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“Little Schengen” Project in a Nutshell – What Does It Mean For Your Business?

“Little Schengen” Project in a Nutshell – What Does It Mean For Your Business?

North Macedonia
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If the Western Balkan countries are in your business spotlight, you must have heard about the “Little Schengen” project that was discussed between the governments of Albania, Serbia, and North Macedonia, and the signing of the consequent Declaration on Establishment of Free Movement of People, Goods and Services on October 10, 2019 between the leaders of these countries (“Little Schengen Declaration”). Although it may be argued that the “Little Schengen” project comes as an answer to the fact that the “Big Schengen” is still out of the reach for these Balkan countries, closer economic cooperation between the Western Balkan countries is a trend that’s being going on for a while. In particular, four months prior to the signing of the Little Schengen Declaration, North Macedonia and Serbia signed an agreement to establish joint controls at the border crossing point of the road between North Macedonia and Serbia (the “Bilateral Agreement”).

The main idea behind both the Little Schengen Declaration and the Bilateral Agreement is to lift barriers on the movement of goods, services, and people between the Western Balkan countries. So, politics aside, what does it mean for your business?

The Little Schengen Declaration stipulates cooperation, mainly, in: (1) the free movement of goods: (i.e., enhancing border crossing point procedures and infrastructure, and mutually recognizing of documentation accompanying goods); (2) the free movement of people and freedom to provide services (i.e.: (i) allowing the movement of people with possession of ID card starting in 2020; (ii) ensuring unique stay and working permits; (iii) regulating social security and employment requirements; (iv) recognizing professional qualifications and mobility; and (v) strengthening cross border cooperation); and the free movement of capital to increase investments across the region.

The Little Schengen Project should mean cheaper products and services, with less paperwork, which should contribute to greater economic cooperation. In addition, Serbia, North Macedonia, and Albania would be presented as a single market to foreign investors. If the “Little Schengen” is seen as a customs union, it would be a positive step for the region’s reintegration. This would facilitate increased business (at lower costs) between neighboring countries, which would have a positive impact on economic growth.

For its part, the Bilateral Agreement increases the possibilities for further strengthening and improving mutually beneficial and well-balanced long-term economic cooperation between Serbia and North Macedonia. The parties agreed to establish joint controls at the Presevo-Tabanovce border crossing point. These joint controls started at the end of August 2019. Based on this positive experience, North Macedonia initiated a similar form of cooperation with Albania as well.

In concept, the joint controls will act as a one-stop-shop and simplify customs procedures, with the control of vehicles and goods carried out in one place. The main benefits of the implementation of joint controls as a one-stop-shop include: (i) decreasing the border crossing time and reducing unnecessary delays (thus accelerating freight traffic); (ii) providing a higher degree of coordination of border controls (reducing the likelihood of customs fraud by allowing for a direct inspection of documents as part of goods control and enforcement of border formalities); (iii) lowering costs for companies (the quicker flow of goods will reduce the costs of cross-border trade, which will significantly cheapen freight transport and provide greater competitiveness for importers and exporters); and (iv) minimizing the opportunities for smuggling and fraud (companies would not be able to present different values for goods, since the value of goods exported from Serbia or abroad would have to be the same in the documents for North Macedonia).

The implementation of these projects should have a positive impact on regional economic growth, although the projects are in their initial phase and many issues (especially involving legal aspects) which are necessary for the realization of the planned cooperation in practice remain unresolved. It is expected that the implementation of these kind of initiatives and business reforms will increase economic cooperation by providing better transport connectivity between the countries of the Western Balkans, which should result in greater economic development of the region.

By Marija Filipovska, Partner, and Dusan Bosiljanov, Attorney at Law, CMS Skopje

This Article was originally published in Issue 6.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.