Thank you for giving me the opportunity to report on developments in the Stability Pact for the second time this year. Considering the OSCE's comprehensive concept of security, encompassing issues such as military security, economic and environmental security, as well as democratisation and human rights, it is not surprising that the Stability Pact has also been placed under the auspices of your organisation. I thus come to you with pleasure, knowing that our work is based on very similar concepts and that the Stability Pact has an obvious ally in the OSCE.

South Eastern Europe has come a long way over the past few years, and I think the Stability Pact - and I mean everyone involved in this initiative - can take some credit for this development. But there are still numerous challenges ahead of us. The upcoming decision of the European Union to invite ten new members to join the Union will significantly change the political landscape of Europe. So will the decision on NATO enlargement, which will be taken in Prague later this month. It is of the utmost importance to prepare ourselves for this new environment, which creates new challenges for the region, but also opens up new possibilities for the countries of South Eastern Europe. It will certainly bring increased stability to the region. But continued engagement of the European and Transatlantic institutions in South Eastern Europe has to be ensured to give these countries a perspective. New EU members such as Slovenia and Hungary will have the opportunity to play an important role in maintaining this focus on South Eastern Europe, supporting ongoing efforts of current member states.

When addressing this forum eight months ago, I had just taken up office and my presentation was very much a look ahead - giving an outline of proposed reforms and the goals that we had set ourselves for the year 2002. It thus comes naturally to start out with informing you on what has actually been achieved in this respect. And I do this with pleasure, because I think we have indeed reached our goals to a large extent.

• The network of bilateral free trade agreements between the countries of South Eastern Europe, which we are working to establish, will in effect create a free trade area of 55 million consumers and will make the region more globally competitive, encourage more foreign direct investment and create employment. With 12 out of 21 agreements signed and 9 under active negotiation much has been achieved in this area since the beginning of the year.
• In the field of infrastructure, 23 out of 46 infrastructure projects with a total volume of 3,46 billion Euro have commenced physically on the ground. The Infrastructure Steering Group is actively working to identify and overcome barriers to implementation. Furthermore, the South East European Electricity Forum has been launched in cooperation with the European Commission to improve the stability of electricity supply for the countries of the region, which is fundamental for economic development and political stability. A memorandum of understanding has been signed in this respect only a week ago in Athens. This is a real breakthrough and will form the basis for further work in this field.
• Regarding refugees, record numbers of refugees have returned in 2001 and 2002. The Stability Pact Refugee Return Initiative has successfully found sustainable solutions for over 125,000 persons this year. The initiative has basically worked itself out of a job and will be phased out in the course of 2003. Some of its activities regarding refugees will be mainstreamed into other Stability Pact initiatives. The OSCE is a full partner of and major contributor to the Stability Pact's RRI Agenda for Regional Action and endorsed the guiding principles on return in Bosnia and Herzegovina, Croatia and Federal Republic of Yugoslavia.
• In an attempt to streamline ongoing initiatives to fight organised crime, the Secretariat of the Stability Pact Organised Crime Initiative will be established at the Regional Crime Fighting Centre in Bucharest. The Centre is a good example of regional ownership and the Stability Pact will concentrate its law enforcement activities at the Centre.
• A Small Arms and Light Weapons Clearinghouse for the region has been set up in Belgrade. The response in the region has been very supportive and the Clearinghouse has already developed substantive programmes. We have also developed a very useful partnership in this endeavour with some of the OSCE Missions in the region.
• In close cooperation with High Representative Solana, who hosted the first informal round of regional principals in South Eastern Europe together with Commissioner Patten, I have launched a process of dialogue with UN Special Representative Steiner, High Representative Ashdown and EU Special Representative Le Roy on sub-regional issues. I am pleased about the willingness to strengthen our links with a view to promoting sub-regional cooperation in areas such as the fight against organised crime and trade issues. A next step will now require including the respective Governments.

We are looking forward to building on these successes in the next year. But the Stability Pact is an initiative that does not, and cannot know stasis. The situation in South Eastern Europe as well as in Europe overall is constantly changing, and the Stability Pact has to change with it. In the end, success for South Eastern Europe will be judged against three related but separate criteria:

• It's ability to work together effectively in the region to solve practical issues of common concern - considering the numerous fora, in which representatives of countries that fought each other only few years ago are now sitting together, much has been achieved already;
• The steady elaboration of the region's perspective towards the EU, resulting in a truly European Integration process - the Stabilisation and Association Process created by the EU is clearly the most important tool in this respect;
• And the region's capacity for undertaking and implementing international commitments made within a wide scope of international initiatives and organisations.

Its ability to support the region in these directions should also be the criteria by which success of the Stability Pact should be judged. But we need to keep in mind that the Stability Pact is not able, nor should it deal with every issue at hand. It needs to focus and come in with strength on those issues, where it can actually bring an added value. In this light, we are currently working on establishing core priorities for the coming year and beyond, which will obviously show some continuity, but will have to adapt to the changing environment as well.

In past and present, many Stability Pact initiatives are working very closely with OSCE institutions, most of all with the field missions in South Eastern Europe. Here we have a partnership truly based on comparative advantages - the Stability Pact can offer its regional approach and issue-specific expertise, whereas the OSCE Missions can provide country-specific expertise and an invaluable presence on the ground.

I myself have participated in the Regional Heads of Mission meeting in June and my office has followed up last week, and briefed the Heads of Missions in Skopje on concrete areas for enhanced cooperation. This has been very successful from our point of view and we hope to continue this close cooperation.

To illustrate, I would like to mention a few areas of successful cooperation between the OSCE and the Stability Pact:

• Trafficking in Human Beings is an obvious area, since the OSCE is hosting the Stability Pact Task Force here in Vienna. This is an issue of great concern for the region - and Europe as a whole - and several Field Missions are working actively in this field and cooperating closely with the Task Force here in Vienna.
• Regarding Parliamentary Cooperation, the Stability Pact Parliamentary Troika was established in June 2001, comprising the Parliamentary Assemblies of the OSCE, the Council of Europe and the European Parliament. One of the recommendations of the Parliamentary conferences organised by the Troika was the establishment of ad hoc parliamentary committees on the Stability Pact. Unfortunately progress in this respect has been slow. Such committees would be important to ensure parliamentary participation in the Stability Pact and could one day form the backbone of a regional parliamentary structure. Such a structure could develop into a forum for sharing information and experience and facilitate the collective task of harmonisation of legislations in line with the EU acquis communautaire, as a prelude to EU association and/or accession. The OSCE Missions play an important role in preparing the Parliaments for this important task through training and capacity building. Closer links in this respect would be useful.
• Several OSCE Missions, for example in Albania, have used the Stability Pact emphasis on empowering local government as a starting point for their own efforts to promote the relevant legislation and train local government officials. The aim often has been to deepen and speed up the decentralization process and to obtain the commitment and support of external partners. A Stability Pact conference on Local Democracy and Cross-border cooperation in the beginning of this week in Osijek has reaffirmed our commitment to this important aspect of democratisation and confidence building.
• All of the OSCE Missions in South Eastern Europe have supported Gender Task Force projects. With the ongoing institutionalisation of the Task Force, the role of OSCE as the main administrator is shifting to the Regional Centre of the Task Force in Zagreb, which co-operates closely with the OSCE Secretariat in Vienna. The Task Force is contributing to the sustainability of regional gender equality developments in SEE.
• The Stability Pact Initiative on Organised Crime (SPOC) was elaborated together with OSCE Field Missions, laying out standards according to the EU acquis communautaire. A possible future role of the OSCE Field Missions would be to help develop and implement National Action Plans together with the initiative, to improve regional cooperation by facilitating the exchange of information and harmonization of legislation. The SPOC secretariat will be established by the end of the year. It now needs to be promoted and used as an instrument by the countries of the region.
• Regarding Small Arms and Light Weapons, the Stability Pact Small Arms Clearing House in Belgrade (SEESAC) is cooperating closely with OSCE Missions on the ground. The OSCE Economic Forum in Prague next year will be focusing on the economic aspects of trafficking in small arms and light weapons and we are looking forward to work closely with the OSCE to make the event a success.
• In the field of Media, the Stability Pact Media Task Forces has helped establish Working Groups in the countries of South Eastern Europe comprised of representatives from media outlets, NGOs and government. Closer cooperation would be useful with OSCE Missions, especially in the areas of determining priorities for legal reform as well as ensuring implementation.

The Stability Pact is currently - together with interested parties - exploring ways and possibilities on how to embark on an enhanced reconciliation initiative in South Eastern Europe. In order to add value and bring greater coherence to the wide variety of initiatives in the area of reconciliation, the planned initiative would focus both on the political as well as the project level - areas which could be envisaged are i.a. Education, Youth, Media, Local Democracy and Cross-border cooperation. With its proven track record in the area of confidence-building, the OSCE is for obvious reasons a key partner in this possible future initiative.

To conclude, I would like to stress again that due to the comprehensive concepts of security that the OSCE as well as the Stability Pact are built upon, the two are Natural partners. I look forward to continuing our close cooperation in the future.