Southeastern Europe: Left Behind or Leading the Change in Europe?

These days, Europe desperately needs success stories. After years of economic and financial turmoil and with the eurocrisis still unresolved combined with unprecedented security challenges at its eastern and southern doorsteps and rising populism across the continent, Europe needs a new positive narrative to confront the plethora of serious internal and external challenges it faces. Otherwise, the entire European project as such may be at risk. This would be a historic mistake.

As I have previously argued on The Huffington Post, countries in the Nordic-Baltic region and Poland provide one source of inspiration for other parts of Europe. Here, several governments have adopted pro-growth, pro-reform agendas combined with an innovative business-friendly environment. These policies have successfully born fruit in terms of higher-than-average economic growth and an impressive list of tech start-ups.

But looking further south, the story is quite different. Many Eastern and Southern European countries still struggle with anemic growth and record-high unemployment levels. What's even worse: many of these countries (such as Greece) seem unable to carry out the kind of reforms required to turn their economies around. Consequently, there is a risk of a growing north-south economic and political divide in Europe. This prospect constitutes an existential challenge to European integration.

One area that will be critical for Europe's future is Southeastern Europe. This is a region with many challenges indeed. Growth remains sluggish and unemployment historically high in many countries. There are also well-known problems with governance, corruption, and political uncertainty - as we have recently seen in Macedonia.

However, Southeastern Europe also holds significant untapped potential to become a driver of positive change in Eastern and Southern Europe. Of course, this is only if the region's leaders are truly serious about reforms.

Underpinning this potential is the fact that, geopolitically, Southeastern Europe is located in one of the most dynamic parts of the continent. Bordering the rising global middle power and energy hothouse, Turkey, the region is well positioned to play a major transport hub for European energy. Construction of new pipelines in the region are already underway along with an LNG terminal in Croatia. Southeastern Europe will also be the gateway between Europe and China's New Silk Road, positioning the region to also become a major transportation hub.

Another driver of change in the region is the prospect for further EU enlargement. This process has already prompted serious reforms in several regional states with EU aspirations. In Croatia - the EU's most recent member - this is clear. The government has taken steps to towards liberalizing the business sector (for example, by restructuring and reducing the number of large state-owned enterprises) and implementing domestic reforms such as in the labor markets.

But while public sector reform is important, private sector transformation is equally crucial. Many large companies in the region are still in dire need of restructuring, reorienting themselves around knowledge-creation and innovation, and doing capital raising for market expansion beyond Southeastern Europe.

Fortunately, there is a group of regional business leaders that appreciate the importance of such reforms. Take Zvonimir Mršić, CEO of the Croatian food and pharma group, Podravka, for example. Under his leadership, this company is in the process of growing into something of a regional giant. Having conducted a successful internal restructuring program, it is currently actively raising capital for further market expansion in the region - it recently acquired the largest food company in Slovenia, Zito, and is in the process of making inroads into the lucrative Central European market. Podravka's recent growth - last year, its profit rose by 39 percent - is not accidental. It would not have been possible without serious reform efforts and leadership.

Other regional companies can learn from this and other examples. If so, the region has the potential to become an engine of growth in Europe. It already has a highly educated and competitive labor force. Further taking advantage of the region's emergence as an energy and transportation hub can help better position regional companies for Europe-wide market expansion, serving as a regional as well as a European growth engine.

For Europe to be a leader in the 21st century - and not become a mere destination for Asian tourists - it must rise to the occasion. Here, Southeastern Europe - if it is truly serious about governance and market reforms - can set a new example of a successful regional turn-around at a critical time. If so, this would be a valuable success story in and by itself and also hopefully something that other, less reform-oriented Southern and Eastern European economies can learn from.

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