New study highlights the nearshoring potential of the Western Balkans


Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia are likely to benefit from a relocation of production from the Far East after Covid-19. To have a major impact, it is essential to improve governance, education and transport infrastructure.

Missing parts in the automotive industry or not enough vaccines: just two examples that demonstrate the vulnerability of global supply chains during the coronavirus era.

“In view of protectionist trends in world trade, a shift in production from Asia to the outskirts of former industrialized countries has already started over the past decade. This phenomenon, known as “nearshoring”, is expected to increase considerably in Europe after the experience of the pandemic “, says Branimir Jovanovic, economist at the Institute for International Economic Studies in Vienna (wiiw) and co-author of a new study on the subject.

With his colleague from the wiiw Mahdi Ghodsi and other authors from the chambers of commerce and industry of the countries of the Western Balkans, Jovanovic assessed what this change means for Albania, Bosnia and Herzegovina, Kosovo, Montenegro , North Macedonia and Serbia.

His conclusion?

“The economies of the Western Balkans can indeed benefit from nearshoring, but should take the right political steps to take full advantage of it.”

Two large surveys of German companies, cited by the study, indicate that nearshoring is possible.

For example, in World Business Outlook 2020, conducted by the German Chambers of Foreign Trade (AHK) with 3,500 German companies based abroad, as many as 16% said they were considering changing their supply chain. Indeed, 12 per cent of them plan to move, notably to the United Kingdom and Italy.

In addition to market developments (51%), they cite the optimization of costs (46%) and risk diversification (36%) as the main reasons.

“Especially these last two factors show the negative impact of the pandemic and the desire to relocate supply chains and industrial sites,” says Jovanovic.

In the second survey, Going International 2021, conducted by the Association of German Chambers of Industry and Commerce (DIHK) among 2,400 German companies with operations abroad, 40% complained about problems in their chains supply. Nearly 70% of them would therefore like to diversify them.

Billions of euros of possible direct investments

“Even if only a small proportion of the companies surveyed actually make changes to supply chains and production sites, this could still mean billions of euros in direct investment for the countries of the Western Balkans,” Jovanovic explains.

After all, the existing German foreign investments in the world amount to 1.7 trillion euros. Today, in the Western Balkans, only 2.5 billion euros were invested between 2010 and 2019. “There would therefore be a huge room for improvement, including from other large investors in Western Europe of the region, namely the Netherlands, Switzerland and Austria, ”Jovanovic adds.

Along the way, however, the study recommends a fundamental change in the investment environment in addition to addressing long-standing deficits such as poor governance and political instability.

“Low labor costs and low taxes no longer play the decisive role. Above all, foreign investors need a well-qualified workforce and infrastructure, ”says Jovanovic.

For him, this means increased public spending on education, a focus on the disciplines of science, technology, engineering and mathematics, more practical vocational education and training as well as huge improvements. in transport infrastructure.

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