Western Balkans Competitiveness Outlook 2024: Regional Profile

Report

Competitiveness and Private Sector Development

26 June 2024

2. Infrastructure and connectivity cluster

Abstract

This chapter aims to assess and quantify tangible progress in the WB6 economies in policies related to infrastructure and connectivity, focusing on the development, functioning and integration of infrastructure in the transport, energy and digital sectors. It also examines progress in establishing functioning research and development infrastructure that can serve as a bedrock for regional collaboration and competitiveness. First, the chapter looks at the region’s policies in planning and managing the development of its transport, energy and digital infrastructure networks, including to what extent policies are in place to ensure that infrastructure is resilient to the impacts of climate change, cyberattacks and other threats. Second, it examines the extent to which the region is benefitting from the potential of market-based reforms to improve the functioning of its transport, energy and digital infrastructure networks. Finally, the chapter assesses the degree to which reforms are using infrastructure to drive the region’s integration into a common economic space, both between the WB6 economies and with the European Union.

Key findings

The WB6 economies have a significant infrastructure gap with the EU and struggle to converge to the EU level of infrastructure development and performance. Nevertheless, some key achievements have been made in recent years:

Substantial progress has been made in deploying organised markets for electricity in the region. With market coupling between Albania and Kosovo having taken place in early 2024, five out of six economies have organised day-ahead markets for electricity. This provides a key step towards further regional energy market integration and has the potential to improve price competitiveness and supply security.
Policies to enhance the resilience of critical infrastructure are at an early stage in the region and primarily focus on assessing rather than mitigating risks. Nevertheless, progress has been made, particularly in the cybersecurity field with the establishment of the Western Balkans Cyber Capacity Centre in 2023.
The energy crisis has pushed the WB6 economies to become increasingly aware of the need to improve their resilience to external supply shocks by preparing adequate emergency response plans and working on the diversification of their energy supplies. Most economies are looking to achieve this goal through an increased focus on the deployment of renewable energy sources, although more ambitious efforts are required to achieve both goals.
Progress is being made in most of the WB6 economies to lower barriers to market entry in the electronic communications sector as a means of supporting digital connectivity. This is being achieved by the introduction of EU good practices in facilitating market access through alignment with the European Electronic Communications Code (EECC), with Albania and Serbia having made the most progress and other economies following suit.

However, despite these positive regional trends, there is still significant scope to strengthen policies and improve outcomes related to infrastructure and connectivity. As such, some of the most salient key challenges facing the region are as follows:

Project appraisal and selection processes have significant room for improvement to ensure that investments are channelled into cost-effective and sustainable infrastructure projects. Albania, Montenegro and Serbia have made the most progress in improving their appraisal processes since the previous assessment, but have not yet been followed by the other WB6 economies.
Insufficient competition in electricity markets and domination by powerful incumbents often constrain any benefits of the deployment of organised power markets. Particularly, challenges persist in developing the density of transport infrastructure, the reliability of energy infrastructure and upgrading the digital infrastructure. In all the WB6 economies, except for Albania, dominant market incumbents represent more than 80% of the share of electricity traded on the market.
The region’s road and rail infrastructure is underdeveloped, at only 27% and 45% of the EU’s respective levels of road and rail infrastructure density in 2021. When comparing with five EU member states (EU-5) that have similar topographic characteristics,1 the gaps remain sizeable, with the WB6 average only 60% of the average road infrastructure density and 56% of the average rail infrastructure density of the selected EU member states.
Although participation in regional and European research collaboration platforms has increased, it is constrained by the overall low competitiveness and development of the region’s research and innovation infrastructure, underpinned by low human resources and insufficient financial support.

1. For the purpose of comparing the rail and road infrastructure density of the WB6 economies with a relevant benchmark, the category of “EU-5” was created. This category comprises Austria, Bulgaria, Croatia, Greece and Romania. These member states have geographic proximity to the region and similar topographic characteristics, including significant shares of mountainous terrain – which can complicate the development and operation of infrastructure. Data for road infrastructure density in Greece were not available.

Introduction

Well-developed and well-functioning infrastructure networks are the foundation for economic competitiveness as they are necessary for trade, communications and economic activity. Composed of small economies that neighbour both each other and the European Union, the Western Balkan region stands to gain from promoting the connectedness of its infrastructure networks, which can facilitate trade flows, the movement of people, and the efficiency of electronic communications and energy networks. The notion of infrastructure is broad and can cover a wide array of sectors and sub-sectors. The analysis in this chapter focuses on the policy dimensions relevant for infrastructure and connectivity covered under the Western Balkans Competitiveness Outlook (CO) 2024, namely transport, energy, digital society, and science, technology and innovation.

Closing the infrastructure gap and building quality infrastructure

To support their economic competitiveness and development, the WB6 economies will need to expand and modernise their transport, energy and electronic communications infrastructure networks. Large-scale initiatives, such as the EU’s Economic and Investment Plan for the Western Balkans, initiated in 2020, are in place to help bridge the infrastructure gap and mobilise the capital investments necessary for developing the region’s infrastructure.

Planning for current and future infrastructure needs

Governments need to have well-developed, comprehensive and strategic visions to ensure the proper development of their infrastructure networks. Substantial benefits can be unleashed when these visions are long-term, aligned with government’s horizontal policy priorities and appropriately consider the concerns of key stakeholders. Furthermore, efficient co-ordination mechanisms between the different actors involved are key to support implementation, and robust asset management practices are necessary to ensure that infrastructure is adequately maintained throughout its life cycle and provides the best value for money.1

Comprehensive infrastructure development plans are in place, but they are not always based on data-driven tools and implementation is not consistently monitored

The infrastructure development strategies of the WB6 economies in the transport, energy and digital sectors are generally well developed, set over a long-term horizon, and aligned with overarching policy priorities such as national development strategies or economic reform programmes. However, these plans are not always supported by evidence-based quantitative models or mapping tools that aim to align infrastructure development plans with projected demand. While the situation is better in the energy and broadband infrastructure areas than in the transport sector, it could be improved across the board.

The WB6 economies are at different stages of developing or updating their strategic frameworks to enhance long-term planning and resource allocation for the transport sector. These policy frameworks outline planned reforms in the sector that help align and prioritise investments into transport infrastructure. The updated strategies for Albania and Serbia are currently pending adoption, while the other WB6 economies are implementing their frameworks.

While these efforts demonstrate a commitment to planning infrastructure in the long term, the effectiveness of these frameworks ultimately depends on their successful implementation, effective interinstitutional co‑ordination mechanisms and long-term political commitment. Moreover, monitoring and evaluation of transport policy frameworks is not consistently applied in all economies. For instance, even in Montenegro, which can be considered a good performer in monitoring its transport policies compared to regional peers, the last monitoring report for its Transport Development Strategy 2019-35 was published for the 2019‑2020 period, showing a lack of consistency and commitment to the monitoring process.

The WB6 transport sectors are also supported by transport master plans, which guide the overall development of the transport network and allocate investments to transport infrastructure projects. Apart from Albania, Montenegro and Serbia, limited progress has been observed in the development of national transport models that can support these plans with quantitative demand forecasts, highlighting a need for enhanced data-driven decision making in transport infrastructure development. In May 2023, the WB6 economies and the European Commission signed a high-level understanding on the extension of the Trans-European Transport Network2 (TEN-T) to the region, establishing a dedicated Western Balkans-Eastern Mediterranean transport corridor that should help facilitate the planning and alignment of transport networks and the allocation of relevant investments (Transport Community, 2023[1]).

The energy policy, legal and institutional frameworks in the WB6 economies contain long-term network development plans as a key tool for planning the development of electricity and natural gas infrastructure networks and identifying priority projects for investment. Most economies have also conducted adequacy assessments of their energy networks, which are essential for maintaining and planning energy infrastructure investments in line with projected supply and demand. However, Albania and Kosovo have not yet conducted such assessments, and due to concerns over the role of national policy making in determining the energy mix, the focus of adequacy assessments in the region continues to be economy-specific, which is a barrier to potential synergies through an understanding of the impacts of varying consumption patterns and supply configurations across the region.3

Regarding the planning of digital infrastructure, the WB6 economies are implementing plans to improve their digital connectivity by supporting the deployment of broadband infrastructure networks, with a particular focus in recent years being put on extending coverage to rural areas. Some economies have also made progress in establishing broadband mapping to support the development of these networks and prioritise underserved areas, with Serbia, Montenegro, North Macedonia and Kosovo showing the best progress so far and Bosnia and Herzegovina lagging behind (for more information, see Chapter 4: Digital transformation).

Infrastructure investment plans are in place in all the WB6 economies but do not adequately capture the region’s investment needs to achieve the green transition

The transport infrastructure of the WB6 economies is considerably less developed than in the EU. Regarding the density of rail infrastructure, the WB6 economies exhibited an average density of 2.4 kilometres (km) per area of 100 km² in 2020, which is 45% of the EU’s average value (5.5 km²) (Figure 2.1). The development of road infrastructure follows an upward trend – the average road infrastructure density in the WB6 economies rose from 37.5 km in 2017 to 39.3 km in 2021. However, the gap with the EU is even wider, as EU average density reached 146.8 km in 2021, more than three times the density in the WB6 (Figure 2.2). When also taking topography into consideration, and comparing the WB6 to the five EU member states with geographic proximity to the region and similar topography, a sizeable gap can still be identified.

Figure 2.1. Rail infrastructure density in the WB6 economies and the EU (2013, 2020)

Rail infrastructure (km) by area of 100 km²

Figure 2.2. Road infrastructure density in the WB6 economies and the EU (2017, 2021)

Road infrastructure (km) by area of 100 km²

The WB6 economies are primarily focusing their transport infrastructure investments on road networks, with spending on other modes, notably rail infrastructure, significantly lower. Investments into road infrastructure dominate total inland infrastructure investments in all economies (Figure 2.3). In recent years, Albania and North Macedonia have experienced notably high levels of investment in road infrastructure compared to their overall inland infrastructure investments, even exceeding the levels seen in the EU and the OECD. This trend reflects significant road construction and rehabilitation initiatives underway in these economies, which are helping to bridge the gap with the EU in road infrastructure density. However, it also reflects the fact that the level of investment in rail infrastructure is dwarfed by the size of investments in roads and falls below the averages observed in OECD and EU countries. This is a challenge, as most of the region’s modal share for both passengers and freight is concentrated in road transport, which is more polluting and costlier for businesses than rail. The region’s low level of rail infrastructure density compared to the EU highlights untapped potential to develop rail infrastructure to facilitate the flow of goods and people.

Figure 2.3. Inland transport infrastructure investment, including for road and rail, in the WB6 economies, the EU and the OECD (2019-21)

In percentage of GDP

Given the age and deteriorating conditions of railway assets in most of the WB6 economies, significant financial resources are needed to maintain and modernise the region’s railway network (Transport Community, 2023[3]). Important efforts are underway to modernise key railway routes in the region, including with financial support from the EU, the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and other international financial institutions. Flagship projects financed under the Economic and Investment Plan for the Western Balkans include the modernisation and expansion of rail infrastructure along key corridors such as Corridor VIII and Corridor X,4 as well as railway interconnections between the WB6 economies (WBIF, 2023[4]). Table 2.1 gives an overview of the flagship regional transport investment projects being implemented under the Economic and Investment Plan, their approximate correspondence to the pan-European corridors, and their projected completion dates.

EIP flagship projects in the transport area	Corresponding pan‑European corridor	Economies involved	Estimated investment amount under the EIP	Projected completion year of projects
Flagship 1: Connecting east to west	Corridors VIII and X	BIH, KOS, MKD, SRB	EUR 1.92 billion	2029
Flagship 2: Connecting north to south	Corridor Vc	BIH, MKD	EUR 1.99 billion	2028
Flagship 3: Connecting the coastal regions	N/A	ALB, MNE	EUR 0.47 billion	2029

Notes: EIP = Economic and Investment Plan. The nomenclature of the pan-European corridors, also called the “Helsinki corridors” is often used in reference to projects on the TEN-T networks. Nevertheless, these two networks are separate, with the TEN-T taking precedence in policy making at the European level. Estimated investment figures are as of 2022.

Source: WBIF (2023[5]).

The Western Balkan economies grapple with outdated energy infrastructure and suffer from substantial losses: on average 14% of electricity injected into the grid is lost, compared to only 5.2% in the EU (Figure 2.4). These figures indicate that significant investments are needed to modernise the energy infrastructure in the Western Balkans, especially in Albania and Kosovo, which have the highest rates of power losses. Such investments should also be targeted at developing sustainable and resilient energy networks to ensure the region’s transition to low carbon energy sectors. According to the EBRD, an annual investment of approximately USD 23 billion is needed in the wider South East Europe (SEE) region (comprising the WB6 plus Bulgaria and Romania) to facilitate a sustainable, secure and affordable transition to a net-zero economy by 2030 (Mirbabaeva, Nigina, 2023[6]).

Figure 2.4. Total power losses in the WB6 economies and the EU (2018)

% of total electricity injected into the distribution and transmission grid

The region’s electricity networks are currently facing significant barriers to the deployment and integration of renewables, including capacity constraints, a lack of flexibility and demand response, and inadequate investment incentives.5 These factors are therefore also an obstacle for the greening of the WB6 energy sectors, as well as for diversification and energy security. Significant additional investment into developing WB6 electricity grids is needed to modernise and expand transmission and distribution infrastructure, and enable increasing electrification and the integration of renewable energy sources into the power network.

Appraisal, selection and procurement processes of infrastructure projects are improving, but challenges persist in systematically assessing their financial and non-financial impacts

Since the previous CO assessment in 2021, the main efforts to improve the project selection processes for infrastructure projects in the region have been focused on the broadening of criteria assessed by project selection tools and frameworks. Albania and Montenegro updated their respective project selection processes in 2023, improving the alignment of selection criteria with strategic and sectorial priorities, and integrating environmental and social impact assessments into the process. Serbia has also updated its project selection process through the introduction of its Public Investment Management Information System (PIMIS) in 2023. However, it is not consistently applied for all projects.

Despite these advancements made in some economies, others continue to face challenges in effectively appraising infrastructure projects. Bosnia and Herzegovina, Kosovo, and North Macedonia face challenges in ensuring that their project selection tools are regularly updated, putting into question their continued use and relevance. These economies also lack legal mandates for cost-benefit analyses (CBA), and inconsistent regulatory frameworks hinder the effective and comprehensive appraisal of infrastructure projects.

Without properly developed and applied appraisal tools, the WB6 economies risk investing in projects that are not economically viable, fail to address the most recent needs of the population and underestimate the potential negative consequences – especially on the environment. The concerns of the region’s stakeholders on the economic viability of projects such as the Belgrade-Budapest railway and the Bar‑Boljare highway attest to this. So far, the only economy that has developed CBA guidelines tailored to its own circumstances and needs is Serbia, and these have not been updated since 2010.

Several of the WB6 economies have established consistent and coherent implementation and procurement processes for infrastructure projects, and to varying degrees use alternative procurement methods such as public private partnerships (PPPs) and concessions. Most notably, Montenegro and Serbia have taken steps to improve their public procurement systems and to align the governance of alternative procurement methods with EU good practices through updates to their legal frameworks. Albania, Kosovo and North Macedonia require additional amendments to their legal frameworks to ensure that alternative procurement methods are appropriately monitored and fully integrated into the frameworks for public financial management.

Given the risks associated with alternative procurement methods such as PPPs, strong institutional frameworks are imperative to ensure that they are governed and implemented in line with government priorities and that they do not represent significant fiscal risk (IMF, 2023[9]). In Bosnia and Herzegovina, the absence of coherent and up-to-date legal frameworks for PPPs and concessions hampers the adoption of alternative procurement methods throughout the economy – limiting investment in infrastructure.

The implementation of infrastructure projects is delayed by administrative constraints and challenges in co-ordination

Institutional co-ordination challenges persist in some WB6 economies, hindering the translation of transport visions and development plans into tangible outcomes. Bureaucratic hurdles and differing mandates among government agencies often impede seamless co-operation, as seen most prominently in Bosnia and Herzegovina and North Macedonia. Moreover, challenges in on-the-ground implementation are leading to delays in the implementation of key projects on the core TEN-T network, with most road and railway infrastructure projects in the region suffering delays of over two years following their approval.

In the energy sector, most of the WB6 economies are facing delays in the implementation of their energy infrastructure development plans. Only Montenegro is on track, while Albania and North Macedonia, and to a greater extent Serbia, have encountered delays. The main reasons cited for delays are budget constraints, lack of human resources, and problems with land purchase and usage rights. As of 2022, the majority of flagship connectivity projects in the energy sector were facing delays of at least a year, with some facing more serious delays (WBIF, 2022[10]).

The development of broadband networks has steadily progressed in the region, leading to a rise in both fixed and mobile broadband connectivity and coverage throughout the WB6 economies. However, significant disparities exist between the WB6, with Albania, Kosovo and North Macedonia lagging behind the other economies in terms of fixed broadband penetration due to significant infrastructure financing needs. The regional Balkans Digital Highway initiative aims to create a wholesale broadband network leveraging the optical fibre infrastructure of participating transmission systems operators. The feasibility study, cost benefit analysis and preliminary design were completed in 2023 (for more information, see Chapter 5: Digital transformation).

The region could significantly improve the establishment of effective practices for managing and maintaining infrastructure assets

The efficiency and implementation of asset management systems for transport infrastructure remains limited across the region. Economies such as Albania and Serbia have secured international assistance and funding to develop comprehensive asset management systems in the rail and road sectors, laying the groundwork for proactive maintenance planning and resource allocation. However, the implementation of asset management practices for other modes of transport such as maritime and aviation remains limited across the region. The absence of fully developed asset management systems hampers the ability of the WB6 economies to prioritise maintenance activities and allocate resources effectively, leading to deteriorating infrastructure conditions and higher maintenance costs in the long run.

The picture is more positive for energy infrastructure. Except for Montenegro and Bosnia and Herzegovina, all the WB6 economies have put in place methodologies for managing and maintaining their energy infrastructure, and use tools such as maintenance plans and software solutions, albeit with varying degrees of sophistication. All economies are also regularly collecting key indicators related to energy infrastructure, and most are regularly publishing these indicators, although Montenegro is more restrictive in this regard, citing potential security risks as a reason for the non-publication of information.

Building sustainable and resilient infrastructure

The WB6 infrastructure is increasingly exposed to climate-induced risks, with floods being a common source of damage in the region. The region’s digital infrastructure is also susceptible to cyberattacks, the intensity and frequency of which have been increasing in recent years, as evidenced by recent cyberattacks on the critical government information and communication technology (ICT) infrastructure of economies such as Albania and Montenegro.

Definitions of critical infrastructure exist, but policies to improve its resilience are at an early stage, and potential for regional co-operation is underdeveloped

Most of the WB6 economies, with the exception of Bosnia and Herzegovina6 and North Macedonia (which developed a draft law in 2022 that is yet to be adopted), have defined critical infrastructure in their domestic legal frameworks. It is generally defined as systems, networks or assets which are essential for their social and economic functioning, and whose disruption would cause significant damage to economic, material or human security. Broadly speaking, the definitions of critical infrastructure in the WB6 economies comprise sectors such as energy, ICT and transport infrastructure, as well as other sectors such as public services, healthcare and the financial system. While such definitions are overall comprehensive and represent progress in alignment with the EU acquis,7 definitions between the WB6 economies are not harmonised. This can create a barrier to information sharing and improved regional co-operation in the development of more resilient critical infrastructure (KCSS, 2023[11]).

The region is making progress in introducing policies to protect its infrastructure from the impacts of climate change such as changes in weather conditions and natural disasters. With the exception of North Macedonia, all economies have either adopted, or are in the process of adopting, national adaptation plans (for more information, see Chapter 6: Greening). However, in Bosnia and Herzegovina, the lack of a critical infrastructure definition results in the limited coverage of this aspect in its plan.

Despite these steps, policies to manage risk to critical infrastructure in the region are at an early stage and remain mostly reactive rather than proactive, focusing more on risk mapping and anticipation than adaptation measures to improve the resilience of critical infrastructure to potential threats (Popovski et al., 2023[12]). For instance, Serbia’s Climate Change Adaptation Programme 2023-30 plans to conduct a risk assessment of road infrastructure’s vulnerability to climate change impacts and an assessment of the impacts of changing hydrometeorology conditions on hydropower generation.

Recent cybersecurity incidents have increased the region’s awareness of the importance of this field and have led to all the WB6 economies, except Bosnia and Herzegovina,8 adopting policy frameworks that aim to reinforce cybersecurity, including for critical ICT infrastructure. While the region’s legal frameworks need to be further reinforced to align with EU good practices and ensure the resilience of critical ICT infrastructure (for more information see Chapter 5: Digital transformation), encouraging initiatives have been deployed, such as the establishment of the Western Balkans Cyber Capacity Centre in 2023. This centre, established with the support of France and Slovenia, aims to play a leading role in capacity building for the region’s cybersecurity authorities,9 constituting a good example of regional collaboration to enhance the resilience of critical infrastructure.

Project selection and procurement processes show a positive trend towards promoting low‑carbon and sustainable infrastructure, but progress is uneven between economies

While some economies have made strides in integrating sustainability and resilience goals into project selection criteria and investment allocation, others lag behind. As mentioned, through updates to their project selection frameworks, Albania and Montenegro have recently incorporated environmental and social impact assessments into their project selection processes. The integration of these goals into criteria for selecting projects and allocating investments is inconsistent. Namely, the lack of strong mandates for the use of project selection tools prevents Bosnia and Herzegovina, Kosovo, and North Macedonia from comprehensively considering resilience and sustainability factors in their project appraisal processes.

Public procurement frameworks for infrastructure projects have not yet been adapted to reflect good practices in the areas of green procurement in the region, and further efforts will be needed to ensure that environmental considerations are mainstreamed in procurement processes. One notable exception is Serbia, which updated its Law on Public Procurement in 2023 to emphasise quality as the primary criterion in the tendering process, with a strong focus on criteria such as the product's lifespan, maintenance costs, water and electricity consumption, and the recyclability of materials used in construction. Bosnia and Herzegovina has recently adopted a new strategy on the development of public procurement that aims to reinforce the use of environmental criteria in public procurement, including for infrastructure projects.

Policies to enhance the resilience and sustainability of electronic communications networks are starting to emerge in the region but have yet to be embraced by all economies

Policies to build the resilience of broadband infrastructure in the WB6 economies are at an early stage of development. Existing electronic communications frameworks include basic rules related to network security and integrity, such as requirements for implementing security measures against unauthorised access and breaches, and ensuring network availability and quality of service. However, they lack the more detailed provisions needed to address the evolving security challenges of the telecommunications sector. Moreover, capacity building and training initiatives to enhance the skills and knowledge of key stakeholders involved in broadband infrastructure resilience, such as network operators and emergency responders in disaster preparedness, cybersecurity and resilience planning, are underdeveloped in the region.

The European Electronic Communications Code (EECC) represents a significant advancement in enhancing the reliability and availability of critical communication infrastructure across the EU. Efforts by the WB6 economies to align their legal frameworks with this code could help build resilience by increasing requirements for network operators, encouraging collaboration between stakeholders and co-ordinating responses to emergencies. Currently, Serbia has made the most progress in this regard, with Albania following and the other WB6 economies making slower progress (for more information, see the section: Improving the functioning of infrastructure through market-based reforms and regulatory efforts).

Albania stands out as the only regional economy that has introduced initial provisions on supply chain diversification to address the risks associated with reliance on a limited number of suppliers for critical broadband equipment and components.10 The Albanian Electronic and Postal Communication’s Authority’s (AKEP) Strategic Plan on 5G Technology recognises supply chain diversification as a key measure for strengthening the resilience of critical infrastructure, such as 5G networks, against various threats and disruptions. In this regard, it aims to establish two bodies: the Albanian Trusted Supplier Certification Company/Department, which will be responsible for identifying and closing regulatory gaps and ensuring compliance, and the National Telecoms Lab, which will be responsible for independently testing network equipment security, resilience and performance under various conditions.

Policies to ensure that digital technologies and networks are operated in a sustainable way are also at an early stage in the region, although have recently gained traction in some economies, with Albania, Kosovo and North Macedonia integrating objectives such as deploying broadband networks based on environmentally friendly and sustainable technologies, utilising alternative energy sources to power communication systems,11 and reducing environmental pollution from electronic equipment usage into their broadband development policies. Despite this encouraging trend, the implementation of measures related to these objectives is at an early stage even in these economies.

The energy crisis has encouraged some of the WB6 economies to develop policies to improve the resilience of their energy systems to external shocks, but others lag behind

The rise in global energy prices, compounded by Russia’s full-scale aggression against Ukraine since 2022, has impacted the energy sectors of the WB6 economies, leading to price volatility and even power outages in some economies12 (CEE Bankwatch Network/ETX, 2022[13]). The region’s economies are becoming increasingly aware of the need to improve their resilience to external supply shocks by preparing adequate emergency response plans and working on the diversification of their energy supplies.

All the WB6 economies introduced immediate measures as a response to the energy crisis, ranging from price caps and tax subsidies to information campaigns and support mechanisms to reduce energy consumption and boost the uptake of energy efficiency measures. Moreover, all the WB6 economies have implemented measures to improve energy security, albeit with different approaches and levels of ambition.

North Macedonia has introduced new processes focusing on better crisis reaction mechanisms and international co-ordination, and stands out as the only economy that has developed coherent and comprehensive demand and supply side emergency plans to cope with eventual energy supply disruptions. Bosnia and Herzegovina performed an Energy Security Stress Test that included an assessment of the risks associated with natural gas supply disruptions and security of supply. The other WB6 economies have focused their efforts on creating dedicated working groups or changing the composition and frequency of meetings of existing groups.

Regarding supply diversification, most of the WB6 economies have increased the focus of their policies on deploying renewable energy solutions to counter future supply challenges, aiming to enhance both sustainability and energy security. Other economies, such as Serbia, have focused on the diversification of natural gas import sources to reduce supply risks.

Differences in energy mixes between the WB6 economies lead to different sectoral vulnerabilities to supply shocks. Hydropower generation represents an overwhelming majority of the region’s renewable energy mix, limiting its potential for contributing to diversification (for more information, see Chapter 5: Greening).13 The continued reliance on fossil fuels across all economies shows significant room for improvement for the deployment of non-hydro renewable energy sources (RES) to drive forward both energy security and sustainability (Figure 2.5). More ambitious policies will be needed to ensure both effective decarbonisation and diversification through the deployment of new RES capacities.

Figure 2.5. Composition of the total energy supply by energy sources in the WB6 economies (2022)

Percentage of the total energy supply

Recommendations for closing the infrastructure gap and building quality infrastructure

Improve the use and regional sharing of data for infrastructure planning and decision making. The WB6 economies should prioritise the establishment and utilisation of robust data-driven approaches for infrastructure planning to enhance the clarity and effectiveness of their strategic visions for infrastructure development. This involves investing in comprehensive data collection, analysis and modelling techniques to inform decision-making processes. By leveraging data on economic and demographic trends, transportation patterns, and environmental factors, governments can gain valuable insights into infrastructure needs, identify priority areas for investment, and assess the potential impact of infrastructure projects on sustainability and connectivity. Introducing data-sharing practices between the WB6 economies can also strengthen the basis for co-ordinated infrastructure planning and investment to maximise the region’s potential.
Develop robust cost-benefit analysis guidelines and impact assessment frameworks that assess a wide range of criteria. The WB6 economies should collaborate to standardise cost‑benefit analysis guidelines and impact assessment frameworks for infrastructure projects, aligning them with EU and OECD standards that provide comprehensive guidelines outlining the criteria for assessing the economic, social and environmental impacts of infrastructure projects. This would facilitate the consistent evaluation of project viability and potential impacts across the region, thus enhancing transparency and the comparability of infrastructure investments. Tailored guidelines should also be developed to address the unique socio‑economic and environmental contexts of each economy, ensuring that infrastructure projects contribute effectively to long-term sustainability and competitiveness. Mainstreaming resilience and sustainability considerations into project selection and prioritisation processes and increasing the importance of relevant criteria will also be important to properly assess the benefits of investing in resilient and sustainable infrastructure, and fully measure the costs of not doing so. Box 2.1 provides an example of multi‑criteria analysis (MCA) as practiced in the United Kingdom.

Box 2.1. The UK’s Multi-criteria Analysis Manual: A guide for comprehensive impact assessment

In 2009, the UK’s Department for Communities and Local Government introduced a manual for multi‑criteria analysis (MCA) to help local authorities assess a wide range of criteria when planning, prioritising and selecting infrastructure projects.

The manual covers instructions and methodologies for monetary valuation techniques such as CBA that look at the financial consequences of implementing a given project, as well as non-monetary criteria such as the environmental and social impacts of a project. It also gives guidance on how to integrate monetary and non-monetary valuation techniques into project selection processes to ensure that all relevant impacts and costs are assessed.

The WB6 economies should look to develop similar documents to provide guidance to their sub-national and local authorities, which often play an important role in selecting and implementing infrastructure projects, and to ensure that infrastructure decisions avoid adverse lock-in effects.

Sources: OECD (2009[15]); UK Government (2009[16]).

Integrate environmental criteria into public procurement frameworks. The WB6 economies should introduce policies and legislation emphasising the importance of environmental criteria in awarding public procurement contracts. Green public procurement can drive innovation by providing an important incentive to businesses seeking to compete for public contracts, and can result in savings for governments and public authorities by integrating the full life-cycle costs of contracts into the bidding criteria. Serbia’s recent amendments to its Law on Public Procurement can serve as an example of good practice for the other WB6 economies.
Strengthen asset management systems. The WB6 economies should prioritise the development and implementation of asset management systems for all types of infrastructure, particularly transport infrastructure, where it is underdeveloped, to ensure the efficient maintenance of infrastructure assets. This includes investing in capacity building, technical assistance and institutional strengthening to support the establishment of robust asset management frameworks, data collection mechanisms and performance monitoring systems.
Adopt proactive policies that aim to improve the resilience of critical infrastructure and increase regional and international co-operation. The WB6 economies would benefit from aligning their legal definitions of critical infrastructure. This would allow them to improve co‑operation in identifying and building resilience to transboundary threats such as natural disasters (including those induced by climate change), sabotage and economic shocks, while maintaining the national specificities of their legal frameworks where relevant and necessary. The WB6 should also look to develop proactive policies to increase the resilience of their critical infrastructure to such threats, adopting a whole-of-government approach and exploring possibilities to reduce the impacts of potential shocks to broader societal and economic functioning. In this regard, increased regional co‑operation has the potential to leverage synergies by pooling resources and expertise and creating platforms to exchange good practices, such as the recently launched Cyber Capacity Centre. Box 2.2 shows how OECD and EU member states are exchanging good practice and experience with resilience-enhancing policies.

Box 2.2. Good practice sharing platforms for critical infrastructure resilience in the EU and OECD

In 2022, the European Union adopted Directive 2022/2557 on the Resilience of Critical Entities, giving member states until October 2024 to transpose it into their national legislation. The European Commission established a list of 11 sectors and sub-sectors1 constituting essential services through a delegated regulation.

Under the directive, member states have until 2026 to adopt strategies for reinforcing the resilience of their critical infrastructure entities. These strategies must contain elements such as measures to improve the resilience of critical entities, risk assessment, definition, mapping and justification thereof of critical entities, and a governance framework for resilience building measures. To facilitate the co‑ordination of efforts and exchange of good practice between member states, the directive also establishes a Critical Entities Resilience Group composed of relevant authorities and stakeholders from member states.

Since 2014, OECD members adhering to the Recommendation on the Governance of Critical Risk have been implementing policies to monitor, mitigate and prevent the impacts of threats involving risk to critical infrastructure and services. As an official OECD working party, the annual High-Level Risk Forum serves as a platform for regular exchange of good practice between OECD members and other adhering parties, involving sub-national authorities and other stakeholders such as civil society and the private sector.

The WB6 economies, due to the shared challenges they face, could look to establish similar platforms for the exchange of good practice in managing risks to their critical infrastructure, and to co-ordinate efforts. In parallel they could explore options for membership or observer status in the aforementioned bodies in order to further align their policies with both the EU acquis and international good practice.

1. Energy; transport; banking; financial market infrastructure; health; drinking water; waste water; digital infrastructure; public administration sector services; space; and food production, processing and distribution.

Sources: European Commission (2023[17]); European Union (2022[18]); OECD (2014[19]).

Focus on enhanced regional co-ordination in energy network management to strengthen resilience and crisis response. A regional approach in managing energy networks allows for the sharing of resources, expertise and information among neighbouring economies. It enhances the ability to manage energy supply disruptions, natural disasters or other emergencies more effectively by pooling resources and co-ordinating responses to emergencies. Assessing supply and demand needs with a regional perspective also facilitates the integration of renewable energy sources and ensures a more stable and secure energy supply across the region, ultimately leading to a more efficient and resilient energy infrastructure network.

Improving the functioning of infrastructure through market-based reforms and regulatory efforts

Beyond planning and implementing the development of infrastructure networks, the WB6 economies also need to ensure that the operation of these networks is efficient and aligned with the EU acquis. In this regard, market-based reforms have the potential to significantly improve the competitiveness of infrastructure operation markets, as well as to prepare the region for both the regulatory requirements and competitive pressures of the EU single market.

Harnessing the potential of market-based reforms for efficient and integrated infrastructure networks

EU policy governing energy and transport networks is strongly defined by the unbundling of vertically integrated natural monopolies in network sectors such as rail, electricity and natural gas, ensuring the openness of markets to competition and promoting cross-border co-operation and integration. As prospective members of the EU and members of the Transport Community and Energy Community, The WB6 economies are making efforts to align their domestic legislation and market governance structures with essential parts of the EU acquis, facilitated through the technical assistance, financial support and monitoring of these organisations.

The WB6 are gradually opening and reforming their rail and aviation markets, fostering competition, and aligning the governance of transport networks with EU good practices

Some WB6 economies have taken significant steps to liberalise their rail markets in recent years, allowing for the entry of new operators and fostering competition. However, challenges remain in ensuring effective competition and reducing barriers to entry across the region. These include limited interest from private operators, regulatory complexities and infrastructure bottlenecks. Serbia stands out as a leader in rail market liberalisation, having fully opened its rail market and attracted multiple private operators. Albania and Kosovo have also initiated steps to liberalise their rail sectors, with plans for market opening approved in recent years. Montenegro and North Macedonia have made initial steps in updating their rail regulations and aligning with EU standards, laying the groundwork for future market opening. However, challenges persist in implementing liberalisation measures effectively, such as bureaucratic hurdles, inadequate infrastructure capacity and limited promotion of competition.

Various aviation reforms have been carried out by the WB6 economies to improve the competitiveness of the aviation sector. These include aligning with the relevant EU legislation, enhancing safety standards and modernising aviation infrastructure. The region is aligning airspace management practices with the EU standards set out in the Single European Sky (SES) regulations. The most progress is being made in Montenegro and Serbia, which have fully aligned with the SES II provisions, whereas alignment efforts in the other WB6 economies are ongoing. Investments in airport infrastructure, air traffic management systems and staff training are also contributing to improved safety, efficiency and capacity in the aviation sector. However, challenges such as institutional capacity constraints, staffing issues and delays in regulatory reforms persist in some economies, particularly Bosnia and Herzegovina and Kosovo, which impact the pace and effectiveness of these reforms. With the exception of Bosnia and Herzegovina, none of the region’s economies are part of a Functional Airspace Block, which results in inefficiencies in air traffic management, restricted routing options, safety risks and limited opportunities for airspace optimisation, and impacts the region’s connectivity and competitiveness in the global aviation market.

The region has significantly developed its organised electricity markets, but barriers to competition remain

Since the previous CO assessment in 2021 there have been major developments in the deployment of organised energy markets in the Western Balkans. In 2023 alone, three additional day‑ahead markets for electricity were launched in Albania (ALPEX), North Macedonia (MEMO) and Montenegro (MEPX), and have been operating continuously since then. These power markets have the potential to improve the efficiency, stability and sustainability of the energy sector.

With the opening of an ALPEX branch in Kosovo in early 2024, Bosnia and Herzegovina is the only economy in the Western Balkans without an organised day-ahead market for electricity. Serbia, which has been operating a day-ahead market since 2016, has further developed its market structure by launching an intraday market in 2023, further improving the flexibility and competitiveness of its electricity sector (Spasić, Vladimir, 2023[20]). While overall liquidity at the different power exchanges remains limited, the creation of organised markets is a big achievement and will enable additional integration in the region and beyond.

Despite this progress, in some economies there is insufficient deregulation. Although legally deregulation is quite advanced in most WB6 economies, existing tariff structures prevent a full liberalisation, which hampers the creation of truly competitive markets. This is also mirrored by the high degree of market concentration present in the different economies, as shown in Figure 2.6, which illustrates the dominant position of market incumbents across the region.

Unbundling in the electricity sectors has been further advancing in recent years in line with EU and Energy Community good practices, including the appointment of compliance officers and the adoption of detailed compliance programmes in most WB6 economies. Additional efforts, however, are needed to unbundle the respective operators in the gas sectors, as shortcomings in this area persist in multiple economies. There is also room for improvement in ensuring third-party access and the mutual recognition of licenses, and discriminatory practices in some economies present market entry barriers and hamper the development of competitive markets.

Figure 2.6. Market shares of traded electricity volumes in the day ahead timeframe in the WB6 economies (2022)

Percentage of traded electricity

Recent legislative efforts have the potential to improve competition in the region’s electronic communications markets

While legal and policy frameworks for the governance of electronic communications markets include measures to ensure competition and reduce market entry barriers, persisting challenges hinder market efficiency and innovation in the telecommunications sector across the region. In all Western Balkan economies, both mobile and fixed electronic communications markets are dominated by a small number of major players, leading to limited competition. Factors contributing to this concentration include regulatory barriers, such as outdated regulations in the case of Bosnia and Herzegovina, high entry costs, exemplified by the expensive spectrum auctions across the region, and the legacy of state-owned incumbents, such as Telekom Srbija in Serbia and BH Telecom in Bosnia and Herzegovina.

Barriers to market entry are particularly challenging in terms of the deployment of high-speed networks such as 5G. The WB6 economies are currently lagging behind the EU in the deployment of such technologies, which have the potential to support technological advancement and economic growth through faster data speeds, greater capacity and new applications for digital connectivity across several industries.

The region’s economies are in the process of updating and aligning their legal and regulatory frameworks with the European Electronic Communications Code (EECC). This alignment with EU good practice aims to create opportunities for new market players by improving spectrum management, strengthening access regulation measures to promote competition in wholesale markets for network infrastructure and services, and facilitating access to passive and active infrastructure,14 thereby lowering the costs of market entry for new operators. Serbia has led this alignment process by adopting a new electronic communications law in 2023, and Albania should soon complete the final adoption stages of similar legislation.

In the past three years, several economies have implemented reforms to strengthen their regulatory frameworks to ensure fairer competition, prevent anti-competitive behaviour and facilitate market entry for new players. Albania, Kosovo and North Macedonia have adopted regulations aiming to reduce administrative burdens and costs and facilitate investment in high-speed network infrastructure, thus advancing the alignment of their policies with the EU Connectivity Toolbox.15 Bosnia and Herzegovina, Montenegro, and Serbia are yet to implement similar reforms. Despite these modernised rules, the effective implementation and enforcement of regulatory reforms will determine the efficiency in fostering a dynamic telecommunications market in each economy.

Aligning regulatory regimes with the EU acquis and ensuring the efficient functioning of regulatory authorities

Strong, independent and proactive regulatory authorities are needed to ensure the proper functioning of the transport, energy and electronic communications markets in the WB6 economies, in line with the requirements of the EU acquis. The alignment of secondary legislation in a wide range of sub-sectors is also a key prerequisite for the implementation of the acquis and requires significant regulatory and legislative efforts, which can be hindered by a lack of administrative capacity in the WB6 economies.

The WB6 economies have advanced in aligning with, and to a lesser degree implementing, important pillars of the EU energy and transport acquis

The adoption of the Clean Energy Package at the ministerial level of the Energy Community in December 2022 constitutes a strong commitment towards the alignment of the region’s energy markets with EU good practices and market requirements, as well as with EU policy for promoting the sustainable development of the energy sector and decarbonisation. Throughout the Western Balkans, governments are working on developing their legal frameworks in line with these additional requirements. Progress has been made both in terms of alignment with and implementation of legislation, although additional efforts are needed across all economies, as shown by monitoring conducted by the Energy Community Secretariat (Figure 2.7).

When it comes to transport, most WB6 economies have shown greater progress for rail transport than road transport in the improvement of regulatory regimes in accordance with the Transport Community Action Plans (Figure 2.8). Albania is the only economy that has aligned its road transport sector with the Action Plan to a greater extent than rail, showing a stronger commitment to addressing road transport challenges and implementing the recommended measures outlined in the Transport Community Action Plans. Additionally, Serbia has surpassed the WB6 averages for implementing road and rail action plans, indicating significant progress in both sectors compared to other economies in the region.

Figure 2.7. Energy Community Secretariat's implementation scores for the WB6 economies (2023)

Figure 2.8. Overall progress of the WB6 economies in progressing on the Rail and Road Action Plans until 2023

Regulatory authorities for key infrastructure networks are being progressively strengthened but require additional resources to effectively conduct their mandates

The regulation of transport modes in the region is improving through efforts to update legislation and establish regulatory bodies to enhance safety standards, promote competition and ensure compliance with EU regulations. However, inconsistencies in implementation, limited institutional capacity and infrastructure deficiencies hinder full alignment with the EU acquis across the region.

In the rail sector, efforts have been made to support the implementation of market opening and address safety concerns through the establishment of regulatory bodies and the adoption of legislation on safety standards, worker's rights and passenger protection across the WB6 economies. Kosovo, Montenegro and Serbia are the most advanced in this regard, with Albania and North Macedonia making progress during the assessment period, and Bosnia and Herzegovina lagging behind (Transport Community, 2023[23]). However, challenges persist in ensuring market access and oversight, and fostering competition in the rail market. In 2023, through the Transport Community, the WB6 economies established a Regional Railway Centre of Excellence to help strengthen the human capacities of the region’s railway sectors by providing dedicated capacity building opportunities for the public sector, railway operators and other stakeholders (Transport Community, 2023[24]).

In the road sector, good progress has been made in adopting road safety strategies, establishing regulatory bodies, and implementing road safety measures such as Road Safety Inspections (RSI) and Road Safety Audits (RSA). Bosnia and Herzegovina and Serbia have established road safety agencies, allowing them to centralise expertise, resources and efforts towards implementing comprehensive road safety strategies, and as a result enhancing co-ordination, accountability and effectiveness in reducing road traffic injuries and fatalities. However, challenges persist in all economies in improving road safety data collection and analysis systems, aligning targets with EU recommendations, and enhancing institutional capacities.

As apparent from Figure 2.7 above, most of the WB6 economies are relatively advanced in terms of the performance of public authorities in the energy sector. Energy regulators in the region largely fulfil the criteria of legal, functional and financial independence; however, salaries mostly remain below industry standard, and additional financial resources will be needed to prevent further brain drain. There is also a need for additional capacity building, particularly to ensure that regulators can take on increasing responsibilities as the WB6 economies transpose additional elements of the EU and Energy Community acquis. Co-operation with European organisations such as the Agency for the Co-operation of Energy Regulators (ACER) is taking place at different levels between the WB6 economies. Currently, only the regulatory authorities of Montenegro and North Macedonia enjoy observer status in ACER, allowing them to take part in some of its meetings and facilitating the exchange of good practice with EU member states.

While the regulatory authorities responsible for electronic communications in the WB6 economies are adequately staffed to fulfil their responsibilities, various challenges have influenced their financial and operational independence, particularly in Bosnia and Herzegovina, Montenegro, North Macedonia, and Serbia.16 The European Commission has raised concerns about the independence of regional regulatory authorities in its latest reports for these economies (European Commission, 2023[25]). Legal changes aiming to align with the EECC have the potential to strengthen the independence of electronic communications regulatory authorities across the region, addressing challenges they have encountered over the past three years.

Recommendations for improving the functioning of infrastructure through market-based reforms and regulatory efforts

Implement comprehensive regulatory rail reforms aligned with EU guidelines. This includes streamlining licensing procedures, ensuring non-discriminatory access to railway infrastructure and fostering a competitive market environment. Investments in rail infrastructure and capacity expansion are also essential to accommodate new market entrants and promote efficient operations. Collaboration among regional stakeholders, including governments, regulatory bodies and industry players, is crucial to overcome challenges and harmonise standards between economies.
Enhance the role of organised energy markets and enforce their de facto deregulation. This will positively impact the energy sector's efficiency and competitiveness. Organised markets facilitate transparent price formation through supply and demand dynamics, encourage competition among providers, and offer consumers more choice, potentially lowering prices. Deregulation also removes monopolistic barriers, fostering innovation and efficiency improvements and paving the way for making the most of enhanced regional integration. Together, these mechanisms ensure that a more dynamic market can stimulate investments in renewable energy and new technologies, leading to a more sustainable and resilient energy system.
Ensure the timely and full transposition of the Clean Energy Package. Full alignment with and implementation of the Electricity Network Codes will allow the WB6 economies to better exploit the potential of regional integration. Particular focus is needed on strengthening long-term planning, institutional co-ordination and energy security.17 In this regard, the revision of the WB6 National Energy and Climate Plans in line with the Energy Community Secretariat’s comments will be crucial, as will continued diversification as a result of renewable energy sources.
Ensure that reforms aligning primary legislation with the EECC are followed by the necessary secondary legislation. All Western Balkan economies will need to rigorously implement such reforms, including updating relevant product and service markets within the electronic communications sector, and aligning voice termination rates across operators’ fixed/wireless networks in accordance with the Commission’s Delegated Regulation18 to ensure a more competitive, cross-border environment. Such measures have the potential to improve competition by identifying areas where it may be lacking or distorted. They can also prevent discrimination against certain types of operators and create economies of scale by promoting co‑operation between operators in different economies.
Implement regulatory reforms to accelerate the development of high-speed networks. Given the transformative potential of new technologies such as 5G, governments in the region should work consistently to facilitate network infrastructure investments, while fostering innovation in its applications. It is crucial for Western Balkan economies to complete reforms aligned with the EU Connectivity Toolbox to streamline high-speed network development, and to adopt regulations aligned with the EU 5G Cybersecurity Toolbox19 to ensure secure deployments of the newest high‑speed network technology. The WB6 economies should also explore options to align with and take inspiration from upcoming EU legislation such as the Gigabit Infrastructure Act (Box 2.3). Harmonising regulations across the region could eliminate barriers to the deployment of high-speed networks. This can be achieved by adopting a permit-exempt deployment regime for small-area wireless access points (small antennas), in line with relevant EU legislation.20

Box 2.3. EU Connectivity Toolbox and the Gigabit Infrastructure Act

In September 2020, the European Commission recommended the development of a common Union Toolbox to aid member states in rolling out very high capacity networks. In March 2021, in accordance with the Commission Recommendation (EU) 2020/1307 of 18 September 2020, the member states, in close co-operation with the Commission, collectively agreed upon a set of 39 best practices, as part of the “Connectivity Toolbox”, which they identified as the most efficient in achieving a swift roll out of very high capacity networks such as fibre and 5G. These best practices include measures to help network operators reduce the cost of deploying networks and EU member states give operators access to the spectrum they need to rollout 5G and to encourage them to further invest in 5G coverage. The Connectivity Toolbox is the result of exchanges between member states, in co-operation with the Commission, following the Commission’s recommendation. Member states have committed to implement a subset of the identified best practices following an assessment of their national circumstances to reduce the cost of deployment of very high capacity networks.

Building on some of the best practices of the Connectivity Toolbox, the Commission has reviewed the Broadband Cost Reduction Directive (2014/61/EU), leading to the proposed Gigabit Infrastructure Act (GIA). The need for proposing a replacement for the Broadband Cost Reduction Directive emerged because the flexibility given to member states not to implement certain measures or to apply exemptions has resulted in inconsistent implementation across the EU, and a diverse interpretation of certain provisions through national dispute resolution and guidelines. Moreover, the ambition and scope of the 2014 Directive no longer fits market and technological developments. Thus, the GIA responds to the growing needs for faster, reliable, data-intensive connectivity, driven by the advancement and use of technologies such as cloud computing, artificial intelligence (AI), data spaces and virtual reality.

In February 2024, a political agreement was reached, and the GIA will soon become law. The act updates the rules to ensure faster, cheaper and simpler rollout of gigabit networks installation, addressing the main hurdles such as expensive and complex procedures for network deployment.

In parallel, the Commission adopted the recommendation on the regulatory promotion of gigabit connectivity, which provides guidelines to national regulation authorities (NRAs) on how to design access remedy obligations for operators with significant market power, thus promoting competition.

Sources: European Commission (2024[26]; 2022[27]; 2024[28]).

Strengthening regional infrastructure connectivity

Reforms that focus on removing barriers to regional connectivity by facilitating the transportation of goods and people, integrating energy markets, and reducing roaming costs are key to leverage the region’s potential as a strategic corridor, and a prerequisite for regional and European integration. In the field of research and innovation infrastructure, a regional approach is important for ensuring that all WB6 economies are using their comparative advantages to maximise their collective research potential and ensure the efficient allocation of individual resources.

Integrating regional infrastructure networks and relevant markets

Efforts to facilitate regional connectivity and promote intermodal transport are gradually gaining momentum in the Western Balkans, albeit with varying degrees of implementation. A notable aspect of this endeavour is the integration of infrastructure networks and the implementation of relevant reforms aimed at fostering closer ties and the smoother movement of goods and people within the region. The recently proposed Growth Plan for the Western Balkans has the potential to further support the integration of regional infrastructure markets in the transport, energy and digital sectors (Box 2.4).

Box 2.4. The European Commission’s new Growth Plan for the Western Balkans: Priority areas related to infrastructure market integration

To support accelerated economic convergence with the EU and incentivise further reforms, in November 2023 the European Commission introduced a proposal for a new Growth Plan for the Western Balkans. The proposal aims to increase financial support to reforms in the region by EUR 6 billion over the 2024-27 period, comprising direct disbursements to government budgets and to projects to be implemented by the Western Balkans Investment Framework (WBIF).

The second pillar of the Growth Plan proposes the gradual integration of the WB6 into different segments of the EU’s single market, which has the potential to provide substantial economic benefits for the WB6 economies. Both the financial support and the incentive of the single market opening will depend on progress made in establishing a Common Regional Market (CRM) between the WB6 economies, as well as on the implementation of fundamental reforms as part of the EU accession process.

The European Commission has pre-identified seven priority areas for integration into the EU’s single market, contingent on strong progress by the WB6 on implementing the CRM in the relevant areas. The areas relevant to infrastructure and connectivity are:

Facilitation of road transport: Reforms supported by the Growth Plan could aim to integrate the region’s road transport networks and align their road transport governance with the EU acquis. This could allow the EU to introduce additional road transport facilitation measures and open the road market to the WB6.
Integration and decarbonisation of energy markets: This priority area includes advancing on the integration of the region’s electricity markets and introducing carbon pricing measures, which could allow electricity market coupling with EU member states and address the impacts of the introduction of the Carbon Border Adjustment Mechanism by the EU.
Digital single market: This priority area would require comprehensive reforms to accelerate the digital transformation of the WB6. Benefits would include integration into the EU single market for e-commerce, reduction of roaming costs and increased interoperability with digital government services in the EU.

Note: The final priority areas will depend on the reform plans adopted by the WB6 governments in co-operation with the European Commission.

Source: European Commission (2023[29]).

Transport facilitation reforms are showing gradual progress, but additional efforts are needed to unleash the region’s potential as a key transport corridor

Efforts to enhance regional transport connectivity have been ongoing since the last assessment, with a strong focus on transport facilitation measures under the Transport Community’s Transport Facilitation Action Plan. Notable advancements have been observed in the establishment and operationalisation of common border crossing points (BCPs), facilitating smoother trade flows and fostering closer co-operation among neighbouring economies. Concrete achievements during the assessment period include the establishment and operationalisation of BCPs such as Zatrijebacka Cijevna-Grabon between Montenegro and Albania, and the launch of the one-stop shop system at Kjafasan-Qafë Thanë border crossing between North Macedonia and Albania.

Despite progress, challenges persist in fully implementing reforms to leverage infrastructure for regional integration. Delays and bureaucratic hurdles in finalising bilateral agreements, as observed in negotiations between Serbia and Bosnia and Herzegovina for rail border control agreements, underscore the complexities involved in aligning policies and procedures across borders. Additionally, while advancements have been made in implementing joint BCPs, further investments and improvements are needed to optimise their functionality and efficiency.

Regarding combined transport, several of the WB6 economies have initiated policies and strategies to support the development of multimodal transport. However, challenges in deploying the necessary infrastructure, as well as a lack of dedicated legislation and funding constraints, hinder progress in this area. While efforts in individual economies such as Serbia, for example the establishment of intermodal terminals and the development of multimodal transport nodes, show promise, more comprehensive and ambitious policy frameworks and co-ordinated investments are necessary to unlock the full potential of multimodal transport in supporting the region’s role as a key transport corridor and helping them to converge with the EU’s level of logistics performance (Figure 2.9).

Figure 2.9. Logistics Performance Index scores in the WB6 economies, the EU and the OECD (2018, 2022)

The development of organised electricity markets presents an opportunity to strengthen regional integration and tackle the underutilisation of transmission capacity

The go-live of the power market coupling between Albania and Kosovo in early 2024 represents an important milestone in the integration of electricity markets in the WB6 region, demonstrating that organised marketplaces can be the basis for additional regional integration. With this achievement, five out of the six Western Balkan economies are operating day-ahead markets for electricity, with significant potential benefits in terms of supply security and price competitiveness. Nevertheless, further efforts are needed to effectively enhance regional integration and cross border trade in the energy sector.

The need for regional integration is particularly pressing given that the WB6 economies are currently facing a significant underutilisation of their installed electricity transmission capacity. This underutilisation is evident in the value range for the ratio between maximum export/import net transfer capacity (NTC) and the nominal transmission capacity21 of the interconnectors within the region, which falls between 21% and 42.5%, and is below the 70% target set by the Electricity Integration Package (Table 2.2).

ALB	BIH	KOS	MNE	MKD	SRB
29.5	28.0	24.0	37.5	21.0	42.5

Source: Energy Community (2021[31]).

This underutilisation results from several factors, such as inadequate capacity calculation processes, political barriers or a lack of co-ordination among transmission system operators. An example of political barriers hampering regional integration reaching its full potential can be seen in relation to the Coordinated Auction Office (Box 2.5).

Box 2.5. Coordinated Auction Office in South East Europe (SEE CAO) as a driver of regional integration

SEE CAO was established in 2014 to facilitate the explicit allocation of cross-border transmission capacity in both directions between the control areas of participating Transmission System Operators (TSOs) through NTC-based auction processes. It was formed following several years of intensive preparations and aims to comply with EU regulations and the principles of the Energy Community. It focuses on harmonising congestion management methods in the SEE region. The shareholders of the SEE CAO are the TSOs of Croatia, Greece, Turkey, Albania, Bosnia and Herzegovina, Kosovo, Montenegro, and North Macedonia.

One of the main advantages of SEE CAO is its ability to perform co-ordinated auctions of cross-border electricity capacity rights, which is crucial for ensuring efficient and fair access to transmission networks across borders. This co-ordination helps to optimise the allocation of transmission capacity between economies, which is beneficial for market participants by enhancing the transparency and fairness of the electricity market. SEE CAO supports the secondary market for transmission capacity, allowing participants to resell or transfer long-term capacities, which contributes to the flexibility and efficiency of the market. Moreover, it plays a significant role in reporting and transparency, being among the first to report auction-related data to the ENTSO-E Transparency Platform and regularly reporting to the ACER REMIT Information System, thus enhancing market transparency in the SEE region.

However, the full potential of SEE CAO is not being utilised due to political barriers that are holding back the active participation of all the WB6 economies as shareholders within the shareholder structure, limiting the extent to which SEE CAO can facilitate electricity market integration throughout the region.

Source: SEE CAO (2024[32]).

Substantial progress has been made in reducing roaming charges between the WB6 economies, as well as between the region and the EU

Mobile roaming charges have decreased significantly between the WB6 economies because of the Regional Roaming Agreement, signed in 2019 under the umbrella of the Regional Co-operation Council (RCC). Figure 2.10 shows that before this agreement entered into force, significant charges were applied when roaming in the region, particularly for calls and data transfer. In 2021, roaming charges between the region’s economies were successfully abolished, representing an important milestone in facilitating the movement of people through the engagement of national regulatory authorities and telecommunications operators.

Figure 2.10. Roaming prices in the WB6 economies (2019)

In EUR

Building on this progress, 38 telecommunications operators from the EU and the Western Balkans signed a declaration in 2022 aiming to ensure the gradual decrease of roaming charges between the region and the EU, further facilitating connectivity for citizens and businesses. The first major reduction in charges took place in October 2023, with further reductions planned for 2026 and an alignment with domestic prices for 2028 (European Commission, 2023[34]). Such reductions have the potential to improve connectivity between the region and the EU by facilitating the movement of people, lowering the cost of cross-border business activities and promoting tourism.

Strengthening regional research and innovation infrastructure

Research and innovation (R&I) infrastructure consists of the resources, services and facilities available in local economies to foster research excellence and innovation. Effectively developing R&I infrastructure requires large-scale financing. For the small, open economies of the Western Balkans, the regional integration of local infrastructure can leverage economies of scale and ensure that investments into R&I support structures are as effective and cost-efficient as possible, as well as support regional and European research priorities. It also supports the region’s ambition to create a Regional Industrial and Innovation Area, outlined in the CRM22 action plan, and to implement the Western Balkans Agenda on Innovation, Research, Education, Culture, Youth and Sport.23

Overall, R&I infrastructure in the Western Balkans remains at an early stage of development, with individual economies at different stages. A major obstacle to the creation of effective and scalable support24 is the lack of investment in research and development (R&D). Across the region, gross domestic expenditure on research and development (GERD) remains significantly below EU and regional peer averages (Figure 2.11), although is increasing. In particular, private sector investments remain negligible, accounting for less than one-third of total investments in R&D in most economies.

Figure 2.11. Gross expenditure on research and development (GERD) in the WB6 economies and the EU (2018, 2022)

% of gross domestic product (GDP)

Progress has been made in strengthening the ecosystem to be conducive to startups and innovation, but research infrastructure remains non-competitive

Most WB6 economies have progressed well in establishing a support infrastructure for innovation and startups, with incubation services, business training and networking opportunities available across economies, and some also providing scalable financial support. While dedicated agencies such as the Serbian Innovation Fund or North Macedonia’s Fund for Innovation and Technological Development offer targeted financial schemes to foster innovative business activities, most support targets early-stage companies more generally rather than specific innovation activities.

In contrast, research infrastructure often suffers from chronic underinvestment across all the WB6 economies. Scientific research, including its infrastructure, is predominately publicly funded and implemented by higher education institutes (HEIs). However, public sector funds are mainly allocated for teaching purposes, often overlooking research facility investments. Identifying, assessing and mapping R&I infrastructure, including HEI research facilities and equipment, is therefore an important step in identifying shortcomings and prioritising investment. All economies have adopted an R&I infrastructure roadmap with support from the RCC in recent years. In 2022, the RCC also published a regional Western Balkan R&I infrastructure roadmap25 to identify opportunities for the increased interconnectivity of individual structures. The report emphasises the lack of funding for scientific research and concludes that R&I infrastructure in the region is currently insufficiently competitive to integrate into pan-European networks.

Several WB6 economies are focusing on bricks and mortar investments, particularly science and technology parks (STPs), but progress remains highly uneven. For instance, in Serbia, the network of STPs is reaching full capacity and expanding with a loan and technical assistance from the EBRD,26 and construction of the Bio4 campus commenced in late 2023, supported by the Development Bank of the Council of Europe.27 In North Macedonia and Montenegro, plans to establish centralised STPs are yet to be fully finalised. Technology transfer facilities, which support the adoption of innovative business practices, remain limited, and are only available at scale in North Macedonia, where the Centre for Technology Transfer and Innovations has operated since 2018, and through a Technology Transfer Facility in Serbia, established by the economy’s flagship Innovation Fund.

Some economies have established centres of excellence in support of their smart specialisation strategies (S3). For instance, in 2020 Montenegro set up a centre of excellence for digitalisation in the field of food safety and authenticity, while Serbia is in the process of establishing a biotechnology centre. If backed with sufficient financial and non-financial support, these can build the region’s capacity to offer competitive and state of the art scientific research in priority areas for regional development and EU integration.

Participation in pan-European R&I infrastructure is gradually increasing, but regional integration remains well below potential amid a lack of human and financial resources

All the WB6 economies participate in international and regional collaboration activities, but the priority focuses on participation in the European Research Area rather than creating intra-regional linkages. Performance in EU umbrella programmes such as Horizon Europe has improved in all economies, with the region having received over EUR 111 million in EU contributions between 2021 and 2023, compared with EUR 171 million during the entire implementation period of Horizon 2020 (2014 to 2020) (European Commission, 2023[37]). However, significant disparities remain, with Serbia receiving an overwhelming share of this funding due to insufficient absorption capacities in the rest of the region (Table 2.3).

ALB	BIH	KOS	MNE	MKD	SRB
5.76	5.48	1.24	3.80	8.68	86.69

Source: European Commission (2024[38]).

There is some regional collaboration under Horizon Europe activities, particularly between Montenegro and Serbia, although there is little evidence of a strategic effort to leverage regional partnerships to participate in such EU framework programmes. Participation in projects and landmarks of the European Strategy Forum on Research Infrastructure (ESFRI) is equally driven by individual economies: according to the 2021 ESFRI roadmap, the WB6 economies only participated in six activities, with just half including participation by more than one economy.28

There is also little focus on enhancing the intra-regional exchange and mobility of researchers, which could in the long term play an important role in increasing R&I capacities, as well as leverage existing expertise and contribute to the development of a regional R&D ecosystem.

Notwithstanding the strong international focus, some regional R&D initiatives have emerged. For instance, in 2017 the WB6 economies, alongside Bulgaria and Slovenia, established the Southeast European International Institute for Sustainable Technologies (SEEIIST)29 with the objective of setting up a regional centre of excellence for cancer therapy and biomedical research. However, the institute is yet to become a fully operational research centre, and as of the end of 2023 activities were co-ordinated out of Switzerland. In 2020, NanoALB30 was established to co-ordinate activities in the area of nanoscience and nanotechnology across Albania, Kosovo, North Macedonia and Montenegro.

Such initiatives constitute important milestones in the region’s pathway to creating a regional R&I infrastructure; however, without strong commitment from all stakeholders, manifested in sufficient financial and human resources, these initiatives will likely not develop into competitive WB6 flagship R&I infrastructures that can integrate into global networks.

Recommendations for strengthening regional infrastructure connectivity

Develop credible roadmaps for further power market integration, including alignment with the Electricity Integration Package. The implementation of all network codes will allow the region to reap the full benefits of EU and Energy Community best practices and provide the needed level playing field for further regional integration, eventually leading towards joining the European Single Day Ahead Coupling. This initiative is a crucial step towards the integration of the WB6 and the European electricity markets and aims to create a single pan-European electricity market for day-ahead trading, ensuring the efficient, transparent and fair allocation of cross-border electricity trading capacities. This initiative is part of the broader goal of integrating national electricity markets into a single regional market, which is expected to enhance competition, increase security of supply, and ensure the optimal use of generation and transmission resources.
Strengthen cross-border institutional co-operation in transport facilitation. Establishing joint committees or platforms for dialogue on transport and infrastructure issues can facilitate information exchange, policy alignment and collaborative decision making. Additionally, enhancing technical assistance and capacity-building initiatives can support economies in implementing reforms effectively and navigating challenges related to regional connectivity and combined transport. By fostering a culture of co-operation and partnership, the WB6 economies can leverage synergies and maximise the benefits of regional integration efforts.
Increase investment and policy support for the development of intermodal infrastructure. The WB6 economies should allocate additional resources towards the development of multimodal transport infrastructure, including the construction of intermodal logistics centres and the modernisation of railway networks. Leveraging funding opportunities from international organisations and public-private partnerships can help address financing gaps and accelerate progress towards seamless regional connectivity and efficient combined transport operations. The WB6 economies should also explore pathways for enhanced regional co-operation in these areas as there is room to mobilise the region’s untapped potential by developing partnerships between governments, freight forwarding companies and infrastructure operators.
Promote innovation and digitalisation in transport. Embracing innovation and digitalisation in the transport sector can further enhance the competitiveness of the WB6 economies by improving efficiency, reducing costs and enhancing the quality of services. Investing in smart transport solutions, such as intelligent transport systems, digital logistics platforms and real-time data analytics, can optimise supply chain management, streamline operations and enhance the overall competitiveness of the region's transportation sector. Moreover, promoting the adoption of digital technologies and innovation in transport infrastructure planning and management can help the WB6 economies stay at the forefront of technological advancements and adapt to evolving market demands. By embracing innovation and digitalisation, the WB6 economies can enhance their competitiveness and attract investment. Lessons could be learned from the example of Southeast Asia: following initial constraints on the movement of goods and people during the COVID-19 pandemic, initiatives including the adoption of more efficient procedures and the digitalisation of documentation were launched in the ASEAN economies to enhance trade facilitation.31
Increase investment to strengthen existing R&I infrastructure. Increased funding for research and development remains the prerequisite for creating competitive R&I infrastructure that supports the development of a knowledge-based economy. For investments to be cost-efficient, governments should leverage and strengthen existing infrastructure by updating equipment and ensuring that facilities are well resourced, while encouraging businesses to invest in R&D and collaborate commercially with R&I infrastructure.
Introduce support mechanisms to encourage targeted R&D and innovation at the regional level. The WB6 economies are largely united in their science, technology and innovation priorities, but do not sufficiently collaborate and leverage intra-regional R&I infrastructure to achieve joint objectives. Incentivising regional research, for instance by introducing joint scientific research grant programmes for selected priority sectors, could stimulate competition for research excellence, which would leverage existing R&I infrastructure and investment into strategically important sectors, while stimulating intra-regional collaboration that may increase the region’s participation in global research networks as a result of economies of scale. Ireland provides an example of how cross-border innovation can be supported through institutional and financial means (Box 2.6).

Box 2.6. Cross-border innovation in Ireland

As part of the Belfast Agreement in1998 that brought peace to Ireland, a cross-border trade and business development body, IntraTradeIreland, was established to foster cross-border collaboration, innovation, entrepreneurship and trade.

IntraTradeIreland offers a suite of support instruments tailored to small and medium-sized enterprises (SMEs) to facilitate cross-border trade and business development between Northern Ireland (part of the United Kingdom) and the Republic of Ireland. These instruments encompass financial support, capability development, networking and advisory services, each designed to address specific challenges and opportunities in the cross-border market.

Financial support schemes:

Acumen Programme: Facilitates sales personnel hiring or market research consultancy for cross-border market entry.
Elevate Programme: Grants for micro-businesses to access consultancy services for identifying sales opportunities and developing marketing strategies.

Capability development programmes:

Trade Accelerator Vouchers: Vouchers for accessing expert advice on taxation, employment law and certification.
Innovation Boost Programme: Supports SME innovation through collaboration with third‑level institutions, focusing on new product, process or service development.

Networking and knowledge sharing:

Business Insight Programmes: Events and workshops for knowledge exchange and networking on cross-border trade topics.
Sectoral Programmes: Sector-specific initiatives offering bespoke support and networking opportunities.

Advisory services:

Brexit Advisory Service: Guidance on Brexit-related issues such as customs, supply chain management and legal considerations.

These support instruments aim to enhance SME competitiveness, innovation capacity and market expansion in the cross-border economy, reflecting IntraTradeIreland's commitment to fostering a vibrant cross-border trade environment.

Sources: InterTradeIreland (2024[39]); Queens University Belfast (2024[40]).

References

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[13] CEE Bankwatch Network/ETX (2022), The Western Balkan Power Sector: Between Crisis and Transition, CEE Bankwatch Network and Emissions Trading Extra (ETX), https://etxtra.org/wp-content/uploads/2023/01/2022-12-05_The-Western-Balkan-power-sector.pdf.

[7] CEER (2020), 2nd CEER Report on Power Losses, Council of European Energy Regulators, https://www.ceer.eu/documents/104400/-/-/fd4178b4-ed00-6d06-5f4b-8b87d630b060.

[31] Energy Community (2021), Electricity Interconnection Targets in the Energy Community Contracting Parties, https://www.energy-community.org/dam/jcr:97afc332-0495-479b-a1d6-848a2c6877a2/ECS_Interconnection_Targets_022021.pdf (accessed on 1 March 2024).

[22] Energy Community Secretariat (2023), Annual Implementation Report, https://www.energy-community.org/implementation/report.html.

[8] Energy Regulatory Authority of Albania (2022), The Situation of the Power Sector and ERE Activity during 2022, https://ere.gov.al/images/files/2023/07/26/Annual_Report_2022.pdf.

[28] European Commission (2024), Gigabit Infrastructure Act, https://digital-strategy.ec.europa.eu/en/policies/gigabit-infrastructure-act (accessed on 5 May 2024).

[38] European Commission (2024), Horizon Europe Database, https://dashboard.tech.ec.europa.eu/qs_digit_dashboard_mt/public/sense/app/1213b8cd-3ebe-4730-b0f5-fa4e326df2e2/sheet/d23bba31-e385-4cc0-975e-a67059972142/state/analysis (accessed on 11 June 2024).

[26] European Commission (2024), The Connectivity Toolbox, https://digital-strategy.ec.europa.eu/en/policies/connectivity-toolbox (accessed on 5 May 2024).

[29] European Commission (2023), Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: New growth plan for the Western Balkans, https://neighbourhood-enlargement.ec.europa.eu/system/files/2023-11/COM_2023_691_New%20Growth%20Plan%20Western%20Balkans.pdf.

[34] European Commission (2023), Decrease of Data Roaming Fees Between the Western Balkans and the EU, News article, 2 October 2023, https://neighbourhood-enlargement.ec.europa.eu/news/decrease-data-roaming-fees-between-western-balkans-and-eu-2023-10-02_en (accessed on 5 May 2024).

[17] European Commission (2023), Enhancing EU Resilience: A Step Forward to Identify Critical Entities for Key Sectors, Press release, 25 July 2023, https://ec.europa.eu/commission/presscorner/detail/en/ip_23_3992 (accessed on 5 May 2024).

[37] European Commission (2023), Horizon Europe, https://dashboard.tech.ec.europa.eu/qs_digit_dashboard_mt/public/sense/app/1213b8cd-3ebe-4730-b0f5-fa4e326df2e2/sheet/d23bba31-e385-4cc0-975e-a67059972142/state/analysis (accessed on 4 June 2024).

[25] European Commission (2023), Strategy and Reports: EU Enlargement Package 2023, https://neighbourhood-enlargement.ec.europa.eu/enlargement-policy/strategy-and-reports_en (accessed on 5 May 2024).

[27] European Commission (2022), Connectivity Toolbox: Member States’ Implementation Reports, https://digital-strategy.ec.europa.eu/en/library/connectivity-toolbox-member-states-implementation-reports.

[18] European Union (2022), Directive (EU) 2022/2557 of the European Parliament and of the Council as of 14 December 2022 on the Resilience of Critical Entities Repealing Council Directive 2008/114/EC (Text with EEA Relevance), Official Journal of the European Union, EUR-Lex, https://eur-lex.europa.eu/eli/dir/2022/2557/oj (accessed on 5 May 2024).

[36] Eurostat (2024), Gross Domestic Expenditure on R&D (GERD), https://ec.europa.eu/eurostat/data/database (accessed on 5 May 2024).

[14] IEA (2024), World Energy Balances, https://www.iea.org/data-and-statistics/data-product/world-energy-balances (accessed on 10 June 2024).

[9] IMF (2023), The Future of PPPs in the Western Balkans, International Monetary Fund, https://www.imf.org/en/Publications/WP/Issues/2023/02/10/The-Future-of-PPPs-in-the-Western-Balkans-529696.

[39] InterTradeIreland (2024), How We Support Innovation: Helping SMEs to Expand and Grow, https://intertradeireland.com/innovation/how-we-support-innovation (accessed on 5 May 2024).

[11] KCSS (2023), Regional Perspective: How do Western Balkans Countries Stand in Protecting the CI?, Kosovar Center for Security Studies, https://qkss.org/images/uploads/files/FinalENG_Regional_Perspective_How_Do_Western_Balkans_Countries_Stand_in_Protecting_the_CI_%281%29.pdf.

[6] Mirbabaeva, Nigina (2023), Energy Sector Strategy 2024-28, European Bank for Reconstruction and Development, 15 December 2023, https://www.ebrd.com/news/2023/ebrd-approves-new-energy-sector-strategy-202428.html#:~:text=The%20Energy%20Sector%20Strategy%202024,phasing%20out%20unabated%20fossil%20fuels. (accessed on 4 June 2024).

[2] OECD (2023), Indicators: Transport Infrastructure, OECD.Stat, OECD, Paris, https://stats.oecd.org/index.aspx?queryid=73638 (accessed on 25 April 2024).

[19] OECD (2014), Recommendation of the Council on the Governance of Critical Risks, OECD, Paris, http://www.oecd.org/gov/risk/Critical-Risks-Recommendation.pdf.

[15] OECD (2009), United Kingdom: Multi-Criteria Analysis Manual, Infrastructure Toolkit, OECD, Paris, https://infrastructure-toolkit.oecd.org/wp-content/uploads/UK_MCA.pdf.

[12] Popovski, V. et al. (2023), Crisis Prevention and Critical Infrastructure in Western Balkans, Institute for Democracy “Societas Civilis” – Skopje, https://idscs.org.mk/wp-content/uploads/2023/05/Second-Paper-Online.pdf.

[40] Queens University Belfast (2024), Identifying and Fostering Industrial Clusters Across Borders, https://www.qub.ac.uk/schools/queens-business-school/research/research-impact/Identifyingandfosteringindustrialclustersacrossborders.html (accessed on 5 May 2024).

[33] RCC (2019), Roaming Prices Drastically Drop Across Western Balkans: Speak More, Surf More – Pay Less!, Regional Cooperation Council, 1 July 2019, https://www.rcc.int/news/551/roaming-prices-drastically-drop-across-western-balkans-speak-more-surf-more-pay-less (accessed on 5 May 2024).

[32] SEE CAO (2024), “Homepage”, Coordinated Auction Office in South East Europe, https://seecao.com/ (accessed on 5 May 2024).

[20] Spasić, Vladimir (2023), SEEPEX Completes Organized Electricity Market in Serbia with Intraday Trading Platform, Balkan Green Energy News, https://balkangreenenergynews.com/seepex-completes-organized-electricity-market-in-serbia-with-intraday-trading-platform/ (accessed on 5 May 2024).

[23] Transport Community (2023), Action Plans and the EU Acquis Progress Report 2023, https://www.transport-community.org/wp-content/uploads/2023/12/Action-Plans-and-EU-Acquis-Progress-Report-2023-WEB.pdf.

[1] Transport Community (2023), Connectivity Summit “Sustainable Links-Stronger Economy”, https://www.transport-community.org/news/connectivity-summit-sustainable-links-stronger-economy/.

[3] Transport Community (2023), Development of Indicative TEN-T Extension of Comprehensive and Core Network in Western Balkans, https://www.transport-community.org/wp-content/uploads/2023/12/TEN-T-Report-2023-WEB.pdf.

[24] Transport Community (2023), Regional Railway Centre of Excellence, https://www.transport-community.org/railways/regional-railway-centre-of-excellence/ (accessed on 4 June 2024).

[16] UK Government (2009), Multi-Criteria Analysis: A Manual, Department for Communities and Local Government, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/7612/1132618.pdf.

[35] UNESCO Institute for Statistics (2024), Science, Technology and Innovation Database, http://data.uis.unesco.org/ (accessed on 5 May 2024).

[5] WBIF (2023), Annual Progress Report 2022, Western Balkans Investment Framework, https://www.wbif.eu/storage/app/media/Library/11.%20Annual%20WBIF%20Progress%20Report/WBIF%20Annual%20Progress%20Report%202022.pdf.

[4] WBIF (2023), Economic and Investment Plan: Endorsed Flagship Investments 2020-2023, Western Balkans Investment Framework, https://www.wbif.eu/storage/app/media/Library/FactSheets/Factsheets%202023/WBIF%20Endorsed%20Flagship%20Investments%20Dec%202023%20updates.pdf.

[10] WBIF (2022), 2015 and 2016 Connectivity Agenda Projects: Progress to date (January 2022), Western Balkans Investment Framework, https://www.wbif.eu/storage/app/media/Document%20PDFs/Progress.pdf.

[30] World Bank (2024), Logistics Performance Index, World Bank Data, https://data.worldbank.org/indicator/LP.LPI.OVRL.XQ?locations=AL-BA-XK-ME-MK-RS-EU-OE (accessed on 5 May 2024).

Notes

← 1. For more information, please see the OECD Recommendation on the Governance of Infrastructure (2021), https://www.oecd.org/gov/infrastructure-governance/recommendation.

← 2. The Trans-European Transport Network (TEN-T) maps key transport corridors identified at the EU level to prioritise development planning of transport connectivity. The TEN-T contains a core network and a comprehensive network. For more information, please see: https://transport.ec.europa.eu/transport-themes/infrastructure-and-investment/trans-european-transport-network-ten-t_en.

← 3. Although such joint assessments are being reluctantly introduced even within the EU, due to its interconnection capacities the region has significant potential to benefit from such an approach, as security of supply concerns cannot be fully evaluated using an economy-specific approach.

← 4. Corridor Vc, Corridor VIII and Corridor X are examples of pan-European corridors for transport flows, reflecting the importance of developing transport infrastructure along these routes. Corridor Vc connects Bosnia and Herzegovina with Croatia and the Adriatic coast, while Corridor VIII connects Albania and North Macedonia with Bulgaria, and Corridor X connects Serbia and North Macedonia with Greece and Central Europe. While these corridors are distinct from the TEN-T corridors used by the European Commission, they are often referred to when talking about infrastructure projects along the TEN-T network.

← 5. There are a lack of sufficient incentives in the WB6 for transmission and distribution system operators to invest in the development of the grid to accommodate the deployment of renewables, as investors implementing RES projects do not own, operate or maintain the transmission and distribution networks.

← 6. Republika Srpska (RS) has had a Law on the Protection of Critical Infrastructure since 2019, and the Federation of Bosnia and Herzegovina (FBiH) is working on adopting its own entity-level legal framework. However, there is no commonly agreed framework for the protection of critical infrastructure at the state level.

← 7. Such as Directive 2022/2557 on the Resilience of Critical Entities and the accompanying Commission Delegated Regulation establishing EU-level categories and sub-categories of critical infrastructure.

← 8. While a Law on Information Security has been in place since 2011 in the RS, it is outdated and non‑compliant with key evolutions in the EU legal framework such as the Network and Information Security (NIS) Directive (2016) and NIS2 Directive (2022). Moreover, FBiH has not adopted any framework regulation cybersecurity, and there is no co-ordinated framework at the state level.

← 9. For more information, please see: https://www.diplomatie.gouv.fr/en/press-room/latest-news/article/cyber-security-signing-of-the-treaty-on-the-western-balkans-cyber-capacity and https://me.ambafrance.org/Western-Balkans-Cyber-Capacity-Center-WB3C.

← 10. Failure to address supply chain diversification can expose network infrastructure operators to various risks, including operational disruptions, increased costs, cybersecurity threats and regulatory challenges.

← 11. Such as deploying solar heating systems at remote sites and stations.

← 12. Other factors played a role as well, including mismanagement of state-owned enterprises and poor hydrological conditions. The consequences of these factors were aggravated by the context of the global energy crisis, as the WB6 economies were less able to rely on imported electricity from neighbouring economies to compensate for decreases in production.

← 13. Primarily due to hydropower’s susceptibility to variations in hydrological conditions, which will become increasingly important due to the intensifying impacts of climate change on rainfall, drought and other environmental conditions.

← 14. Passive network infrastructure comprises the physical components that facilitate data transmission, while active network infrastructure includes the electronic devices and equipment that actively manage and control the flow of data within the network. Both passive and active components work together to create a functioning telecommunications network.

← 15. Commission Recommendation (EU) 2020/1307 of 18 September 2020 on a common Union toolbox for reducing the cost of deploying very high capacity networks and ensuring timely and investment-friendly access to 5G radio spectrum to foster connectivity in support of economic recovery from the COVID-19 crisis in the Union. Please see: http://data.europa.eu/eli/reco/2020/1307/oj.

← 16. Illustrative of these challenges, the Council of the Communications Regulatory Authority in Bosnia and Herzegovina has been operating without a renewed mandate since 2018; in Montenegro, the parliament adopted an amendment to the law in 2023 in an attempt to dismiss existing council members and the executive director of the Agency for Electronic Communications and Postal Services (EKIP) before the end of their mandate. In North Macedonia, concerns regarding the regulatory authority’s independence have recently emerged around 5G spectrum auctions.

← 17. For a general overview of the Clean Energy Package and the Electricity Integration Package and their overall scope and advantages, please also see https://www.energy-community.org/implementation/package/EL.html and https://energy.ec.europa.eu/topics/energy-strategy/clean-energy-all-europeans-package_en.

← 18. Commission Delegated Regulation (EU) 2021/654 of 18 December 2020 supplementing Directive (EU) 2018/1972 of the European Parliament and of the Council by setting a single maximum Union-wide mobile voice termination rate and a single maximum Union-wide fixed voice termination rate (Text with EEA relevance), http://data.europa.eu/eli/reg_del/2021/654/oj.

← 19. Cybersecurity of 5G networks – EU Toolbox of risk mitigating measures, 23 January 2020, https://ec.europa.eu/newsroom/dae/document.cfm?doc_id=64468.

← 20. Commission Implementing Regulation (EU) 2020/1070 of 20 July 2020 on specifying the characteristics of small-area wireless access points pursuant to Article 57 paragraph 2 of Directive (EU) 2018/1972 of the European Parliament and the Council establishing the European Electronic Communications Code (Text with EEA relevance), http://data.europa.eu/eli/reg_impl/2020/1070/oj.

← 21. Nominal transmission capacity refers to the maximum amount of electrical power that can be reliably transmitted over a power line, transformer or other parts of the electrical transmission network under specified conditions, without exceeding the equipment's design limitations. This capacity is usually determined by the physical and engineering characteristics of the transmission components, including their size, material and construction. It is an important figure for power system operators and planners as it defines the upper limit of power flow that the transmission infrastructure can handle under normal operating conditions. Net transfer capacity (NTC) refers to the maximum amount of electrical power that can be reliably transferred between two areas or countries under normal operating conditions, taking into account the safety standards of the transmission system. NTC is a critical parameter for cross-border electricity trading as it determines the volume of electricity that can be exchanged without compromising the stability and reliability of the power systems involved.

← 22. In 2020, the EU and the Western Balkans launched a regional economic integration initiative entitled “The Western Balkans Common Regional Market” aimed at economically integrating the Western Balkans based on the EU Single Market rules by 2025. Please see https://neighbourhood-enlargement.ec.europa.eu/enlargement-policy/policy-highlights/common-regional-market_en.

← 23. In 2021, the EU launched the Western Balkans Agenda on Innovation, Research, Education, Culture, Youth and Sport, a comprehensive, long-term co-operation strategy of the European Union and the Western Balkans. It will promote scientific excellence and reform of the region’s education systems, create further opportunities for the youth and help prevent brain drain. Please see: https://op.europa.eu/en/publication-detail/-/publication/22b8829d-b786-11eb-8aca-01aa75ed71a1/language-en/format-PDF/source-233221374.

← 24. Support which can grow and adapt in response to increased demand.

← 25. Published in 2002 by the Regional Cooperation Council, the Western Balkans Research and Innovation Infrastructure Roadmap is a strategic policy document that sets out an overall vision for research and innovation infrastructure in the Western Balkans and the major steps needed to achieve it. Please see: https://www.rcc.int/pubs/149/western-balkans-research-and-innovation-infrastructure-roadmap.

← 26. In 2023, the EBRD provided a loan of EUR 70 million to the Government of Serbia to be used to finance the construction, fit-out and purchase of new equipment for the expansion of existing STP facilities in the cities of Niš and Čačak, which have currently reached almost full capacity, and the development of a new STP facility in Kruševac. An additional EUR 10 million is available to be used for the expansion of existing STPs in Belgrade and Novi Sad or the development of new STP facilities within the new biotechnology park Bio4 in Belgrade. EBRD’s financing is complemented by a technical assistance project to strengthen the innovation ecosystem in Serbia and reinforce STP practices in their alignment with international best practice for the establishment, management and operation of STPs. The project will focus on the following four elements: 1) performance management; 2) strategic orientation and financial sustainability; 3) linkages between STPs and the wider Serbian innovation ecosystem; and 4) skills development and linkages with universities. Please see: https://www.ebrd.com/news/2023/serbia-to-build-science-and-technology-parks-with-80-million-ebrd-loan.html.

← 27. The Bio4 campus construction commenced in late 2023 near the Torlak Institute in Belgrade and is expected to be completed by 2026. The estimated value of the new bioeconomic hub is around EUR 450 million, with EUR 200 million secured from a loan by the Development Bank of the Council of Europe. Please see: https://www.srbija.gov.rs/vest/en/217212/construction-of-bio4-campus-to-be-completed-by-end-of-2026.php.

← 28. The European Strategy Forum on Research Infrastructures (ESFRI) is a strategic instrument to develop the scientific integration of Europe and to strengthen its international outreach. Please see: https://roadmap2021.esfri.eu/media/1252/rm21-part-3.pdf.

← 29. SEEIIST is regional development project in South-eastern Europe initiated in 2017 to support the establishment of scientific, medical and green infrastructure in the region. Please see: https://seeiist.eu/about-us.

← 30. NanoAlb is a virtual centre established under the Albania Academy of Science to co-ordinate activities in the area of nanoscience and nanotechnology in Albanian universities across Albania, Kosovo, North Macedonia and Montenegro. Please see: https://www.nanoalb.al.

← 31. For more information, please see: https://www.oecd.org/southeast-asia/ERIA%20COVID19%20and%20ASEAN%20Connectivity.pdf and https://asean.org/wp-content/uploads/2021/02/asean-covid-19-guidelines.pdf.

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