Mar 22nd 2007- The Economist
How Serbia loses from its frosty relationship with the European Union.
UNNOTICED by the world, Montenegro has taken a big step in its relations with the European Union. On March 15th it signed a stabilisation and association agreement (SAA), usually the first step to EU membership. Informally, it is a stamp of approval from Brussels.
Serbia too should have an SAA by now but, because it has not arrested such war-crimes suspects as Ratko Mladic, talks were broken off last year. By contrast, Macedonia signed an SAA in 2001, before graduating to candidate status in 2005. A new study by the European Stability Initiative, a Berlin-based think-tank, shows how much difference being on the EU ladder makes.
Consider the textile industry. In Romania and Bulgaria, which joined the EU in January, textiles are booming. In part this is down to low labour costs, but it is also because they are close to the huge EU market. Macedonia's textile industry, centred on the town of Stip, has also revived. Although unemployment is generally high, there is a shortage of textile and clothing workers in Stip. In 2002 the industry employed 4,000; by the end of 2006 the number was 7,000, and it should soon be back to its 1990 level of 8,700. Greeks, Germans, Turks and Swiss are all investing in Stip.
The contrast is with Leskovac, in Serbia, once a world-famous textile town. In 1990 some 11,000 people worked in its textile and clothing factories. Now the industry employs fewer than 900. Although Serbia has attracted some foreign investment, most of it has been for lucrative privatisations. The lack of an SAA deters other investment: an EU official told a Serbian newspaper this week that Serbia had lost investment worth €1.5 billion ($2 billion) because of this.
A debate has begun in Brussels over whether to restart the SAA talks with Serbia, even if it does not produce Mr Mladic. No such luck for Bosnia. An agreement on an SAA was ready last year, but the EU will sign only if Bosnians agree on police reform—which they still have not done. This week in London, Sven Alkalaj, Bosnia's foreign minister, lamented that unless a deal is done by the end of March, EU timetables mean that “we will lose a year.”