Newspaper headlines about the Balkans are invariably dominated by the difficult political situation in the region, be it the recent declaration of independence by Kosovo or the inability of the Bosnian government to reach agreement on police reform.

But beneath the complicated politics the economies of the region are growing, trade and investment is increasing and incomes are rising. Over the past few years, the countries of the region have put in place the building blocks of a comprehensive economic development strategy including an Energy Community Treaty and a regional free trade agreement – CEFTA.

The majority of countries are expected to maintain gross domestic product growth rates of 5-6 per cent and have held inflation to single digits.

More than two-thirds of the region’s trade involves EU partners. Credit ratings are rising and the overall investment climate continues to improve. As a result, foreign direct investment is rising. Croatia and Former Yugoslav Republic of Macedonia are among the top 10 reformers in the World Bank’s Doing Business Report for 2007 and Serbia topped this poll in 2006. Anti-corruption measures are also bearing fruit as shown by improvements in Balkan countries’ ratings from Transparency International.

Political and economic challenges remain, but south eastern Europe is an increasingly good destination for investment. International financial institutions such as the European Bank for Reconstruction and Development are strengthening their presence in the region and the level of optimism from investment bankers shows that the Balkans is an increasingly attractive place to do business in spite of the mixed political climate.

German and Austrian banks dominate the financial sector; Agrokor, a Croatian food company, has made several investments in Serbia and recently announced a €40m ($63m) investment in FYR Macedonia and Serbia’s Delta Holdings plans to invest €2.5bn–€3bn in real estate in the next five years.

The business community has a role to play in both the economic and political development of the region – while governments are putting elements of the business framework in place, these will remain nice pieces of paper if the business community does not use them and encourage governments to improve them.

Professional lobbying by the business community is underdeveloped despite exceptions such as the Foreign Investors Council in Serbia, which has developed an excellent dialogue with the government – but this is dominated by foreign banks and multinational companies. Throughout the region there is a dearth of professional business associations, particularly for domestic small and medium sized enterprises.

The Business Advisory Council for south-east Europe has tried to fill the gap through its regular country missions but it can do only so much. The business community must find ways to influence policy development.

Most Balkans countries have introduced a flat rate of corporate income tax but a flat tax rate is not enough to secure investment or make it profitable. Companies need to make governments aware that they depend on consistent application of the rule of law – title to land should confer exactly that and stamping out corruption should be a priority.

Substantial investment in infrastructure is vital for the economic well-being of the region. Companies need to insist that infrastructure projects actually improve transport routes and energy supplies and are not used for political reasons.

Business thrives in a stable, transparent environment – but companies need to hold the government to existing framework agreements on energy, trade and transport.

Consistency is particularly crucial in transition economies given the overhaul of legislation required by the EU accession process. The business community can add to the process, but it needs to develop the effective mechanisms that already exist in the EU.

All of the countries in the region have managed to catch the EU accession bus – some booked well in advance while others jumped on at the last moment and are still finalising their ticket with the conductor – but all are on board and the bus is moving.

The business community will benefit substantially from EU accession and should be one of the biggest supporters for EU membership. I believe companies have a duty to make their voices heard on this issue and that the publicity will serve them, their countries, the region and Europe well.

Erhard Busek is the special co-ordinator for the stability pact for south-eastern Europe