Businesses look to the Western Balkans to relocate production lines

Western Balkan countries – Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia are expected to benefit from the trend to outsource production of EU companies from Asia near home. them due to the coronavirus pandemic.

This is indicated by a report by the Vienna Institute for International Economic Research.

However, to make the impact more tangible, economists believe it is essential to improve governance, education and transport infrastructure in the region.

The report provides two examples of the vulnerability of global supply chains during the pandemic: the shortage of parts for the automotive industry and medical supplies, drugs and vaccines.

In view of the protectionist trends in world trade, the relocation of production from Asia to the former industrialized countries has already started during the last decade.

This phenomenon will intensify considerably in Europe after the pandemic, say economists from the Institute for International Economic Research in Vienna and co-author of the study.

The team prepared the report with members of the chambers of commerce and industry of the Western Balkans. They assessed what this change means for Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia.

“The economies of the Western Balkans can indeed benefit from this impending production trend, but they will have to take the right policy measures,” the report added.

Two major surveys of German companies cited in the report show that such a scenario is possible.

Almost half of the companies pointed out that cost optimization and risk diversification are the main reasons for the eventual relocation.

In particular, the last two factors demonstrate the negative impact of the pandemic and the desire to shorten supply chains and industrial sites.

If we take Germany’s foreign investments in the world between 2010 and 2019, they amounted to 1.7 trillion euros.

For the same period, 2.5 billion euros were invested in the West. This means that there is plenty of room for increased investment in the region.

The study recommends a fundamental change in the investment environment in addition to overcoming long-standing deficits such as mismanagement and political instability.

“Low labor costs and low taxes no longer play a decisive role. Above all, foreign investors need a well-qualified workforce and infrastructure,” he said. ‘study.

This means countries need to increase spending on education with a focus on science, technology, engineering and math, more practical vocational education and training, and huge improvements in transport infrastructure.

Copyright (c) Published with permission via the Big News Network news agency

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