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New Value Proposition Required

In order for Western Balkan countries to maximise the benefits of nearshoring trends in the post- Covid-19 period and amidst global restructuring, they need to shift their economic narrative by moving beyond being seen solely as low-cost FDI destinations and rebranding themselves as high-quality investment options

Over recent decades, geographical position and free access to key markets, combined with low wages and favourable tax systems and investment incentives, have been among the key characteristics of the Western Balkan economies when it comes to attracting FDI, resulting in the region attracting total FDI inflows amounting to 8.8 billion euros. “But that is still far below the region’s potential,” says Tatjana Shterjova Dushkovska, Secretary General of the Western Balkans 6 Chamber Investment Forum.

In order to benefit fully from the nearshoring trends prompted by the disruptions of the Covid-19 pandemic and intensified by the ongoing restructuring of the global scene, the economies of the Western Balkans also need to change the narratives around their economies and move a step further – from being seen as FDI destinations that offer low costs for investors, to destinations that offer high quality, suggests Shterjova Dushkovska. “This relates, amongst other things, to the further work that each of the economies will have to dedicate to overcoming some of the deficiencies of the systems at present – including a complex legal and regulatory framework, a low level of digital transformation in some key areas, the quality of overall transport infrastructure and labour market shortages,” says our interlocutor.

Regional economic integration can certainly play a role in enhancing the region’s attractiveness to potential investors – setting up a shared area securing the free movement of goods, services, people and capital would be beneficial to both foreign investors – enabling them to source their components regionally – and local companies, as it would enable them to cooperate with foreign companies. Indeed, explains Shterjova Dushkovska, one of the key reasons behind the idea of working to establish a Common Regional Market for the Western Balkans, which was set in motion with the 2020 adoption of the Action Plan within the framework of the Berlin Process, was to also contribute to placing the region on the map for global investors seeking to reduce the distance to EU markets and diversify their suppliers, thereby creating jobs, offering greater choices at lower prices for consumers and enabling people to work throughout the region.

However, benefiting from nearshoring doesn’t just mean attracting more foreign companies. Rather it also means local companies gaining the maximum from the presence of these companies in their countries, by joining their supply chains, but also through different forms of cooperation that extend beyond this – through exchanges of knowledge and information, the joint development of products and the establishing of regional R&D hubs. Improving cooperation between domestic and foreign companies has the potential to ensure positive technological spillovers and supplier linkages with domestic companies, benefiting local firms. This requires further work on building the capacities of regional companies, which is precisely aligned with one of the key activities being conducted at the Western Balkans 6 Chamber Investment Forum with the implementation of the Regional Supplier Development Programme aimed at ensuring the participation of SMEs in regional and multinational supply chains and establishing new regional partnerships between WB6 companies.

Benefiting from nearshoring implies more than attracting foreign companies; it’s also about local companies maximising their opportunities by integrating into the supply chains of these foreign companies

These activities include mapping suppliers from the WB6 region in selected industries, developing databases aimed at providing essential information to SMEs, thus easing their access to markets, providing technical assistance to SMEs, thus easing their access to finances and integration into global supply chains, the staging of networking events for SMEs from the region (joint participation in fairs and business events, investment conferences) and events aimed at increasing the capacities of regional SMEs (info days and trainings), all aimed at supporting the integration of WB6 SMEs into regional and global supply chains. Under the scope of the Regional Supplier Development programme, 2,600 SMEs from the WB6 countries have been reached with trade promotion activities, with 950 SMEs receiving individually tailored support in seeking business and funding opportunities across borders.

To what extent does the inclusion of WB countries in major supply chains impact on the process of adopting European standards?

― The EU is the Western Balkans’ largest trading partner and investor, accounting for more than 70% of the region’s total trade – this naturally means that the standards and practices of global companies proliferate down the supply chain, including local companies from the region. In fact, the challenge of being included in global supply chains requires local companies to transform into modern and serious companies based on high standards, quality assurances and strict procedures defined and implemented.

The establishment of the Common Regional Market is itself a steppingstone for companies from the WB6 region to better integrate into European value chains and strengthen their competitiveness on the European and global marketplace. By adopting the EU acquis, the region closes the gap on the regulatory framework of the Single Market, while the countries also align with one another, and this is also achieved indirectly on a daily basis by the companies themselves, in expanding their cooperation with their EU partners.

In order to contribute to this goal, the European Commission and the Western Balkans 6 Chamber Investment Forum established the ‘WB6- EU Business Platform’, as a forum that brings together representatives of the Western Balkans’ business community and the European Commission to discuss challenges and opportunities for the region’s private sector. Such a dialogue helps the business community to better understand the European Union, its laws and policies, whilst also helping the community prepare for integration into the Single Market by presenting concrete challenges and proposing solutions directly from WB6 companies to decision makers.

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