Strengthening sector specific sources of competitiveness in the Western Balkans

“Defining and Strengthening Sector Specific Sources of Competitiveness in the Western Balkans – Recommendation for a Regional Investment Strategy” will be presented at a media event in Sarajevo on 10 October 2008.  

The report reveals that the countries of the Western Balkans are increasingly relying on their cost competitiveness to differentiate themselves in the global economy. Their cost of labour in services is up to five times lower than in Hungary or Poland, and up to five times lower than in Western Europe when it comes to manufacturing. Inevitable labor cost increases, however, as well as the availability of low cost alternatives such as India and China, make this an unsustainable strategy. The analysis covers four sectors in detail: information and communication technology, business process outsourcing, automotive components, and apparel manufacturing. It suggests that the region’s policy makers must better leverage their advantage in sectors, advancing reforms so as to increase the region’s capacity to compete for markets. The region needs to address four principal weaknesses: its significant gaps in human capital; the limited focus on value-added services and innovation; insufficient links between the research and businesses communities; and the absence of long-term sector-specific strategies and institutional methods for continuously identifying and removing sector specific barriers to competitiveness.

This study represents the first step in a three-phase European Commission (EC) funded project aimed at examining the potential sources of, and obstacles to, competitiveness in the Western Balkans. The project is being implemented by the OECD Investment Compact for Southeast Europe Programme, in close cooperation with the EC and the Regional Cooperation Council (RCC).

For further information on this project, please contact fadi.farra@oecd.org.