be produced for a long
time. It is a great treasure and wealth, which can significantly enhance the receptive
tourism of the entire region. Gastronomy is an area through which all of the above
can be promoted and thus attract new tourists.

Holistic management and marketing in tourism and hospitality can significantly

connect gastronomy and social entrepreneurship and thus create preconditions for
faster development of tourism in the region and faster European integration.

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 INDUSTRIAL REVOLUTION IN AGRICULTURE -
PAST, PRESENT, FUTURE

Dr. Edita STOJIĆ KARANOVIĆ 1

Abstract

Humankind always strives to satisfy needs in all sense, starting from the oldest and
always present need of feeding itself. Therefore agriculture is the oldest area of the
economy and in a constant effort to improve production. Significant changes have
taken place throughout history in all areas of economy and also in agricultural
production. It is interesting and important to look at the previous and current epoch
of industrialization of agriculture, the economic area most dependent from land,
natural resources and atmospheric conditions – in order to more easily perceive the
4th industrial revolution in agriculture today, and the further development in the
direction of the 5th industrial revolution in this area of economy.

Keywords: agriculture, industry, industrial revolution, natural resources,

investments, labour,

Introduction

As it was said in the Preface to this compendium, humankind always strives to satisfy
needs, both those in personal consumption and those that come from constant
economic development, perfecting means and skills of production. Factors of
production in their dialectical development have now reached the level of
development, at which man, his work and technical progress can overcome nature.
This fact is especially important for agriculture as this area of economy is the most
dependent from land, natural resources and atmospheric conditions.

Thus, there is no longer an essential obstacle in the effort to maximize the results of
human work, to apply in agriculture such an organization of production, which saves

1 Research Professor, International Scientific Forum “Danube – River of Cooperation”

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labour and provides a product that quantitatively, qualitatively and structurally could
meet the quantitatively and qualitatively increased needs, that classical agricultural
production would never materialize. And this new organization of production in
agriculture has all the characteristics of an industrial organization of production.

The process of introducing the industrial mode of production in agriculture can

neither be denied nor prevented because it is objectively conditioned and necessary.
However, the economic policy of a country can consciously slow down or accelerate
the industrialization of agriculture.

It was difficult to find an exhaustive, comprehensive work on the problems of

industrialization of agriculture, a monograph that would comprehensively discuss
this topic. Therefore, as literature for this paper books and articles were used that
deal with a topic close to this one, or refer to general and key issues of agricultural
economics. Most of the articles dealing with certain problems of industrialization of
agriculture or "industrial agriculture", especially during the last century, were found
in the French literature, such as Chombart de Lauwe, who does not view the problem
in isolation in conditions of capitalism, but also analyses, as he said, the advantages
that the socialist system has in the industrialization of agriculture. Most other
Western authors (the best example are the German authors Dr. Th. Dams:
"Industrialisierung in ländlichen Entwicklungaräumen", but also Oskar Breternitz:
"Die Industrie - Landwirtschaft") view the industrialization of agriculture as one of
the exits for a capitalist economy that needs more labour, in secondary and tertiary
activities, or as an opportunity to expand industrial capital to agriculture. As a
resource I used for the first time also my master thesis, upon which I got the MA in
1968 at the Faculty of Law, under the title Economic Problems of Industrialization of
Agriculture in Yugoslavia.2

2 I had never had an opportunity to publish or to use any of the text from this thesis, as shortly
after getting the degree I got a job at the Institute of International Politics and Economics, but the
reason I got it, was the fact of my knowledge of Hungarian language, and in that time the
Hungarian economic reform was from interest to this institute. Later, I got several work tasks in
the field of regional research, that began with research of East European socialist countries and
continued with Balkans, and Danube region researches. Therefore, I am utmost thankful to those
members of the Scientific Board of this compendium, with whom I discussed and got positive
answer for using the thesis for the first time as resource for this article.

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Although the process of approaching agriculture to industry and the gradual
industrialization of agriculture is observed today all over the world, and especially in
developed countries, in relation to this phenomenon there is a big difference with
regard to economic strength. Wealthy rich countries, that also have developed
agriculture, witnessing a great degree of industrialization of their agriculture, can at
this stage of their development encourage this process. However, in the earlier phase
of the industrialization of agriculture they were, to put it mildly, too "lenient to their
old customs” (Chombart de Lauwe, 1961, p.8). Developed countries, whose industries
were experiencing labour shortages, always found a solution to this problem in
encouraging the transfer of labour from agriculture to industry, and replace human
labour in agriculture with mechanization and even automation of many production
processes. This is exactly the case with German agriculture, especially in 1950s: "...
the mass of wage labour companies face the naked pressure to abandon old-style
agriculture and switch to industrial agriculture." (Breternitz, 1961, p.129)

Based on certain criteria, individual areas of production can be distinguished, but

they are strongly interconnected, and general economic laws operate equally in all
these areas. There were, it is true, writers who in their works developed some theories
about agriculture sui generis, separate from other production areas. There is certainly
a great dependence of agricultural production on natural conditions. Based on that,
some authors call agriculture a "biological industry". This, among other things, is
discussed by Chombart de Lauwe (Chombart de Lauwe, 1961).

The general discussion of agricultural industrialization

In order to use the inductive-deductive method and historical comparison to come to

the notion of the industrialization of agriculture, we must first analyse the terms of
industry and agriculture - as areas of production, then the differences between
industrial production and classical agriculture, and the historical development of this
two economic areas.

The second agricultural revolution in the 18th and 19th centuries marked a period of
technological development (improved crop-rotation and ploughs, improved transport
infrastructure facilitating a larger national market for produce, land reclamation,
etc.) and increased crop production in Europe. The Third Agricultural Revolution,
also know as the Green Revolution, was a series of research technology transfer

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initiatives that occurred between the 1950s and the late 1960s that increased
agricultural production worldwide, especially in the developing world. New
technologies, including high-yield cereals (especially dwarf wheat and rice), have
emerged with chemical fertilizers and agrochemicals, as well as controlled water
supply (usually with irrigation) and the introduction of new cultivation methods,
including mechanization.

Historical development of industry and agriculture as areas of

production

The "first great social division of labour" appeared with pastoralism, where the main
production activity is agriculture, mainly nomadic, cattle breeding. (Engels, p.163).

At first, preparation of tools was not a separate activity, but later crafts have
separated from agricultural activities. Crafts and agriculture developed at an equally
slow pace until the 16th century. Then begins the faster development of complex craft
cooperatives, manufactures and another division of labour takes place, special i.e.
internal (unlike previous general divisions of labour). In the 18th century, the
Industrial Revolution introduced machine industry. In the industrial activity, tools
have been replaced by machines. Although, in agriculture, more than a hundred years
after the first industrial revolution, the use of horse-drawn ploughs still prevailed,
and agriculture basically remained manual labour.

At the end of the 18th century, the interest in improving agriculture was great. Thus,
for example, in 1784, the Paris Academy of Sciences discussed the practical problems
of agriculture; people are sent from Germany to England to study the cultivation of
various crops (flax, hops, tobacco), methods of raising livestock (stable feeding), etc.
(Kulischer, 1957).

The development of industry has created opportunities for agricultural

modernization. Mechanization was first introduced with the most difficult jobs, but it
gradually expanded to a series of work processes. There has been, through the 20th
century, a complete mechanization of certain branches of agriculture in developed
countries, such as the livestock branches of production, while fruit and vegetable
production remained largely manual labour. The increasingly frequent connection of

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agriculture with science, which is a general phenomenon today, is another sign that
the process of industrialization of agriculture is taking place.

As a field of production, industry processes raw materials of mineral, plant and

animal origin by machine, while agriculture is a production area in which products
are created by the action of human labour on the land, on biological processes in
plants and animals. But what is essentially the same in agriculture and industry is
that in both areas human labour is focused on the production of goods - goods to
meet human needs. On the other hand, if we equate agriculture with its classical
notion, we notice that industry constantly and increasingly narrows the area of
agricultural operation. “With the development of the agricultural industry,
agriculture is losing the processing of its own raw materials… Moreover, by
developing the technical equipment of agriculture, increasing the organic
composition of its capital and thus increasing its productivity, it contributes to the
growing savings of labour in agriculture, and transfers part of that labour to
industry.” (Lavrač, 1953, p. XXX)

And the needs that agricultural production meets are diverse and are constantly
growing. And while their quantitative increase is related to the constant growth of the
population, the increase of needs with higher quality is related to the general
economic development and the increase of the population standards.

The constant decline in the share of agriculture in the creation of national income
worldwide in the period from 1939 to 1960 is indicated by the data in the following
table:

Table No. 1. Share of agriculture in the national income worldwide 1939-1960

1939. g. 1947. g. 1952. g. 1960. g.

Industry and mining 26,8 33,0 40,6 45,5
Agriculture 44,3 36,9 28,4 25,6
Source: Priručnik iz ekonomike poljoprivrede, 1964, p. 931.

Therefore, it is generally accepted that industry is the most important production

area, and that its development largely determines the development of other areas of
production. But the above data show only a relative decline in agricultural production

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as a result of the huge development of industry. Observing agriculture itself over long
periods, a large increase in this production is observed:

Table No. 2. World agricultural production indices (average 1950-1956 = 100)

Average 1948- 1953- 1954- 1955- 1956- 1957- 1958- 1959-

before 1952. 1954. 1955. 1956. 1957. 1958. 1959. 1960.
World g. g. g. g. g. g. g. g.
War II
77 88 98 98 102 107 108 114 115
Source: Priručnik iz ekonomike poljoprivrede, 1964, p. 928.

Unusually rapid pace of population growth is obvious if one bears in mind that in the
mid-sixteenth century the world’s population was only 545 million people, over the
next hundred years, population growth was 40%, in the next hundred years 60% in
the period from 1850 to 1950 world population increased by l00% from the previous
period. (Dragičević, 1965). The world's population continued to grow, so that by the
end of the twentieth century, that number reached 6.2 billion compared to 2.4 billion
in 1950. The number of world’s population in the middle of 2020s is 7.8 billion.
(Worldometer, n.d.) Various humanitarian organizations, were and are concerned
about the nutrition of the world's population. As predicted in the middle of the 20th
century, the population will double by the end of the century, but the population of
the world "who will be threatened by hunger and malnutrition" will also double - if
food production remains at the same level. Solving the problem of satisfactory
nutrition of the entire population of the world has been acute for decades. Food and
Agriculture Organization (FAO) the specialized agency of the United Nations that
leads international efforts to defeat hunger, stated that the goal of organization is to
achieve food security for all and make sure that people have regular access to enough
high-quality food to lead active, healthy lives. With over 194 member states, FAO
works in over 130 countries worldwide. Opportunities for greater food production
exist, exactly in the intensification and in the industrialization of agriculture. That is
why the thesis of Fritz Baade is acceptable, who, by refuting Malthusian ideas, proves
that there are not only possibilities for feeding 7 billion people, but also the possibility
of better nutrition for that population. (Baade, 1960)

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 Industrial mode of production and classical agricultural production

The etymological analysis of the word "industry" shows that this word was first used
to denote diligence, value, work. In English, the term "manufacturing industry" is still
used today to denote an economic area that processes raw materials by machine.
Therefore, it would be narrow to apply the term "industrial mode of production"
exclusively to one area, i.e. to the economic field of industry. Any production that
meets certain conditions can be said to be industrial, regardless of the fact that due to
its other specifics we separate this activity from industry as a field of production.

The basic characteristics of the industrial method of production are:

1. mass production,

2. uniform product quality,

3. application in the production of machine tools for work,

4. developed division of labour both within a whole area of production, and in

production units of that activity and

5. rapid improvement of means of production and rationalization of production.

(Privredni leksikon, 1961, p. 209)

As specific features of agriculture it is usually stated that:

1. there is a private - ownership monopoly over the land,

2. that agriculture is highly dependent on natural factors and that its products
cannot be standardized due to biological properties,

3. that the land is limited and gives declining yields,

4. that the production time does not coincide with the working time in
agriculture and that the possibility of shortening the production cycle is
limited, and

5. low labour productivity and conservatism of agricultural producers (Privredni

leksikon, 1961, p. 485).

However, all these "features" of agricultural production refer only to classical

agriculture, because the limitation of the increase in agricultural production, which
stems from the limitation of arable land, concerns extensive agriculture. And the law
of declining yield also applies to industry, if additional investments are made above

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the optimal investments that are determined by the given level of development of
assets and the application of the technological process in one production unit. If the
entire technical level changes in the entire industry, i.e. agriculture, the yields will
again be proportional to additional investments until a certain optimum. The fact
that the period of work and the period of production do not coincide is gradually
being lost, precisely in proportion to the industrialization of agriculture, as is the
possibility of standardizing agricultural products and reducing the production cycle.

The natural conditions that play a very important role in agriculture are: soil,
precipitation, light, temperature and their time distribution during the year.
However, with the current level of development of technology in the world it is
already possible to determine exactly what amount of chemical material can make
arable land more fertile, precipitation is compensated by artificial irrigation, light and
temperature, which play the biggest role in those plants that can grown in
greenhouses, this is where they are easily regulated. Natural conditions play an even
smaller role in industrial livestock farming.

The views that low productivity is inevitable for agriculture were also refuted, by the
growth of productivity in countries with industrialized agriculture. For example, in
the USA productivity has grown at a rate three times higher in agriculture than in
industry in the period of industrialization of the agriculture in 1960s. For these
increases in productivity it was necessary to invest almost as much money in
agricultural production as was invested in industry, in order for agriculture to be
industrialized and have far higher productivity than it achieves in its classical form.
Of course, then the question of funding these investments arises.

The concept of industrialization of agriculture and its significance

Industrialization of agriculture means the introduction of industrial production

methods, such as mechanical engineering, mass production, developed internal
division of labour, concentration of production, etc. – in agriculture.

The significance of this process is manifold and is reflected in the advantages, positive
phenomena that it brings with it and that it causes. The economic significance of the
industrialization of agriculture consists in increasing the total production, the wealth
of one country and at the same time the whole world. However, in addition to these

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basic positive consequences, there are other economic effects of the process of
industrialization of agriculture. In the field of agricultural production,
industrialization means its rationalization. Human labour, which is wasted in
classical agricultural production, is rationally used in the industrialized production
process, and that also happens with the use of land and means of labour. Then,
instead of the limited and underdeveloped agricultural market, which was created for
the exchange of products obtained mainly by peasant production, - industrialized
agriculture requires and creates a wide market, where its standardized products
always appear in sufficient quantity and constant quality.

Looking from the angle of regional development of one country and the world, the
industrialization of agriculture enabled faster development of agricultural regions
that remained underdeveloped compared to industrialized regions.

The raising labour productivity in agriculture can lead to an increase in incomes of

agricultural producers. This increases their standard, but also the standard of other
members of society, who will objectively have enough of various quality foodstuffs or
other goods that come from agriculture.

The migration of the agricultural population to non-agricultural activities is an

economic, social and sociological phenomena, which enables the labour force to move
from an unproductive agricultural area to more productive activities, which raises the
general rate of labour productivity and the living standard of the migrant population.
And those who remain in agriculture - are becoming more qualified, more
professional agricultural producers. Higher level of general education, as well as
vocational education among the agricultural populations is achieved either through
regular schooling or through various adult education institutions. For example, the
so-called Folk high schools (“Folkhögskola”) in the agricultural regions of Sweden, in
about 110 schools throughout the country, educate a total of 12,000 "students" per
year.3 In the West-Balkan and Middle and Lower Danube regions the vocational
education in general, but also in agricultural knowledge started more intensively just
in the 2010s.

3 I got these information during my visit Folk high schools in Sweden as a guest of professor
Bengt Eneborg in 1968, in the time when I was preparing my Master thesis under the title
Economic Problems of the industrialization of agriculture in Yugoslavia.

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With the industrialization of agriculture, the contradictions between town and
country are diminished, by enabling more modern life for agricultural producers, the
mentality of urban and rural populations gradually also become more closer. For
example, from the mid 20th century in Sweden, the 75% of the total population lived
in rural settlements, although they are not engaged in agricultural activities. (Facts
about Sweden, p.6.)

Minor, or insignificant dependence on natural conditions, or complete overcoming of

nature, i.e. industrialized agriculture brings both income stability and stability of the
economic existence of agricultural workers. The industrialization of agricultural, also
increasingly requires and encourages the process of association of agricultural
producers.

Recent processes of the industrialization of agriculture

As a new phase on the industrialization, the term Green Revolution refers to the
renovation of agricultural practices beginning in Mexico in the 1940s. In the 1940s,
Norman Ernst Borlaug, from the American state Iowa began conducting research in
Mexico and developed new disease resistance high-yield varieties of wheat. By
combining Borlaug's wheat varieties with new mechanized agricultural technologies,
Mexico was able to produce more wheat than was needed by its own citizens,
becoming an exporter of wheat by the 1960s. Prior to the use of these varieties, the
country was importing almost half of its wheat supply. Because of their success in
increasing agricultural productivity in Mexico, Green Revolution technologies spread
worldwide in the 1950s and 1960s, significantly increasing the number of calories
produced per acre of agriculture land. This spreading started from the Americas of
the 1960s. The United States, for instance, imported about half of its wheat in the
1940s but after using Green Revolution technologies, it became self-sufficient in the
1950s and became an exporter by the 1960s.

The increased productivity of Green Revolution technologies can feed the growing
population worldwide. According to Worldometer, in 1 CE. the Earth's population
was an estimated 200 million. It hit the billion mark in 1804 and doubled by 1930. It
doubled again in less than 50 years to four billion in 1974. In 2010 the number was
almost 7 billion, and in 2025 the world's population will be an estimated 8 billion.

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While the Earth can only support a limited number of people, the issue is not about
space, but it is a matter of resources like food and water.

It is important to underline, that the crops developed during the Green Revolution
were high yield varieties - meaning they were domesticated plants bred specifically to
respond to fertilizers and produce an increased amount of grain per acre planted.
During the Green Revolution, plants that had the largest seeds were selected to create
the most production possible. After selectively breeding these plants, they evolved to
all have the characteristic of larger seeds. These larger seeds then created more grain
yield and a heavier above ground weight. This larger above ground weight then led to
an increased photosynthate allocation. By maximizing the seed or food portion of the
plant, it was able to use photosynthesis more efficiently because the energy produced
during this process went directly to the food portion of the plant. Finally, by
selectively breeding plants that were not sensitive to day length, researchers like
Borlaug were able to double a crop’s production because the plants were not limited
to certain areas of the globe based solely on the amount of light available to them.

At that time, the Green Revolution was not an official program neither in the
countries of West-Balkan and Middle and Down Danube regions nor in West
European countries.

However, countries all over the world benefited from the Green Revolution. India, for
example, was on the brink of mass famine in the early 1960s because of its rapidly
growing population. In 1950, India's total fertility rate was approximately 6 children
per woman. Since 1952 India has worked to control its population growth, with little
success. (Rosenberg, 2019, Nov 5). It turned out that in India, as in other
underdeveloped countries, the control of the population growth was much harder and
difficult than it was hoped.4 Food production with new knowledge in the field of
agriculture remain the more serious solution.

For sufficient food for citizens of India Borlaug and the Ford Foundation
implemented research there and they developed a new variety of rice, known as IR8,

4 I remember when starting to work 1968 at the Institute of International Politics and Economics,
the leading research institute for international issues in non-aligned Yugoslavia, that Leo Mates,
the than director of the Institute was engaged as a member of the UN working group for
popularizing the birth-control methods in non-aligned countries in Africa and Asia, travelling to
India, too.

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that produced more grain per plant when grown with irrigation and fertilizers. Today,
India is one of the world's leading rice producers and IR8 rice usage spread
throughout Asia in the decades following the rice's development in India.

As the pioneer-producer of the intensive, new, short-straw but high-yielding of wheat,

rice and other plant varieties, Norman Ernest Borlaug got the Nobel Peace Prize in
1970.5

From the 2000s, the new trend in agriculture sector is Precision Farming, which
makes use of information technology to integrate all the procedures of farming from
analysing the soil-moisture, weather forecasting, and the quality of seed to predicting
the real-time of harvesting. Basically, it focuses on the important aspect of inter-field
and intra-field variability for growing crops. Precision farming is a systems approach
practised in the crop management in order to achieve significant improvement in
yield of crops. It concentrates on crop specific and soil specific strategies to enhance
both quality and quantity of agricultural produce. It also concentrates on input use
efficiency and maintaining the quality of soil and environment as well as disease
detection in crops. Quality and safety of agricultural products is one of major concern
in today’s scenario. In earlier times farmers consults experts or use their own
experience for identification of diseases in their crops but now days information
technologies are slowly replacing the old techniques of monitoring the crops, as they
are more reliable, accurate, fast and economical. Technologies for recognition of
diseases in crops, based on machine learning and image processing, were presented
by researchers all over the world. (Singh, T. 2020, Jun 2).

“In India, there is an indispensable need for Precision Farming because of ‘the fatigue
of Green revolution’ The country might have attained self-sufficiency in food
production due to the ‘green revolution’ but it had put enormous pressure on
environment because of excessive use of fertilizers, pesticides, and irrigation. In order
to achieve further improvements in agricultural production, the countries should, or

5 Norman Ernest Borlaug born in Cresco, Iowa, USA, March 25, 1914, died September 12, 2009 in
Dallas, Texas, USA. Gain BSci. in, 1937 and PhD, 1942 at University of Minnesota. He is known as
the father of the Green Revolution, and his knowledge is used all over the world. In 1970 he got
the Nobel Peace Prize for his research-results that made an remarkable influence on agricultural
production all over the world. Later he got many other medals of recognition, as presidential
Medal of Freedom (1977), Public Welfare Medal (2002), Padma Vibhushan, Republic of India
(2006). (Norman Borlaug, 2020, Jun 27)

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must to embrace the precision farming in a big way. The spectacular results of Green
Revolution were achieved because of genetic manipulation of certain crops like rice,
wheat and maize. But the farmers would have to focus on a ‘Systems Approach to
Farming’ to increase the output per unit of the main natural resources, land and
water, and the resource of labour – but so, that practice harmed much the
environment. So, a new systems-based approach utilizing become to be the latest
technology as the only way to enhance productivity and profitability without putting a
stress on ecology and environment. ‘Compatibility of farmers’ knowledge and the
Precision Agriculture is an important aspect in adopting the Precision Farming
technology.” (Soma, 2019, Mar 31, pp. 2463-2464).

But where do countries of Western Balkans and in Middle and Lower Danube region
stand on this issue? Agriculture is a very important component of the economy in all
of these countries. This is due to the fact that large parts of these countries contain
conditions favourable to agriculture, and in most of them over half of their territory is
being used for agricultural cultivation. Agriculture acts as a major source of
employment and household income while also providing a good deal of base
commodities which are needed to create processed foodstuffs. Agriculture and rural
development play a key role in increasing employment, reducing poverty and
strengthening the countries in the region.

The EU promotes the development of sustainable and inclusive agriculture and rural
development policies through programmes like Pre-Accession Assistance in the
Policy Area ‘Agriculture and Rural Development’ (IPARD), encouraging investments
in modernization of equipment and farming techniques, crop diversification, income-
generating activities in the rural areas and the creation of value chains. Assistance is
also provided to help address the degradation of natural resources and to tackle
environmental challenges arising from climate change. 6

Unfortunately, even though agriculture is substantially subsidized by national

governments, and in some of the Danubian countries also by the EU (either as
members or candidates), the sector is facing serious socioeconomic challenges.

6 As this theme is much wider, but not in the determination of this article, for more information
about IPARD suggested is to look at https://ec.europa.eu/info/food-farming-
fisheries/farming/international-cooperation/enlargement/pre-accession-assistance/overview_en

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 Prospects for the future

As far as agriculture and the process of its industrialization are concerned, this opens
new topics for research, and the basic and initial question is how this new degree of
industrialization can affect agricultural production. First of all, we should pay
attention to the connection of agriculture with the use of natural resources, primarily
land, water and air. Namely, during the industrialization so far, these resources have
been exhausted, which violated the principles of sustainability and environmental
protection, and caused damage to the quality of natural resources. 7

“From 2000 to 2015, more than one fifth of the Earth’s total land area was degraded,
largely due to human-induced processes, such as desertification, cropland expansion
and urbanization. During the same period, there were significant productivity
declines in land cover, with grasslands incurring some of the greatest losses.” (United
Nations)

So, already in 2015, the new term Industry 5.0 appeared also concerning agriculture,
in response to Industry 4.0. At first it is a kind of rebellion against the
dehumanization of processes of production, and then it grows into the concept of
collaborative work of humans and robots in specific jobs. They also call it the return
of "human touch" to production processes. (Nikolić, 2018)

The initial idea called Industry 5.0 was given by Michael Rada in the article
"INDUSTRY 5.0 – from virtual to physical” (Rada, 2015, Dec 1 ). He believed that
after the implementation of the concept Industry 4.0 a total automation could occur
in which humans will be superfluous, and that it is a dehumanization of work
processes. He felt the need to bring the human back into the production process in
another way. Over time, the view has been established that Industry 5.0 is a new form
of collaboration of human and robot to take advantage of the capabilities of both,
machines and humans.

7 One of the most important ISF "DRC" projects pointed to the interdependence of natural
resources in the field of agriculture, as well as the interdependence of industry and agriculture. Its
realization was attended by the best experts, primarily for water resources, not only theorists, but
also experts who have implemented measures in the field of water resources protection, and water
protection, such as B.Sc. engineer Mihailo Sretenović, who first contributed to the regulation of
the water resource in Serbia within the Jaroslav Černi Institute, and then by working on the
Djerdap hydroelectric power plant. (Stojić-Karanović, Sretenović, Imamović, 2011)

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But concerning prospects for the future, we should respect not only the balanced
relationship between human labour and machinery, but also the balanced, or
sustainable use of other natural resources, primarily land and water, while protecting
the air from pollution. The above mentioned above, In the countries of West Balkans,
as well as countries of Middle and Lower Danube regions, the possibilities of support
from IPARD towards these aims was not used or used only partially. Therefore, new
research-works and much more knowledge dissemination is needed in the future on
these topics, including on the interconnections of different natural resource. For
example, the Sustainable Development Goals of the United Nations warn, that
without emergency interventions, humankind could remain dangerously vulnerable
to a range of growing threats, as indicated by the current situation with the Covid-19
pandemic, as well as many other diseases caused by the degradation of air, soil and
water quality. While many water sources are becoming more polluted, agriculture is
getting thirstier, which causes the shortage of quality food. “Climate change is making
water scarcer and more unpredictable, wreaking havoc and displacing millions of
people in the world.” (United Nations)

Impacts of the so called Green Revolution are very important. Since fertilizers are
largely what made the Green Revolution possible, they forever changed agricultural
practices because the high yield varieties developed during this time cannot grow
successfully without the help of fertilizers. Irrigation also played a large role in the
Green Revolution and this forever changed the areas where various crops can be
grown. For instance, before the Green Revolution, agriculture was severely limited to
areas with a significant amount of rainfall, but by using irrigation, water can be
stored and sent to drier areas, putting more land into agricultural production - thus
increasing nationwide crop yields. The use of Green Revolution technologies
exponentially increased the amount of food production worldwide. Places like India
and China that once feared famine have not experienced it since implementing the
use of IR8 rice and other food varieties.

However, along with the benefits gained from the Green Revolution, there have been
several criticisms. The first was that the increased amount of food production had led
to overpopulation worldwide. An other major criticism is that places like Africa have
not significantly benefited from the Green Revolution. The major problems
surrounding the use of these technologies there are a lack of infrastructure,
governmental corruption, and insecurity in nations.

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Even where successful, the Green Revolution has its problems. The development of
high yield varieties meant that only a few species of, say, rice are being grown. In
India, for example, there were about 30,000 rice varieties prior to the Green
Revolution, today there are around ten - all the most productive types. By having this
increased crop homogeneity though the types were more prone to disease and pests
because there were not enough varieties to fight them off. In order to protect these
few varieties then, pesticide use was increased as well, addition to environmental
issues in some cases.

Despite these criticisms though, it is important not to deny also positive

achievements of the Green Revolution that has forever changed the way agriculture is
conducted worldwide, benefiting the people of many nations in need of increased
food production. (Briney, 2020)

Conclusions

The development of agriculture in modern conditions are manifested in the

industrialization of agriculture, the raising agricultural production levels from the
classical to the industrial levels. Industrialization of agriculture occurs when the
productive forces in general achieve a certain degree of development. However,
conscious social action is not excluded, and it can have a positive effect on this
process.

The economic importance of industrialization of agriculture is in raising the general

level of economic development of the country, and especially in raising labour
productivity in agriculture and the ability to reproduce the labour force, labour
potential of the country at a higher level, and in eliminating disparities (branch and
regional). Industrialized agriculture needs a specialized and qualified workforce,
which changes the social position of farmers and loses contradictions in that respect
not only between the village and the city, i.e. rural and urban population, but also
between physical and mental work in agriculture.

Factors that cause and encourage further development of the process of

industrialization of agriculture and on which it depends, are the general level of
industrial development (on which the development of other production areas
depends), the level of development of food industry and processing industry, as direct

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consumers of agricultural products, increasing demand on agricultural products, both
in quantity and in quality and continuity throughout the year. This also refers to the
demand on the world market, which is a factor in stimulating the industrialization of
agriculture, also because every country that today wants to break into the world
market with its agricultural products, must have agricultural production at the level
of industrialization.

Whether industrialization is possible at all - depends on the possibility of mastering

natural factors, i.e. on how far we have come in this regard in technical and biological
sciences, and, on the other hand, on the extent to which it is possible and
economically justified in any given conditions.

Elements of the process of industrialization of agriculture, division of labour,

specialization, concentration and rationalization of production, mechanized and mass
production are the characteristics of industrialized agriculture, which are mutually
conditioned and encouraged in development. These elements in the industrialization
of agriculture exist, and are in the process of development - cumulatively.

The agriculture of most of the countries of the Western Balkans and the Middle and
Lower Danube developed at a slower pace than industry in the period after the
Second World War. Even though the production was constantly growing, it did not
meet, not does it meet currently, completely the needs of the internal market and
exports. Although the natural conditions for this exist, they are used somewhat
insufficiently and inefficiently used in production.

The organizational forms of agricultural production units were inadequate or the

possibilities provided by some organizational forms were not used enough, which was
the result of the lack of economic incentives to raise labour productivity, to intensify
and modernize agricultural production.

The factors that hampered the process of industrialization of agriculture in the

countries of the Western Balkans and the Middle and Lower Danube in the second
half of the 20th century were both objective and subjective. Objective economic
factors slowing down the industrialization of agriculture were insufficient
development of the basic base on which this industrialization should be implemented,
i.e. underdevelopment of agriculture, overpopulation of agricultural population,
unfavourable ownership structure of agricultural land, inadequate organization of
work, insufficient use of modern means of work (especially in individual production),

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underdevelopment of scientific research services in agriculture and inadequate
measures of economic policy. The measures of economic policy in that period gave
priority to the development of industrial branches, especially the heavy industry. The
problems of agrarian overpopulation, insufficient employment, migration from the
countryside, as well as the problem of the ageing of the agricultural population, have
a slowing effect on industrialization. However, the effect of all these negative factors
can be diminished by considering their effects and taking measures accordingly.

Today, there are a number of factors that encourage the industrialization of

agriculture in the countries of the Western Balkans and the Middle and Lower
Danube regions: first of all, the general level of development that has been achieved
to date. Especially, the level of development of the food and processing industry has
reached the level that enables, even requires, the industrialization of agriculture. The
growth of domestic and international demand, both in quantity and quality, also
accelerates the development of the observed process. There are also internal factors
in agriculture that have a positive effect, and that is the fact that science has made
great progress in mastering nature, and that the possibilities of applying new
scientific knowledge have recently increased.

At end it must be mentioned that the achievements of the 4th industrial revolution
come to be very useful and handy just now at the time of writing this article (March –
June 2020), when global economic crisis exploded out of the corona virus (Covid-19)
outbreak, which also had a significant impact on the agricultural economy.

As COVID-19 spreads across the globe, the consequences of chronic underinvestment

in water and sanitation services for billions of people are becoming abundantly clear.
Right now, the global focus is on helping families to survive this disease outbreak. But
even as we get on top of the pandemic and save as many lives as possible, we need to
build resilience for the future. Without actions, we could remain dangerously
vulnerable to a range of growing threats. COVID-19 makes us acutely aware of our
shared vulnerability and common destiny. Yet, the extraordinary global disruption
caused by the pandemic offers a unique opportunity, and a new hope, to “build back
better”. With a shift in priorities, we can get the world on track to deliver the
Sustainable Development Goals (SDGs) concerning the most important natural
resources, among them the water (SDGs 6) and the soil (SDGs 15) by 2030.

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But the knowledge humanity gains from the recent pandemic is not only in realizing
the importance of being more serious and active in achieving the goals stated in
SDGs, but also with using new communication technologies, in the field of agrarian,
too. For example, from the beginning of the pandemic, farmers increasingly offered
their products to consumers directly from their farm, thus avoiding both the farmers
and the consumers going to crowded marketplaces (and in some instances these
markets were temporarily closed down as part of the measure to contain the disease
spread). After getting orders through the Internet connections (using social networks
and/or various online marketplaces/classifieds), farmers delivered the fresh
vegetable, fruits, milk products to the entrance of the consumers house or building,
getting the formerly agreed price for their products.

Also, while agricultural events, seminars, conferences, and other educational

gatherings for agriculturists, farmers, as well as exhibitions have been cancelled in
their physical form, they were moved online. So, the emergency situation was not a
reason to miss the most important happenings and guidance and vision from the
experienced agrarian specialists. This way farmers could be up to date in a rapidly
changing situation, too. Some good examples are such e-gatherings held in Serbia on
May 27 and in Hungary on May 28, 2020. In both countries it was the first time that
online conference with the interactive EXPO zone for agricultural business was
organized. In Serbia it was held in organization of media group Adria Media Group
under the title The New Era of Agriculture. (Adria Media Group, 2020, May).

In Hungary the Portfolio Group organized the on-line conference under the title Virus
crisis: is Hungarian agriculture losing or winning? With the help of top experts in the
sector, it tried to give answers to what farmers and market participants can expect
this year. This conference considered the following issues:

• The agro-economic effects of the coronavirus epidemic: where are we now?

• Agricultural market situation: when can we expect a recovery?

• Changes in agricultural support due to the crisis: EU funds, rural development,

national items

• Longer-term crisis management: further government agricultural plans and

EU visions

• Decisions in agricultural financing: interest-free loans, new loan programs

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 • Other virus attacks: bird flu, swine fever

• Impact of the economic situation on the lands: crop production, horticulture,

feeding

• Crisis and input market: seeds, pesticides, fertilizers

• New challenges in the food industry: what can agrarian businesses expect?

As spreading knowledge in all questions concerning agriculture is of utmost

importance, as we see today, the information technology, or named even the 5th
industrial revolution, in the agrarian sector is becoming very soon our reality.

Resources

Adria Media Group. (2020, May). Nova era poljoprivrede.

http://poljoprivreda.adriamediagroup.com/
Baade, F. (1960). Der Wettlauf zum Jahre 2000. Unsere Zukunft: Ein Paradies oder
die Selbstvernichtung der Menschheit. G. Stalling.
Bellis, M. (2018, Mar 17). History of Agriculture and Farm Machinery. ThoughtCo.
https://www.thoughtco.com/history-of-agriculture-and-farm-machinery-
4074382
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