About “Notes from the Field”: With this occasional column, we let World Bank professionals who lead interesting trade-related projects around the world explain some of the challenges and triumphs of their daily work. The opinions expressed here are personal and should not be attributed to the World Bank.
The interview below was conducted with Borko Handjiski, Senior Economist in the World Bank’s Poverty Reduction and Economic Management (PREM) network. Until his recent transfer to the Africa region office, Mr. Handjiski was the regional sales coordinator for the Europe and Central Asia region. He told us about efforts to liberalize trade in services in the Balkan countries, a topic he and Lazar Sestovic wrote about in a 2011 study: “Obstacles to trade in services in the CEFTA region.” In the interview, which has been edited for clarity, Handjiski explains how the World Bank is helping Balkan countries better understand the benefits of liberalizing trade in services and working with stakeholders to formalize an agreement regional sales.
The commercial post: What is your background and how did you get involved in this kind of work?
Mr. Handjiski: I have a background in macroeconomics. I work as a country economist. I have worked in four Balkan countries during my career. I have been interested in business since the beginning of my career. I think it comes from my background. I come from Macedonia, a Balkan country which is, like all the others, a small open economy. For a small open economy, trade is one of the main pillars of economic development. That’s why I was interested in trade and I had worked on several reports and published reports, even before the one on services, on trade issues for the Balkans.
Having seen the progress on one aspect of trade, i.e. trade liberalization and opening up, particularly trade in goods, my team found that there was a lack of attention given to trade in services and this is how we decided to carry out a paper, with one of my colleagues, on this subject. Following the positive interest we received from countries, I requested funding from a Technical Assistance Trust Fund, which we use to support these countries.
The commercial post: Tell me about the project.
Mr. Handjiski: What we have been working on for the last year and a half – almost two years – is to help countries achieve their goal of increasing regional integration by liberalizing trade in services. So basically the context in the Balkans is that after 2000 they took many steps to liberalize trade in goods. They first concluded a series of bilateral agreements, then decided to replace these bilateral agreements with a regional multilateral agreement for eight countries. And with this agreement, trade in goods was largely liberalized. And the Balkan countries had a goal or commitment to liberalize services – it was a non-binding commitment.
The commercial post: What was the role of the World Bank in this process?
Mr. Handjiski: In 2011, we published a report that showed some of the barriers to trade in certain services. With the help of colleagues from PREM commerce – with Sebastian in particular, who is the expert in this area – we have presented this several times, to all countries at the same time, because they have annual meetings, they have working group meetings, etc.
The term “services” is very broad and therefore covers everything from professional services to financial services to telecommunications and more. Some services in the Balkans have already been liberalized – financial services, telecommunications, electricity, aviation – and so we focused on service sectors that were not yet liberalized. we have witnessed a wave of liberalization. And we selected several sectors – four in particular – and we tried to show the barriers to trade in these sectors (construction, transport, legal and architectural services). And this was very well received by the countries.
They put the issue of services liberalization on the table – within the institutional framework of the Free Trade Agreement (FTA). They put it on the agenda for a possible next stage of liberalization.
The commercial post: What is happening now with the liberalization of services?
Mr. Handjiski: This didn’t happen overnight. Recently, they have started taking concrete steps to address this problem. In November, they held a ministerial meeting in which ministers committed to liberalizing certain services by the end of 2013. This seems a bit too ambitious, but nevertheless, they are currently deciding which specific sectors they will will liberalize. include and what will be the method of negotiation on liberalization.
The commercial post: Has there been political resistance to any of these liberalization efforts?
Mr. Handjiski: In principle, liberalization of the services sector always faces political resistance. In principle, there is a reluctance among political leaders, as this often means opening markets for individual professionals from other countries to provide services in your country. So it’s always a headline: “The neighbors are going to steal our jobs,” whether they’re doctors, computer engineers, architects or whatever. What we often see in the case of the liberalization of certain services, in particular professional services, is that we come under pressure from interest groups. Most professional services – for example lawyers, doctors, architects – are organized into associations and associations often have certain legal powers. It could be about setting prices or saying who can be an architect and who can’t be. And of course they have every interest in protecting their members.
The commercial post: If so, how did you, or the country, overcome this type of resistance?
Mr. Handjiski: We are only now at that point in the process where we must overcome resistance to some of these reforms. And what countries are planning to do is to engage in a process of consultation and dialogue with all relevant stakeholders. As a Bank, we plan to support countries by playing a catalytic role in this process. First, by doing analytical work, we are going to help countries understand the economics of liberalization – to better understand the market, the domestic market, the foreign market, what the possible advantages or disadvantages of liberalization will be.
And then also, we will try to bring all the stakeholders together – perhaps by organizing conferences and workshops. We call it a services knowledge platform, this whole approach to how to liberalize services. We’re already testing it in East Africa, so we have another team member, Nora Dihel, who works in the Africa Department, and she pioneered this approach for the East African Community, which is similar – a regional free trade agreement. , whose vision was to include more than just the trading of goods. We follow a similar approach.
The commercial post: Why is the role of the World Bank – bringing together stakeholders and presenting economic data – important in this process?
Mr. Handjiski: I think this is one of the areas where we are ideally placed to take on this role – and perhaps we are the only actor or institution capable of playing this role. Especially since the greatest value of this process comes from sharing experiences from other regions of the world. And we are the only ones collecting global experiences. If we take the trade issues, they are concentrated in this unit – in (the international trade unit) – I don’t think there are other partners who can provide such support in this area. The European Union plays a very important role in this particular process, with this group of countries. But generally speaking, by carrying out economic analyzes and bringing experiences from around the world, I think the Bank is the best place to take on this role.
The commercial post: What would a successful end to this project look like?
Mr. Handjiski: A positive outcome would be the expansion – within the next twelve months – of the regional free trade agreement, in which certain sectors are liberalized according to a certain timetable and certain rules.