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The Western Balkans should leverage Foreign Direct Investment to integrate in Global Value Chains

The Western Balkans should leverage Foreign Direct Investment to integrate in Global Value Chains

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The arm of a car production line
Photo: Jenson / Shutterstock

How many families own a Fiat Chrysler Automobiles 500 L (a city car)? But would you ever say it was assembled in Kragujevac, Serbia?

Or would you ever think that the BMW 5, an executive car, uses a cockpit designed in Sarajevo, Bosnia and Herzegovina?

And who has not ridden a Van Hool coach at least once? Would you believe it was made in Skopje, North Macedonia?

Hyundai cars are yet another example. Many of their wire harnesses are made in Fier, Albania, by Yura Corporation.

In Kosovo,Intertex, a textile company in Gjakova, produces protective covers for Volkswagen cars. 

These are well-known products that are either manufactured in the Western Balkans, as part of a regional/global value chain (GVC), or use intermediate inputs produced in the Western Balkans.

GVC integration has been limited compared to ASEAN and EU new member states

An upcoming World Bank Group study shows that firms in all economies of the Western Balkans (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia) have integrated in GVCs, and that their GVC participation has increased over time. Moreover, some of these economies upgraded their participation into GVCs in the last two decades. For instance, Bosnia and Herzegovina and Serbia moved from commodities into limited manufacturing GVCs in 1990-2015.

However, when compared to peer and aspirational countries, such as the new European Union (EU) member states, or countries in ASEAN, the Western Balkans underperform on GVC participation. Network analysis shows that Western Balkan economies have limited connections to major hubs in the EU and the United Kingdom. Accelerating integration would bring economic benefits to the Western Balkans. The experience of new EU member states demonstrated that participation into GVCs and connectivity to major hubs can help small economies accelerate export and income growth.

Within the region, there are significant differences. Firms in Serbia, North Macedonia and Montenegro are the most integrated in GVCs, albeit in different sectors. On the other hand, firms in Albania and Bosnia and Herzegovina are the least integrated. Data for Kosovo is not available unfortunately.

Recommendations for improving GVC integration

Attracting more Foreign Direct Investment (FDI) would spur GVC participation and the upcoming WBG Global Investment Competitiveness Report). WBG research shows that FDI inflows into Western Balkans have been stagnant, on average, during the past decade, although higher than EU new member states and ASEAN countries compared to GDP. In the first half of 2019, FDI as a percentage of GDP dropped in the Western Balkans. The economic disruption caused by COVID-19 has made attracting or even retaining FDI a much greater challenge. FDI to manufacturing sectors, particularly high value added, has been limited. In 2019, most FDI went to real estate (83 percent) and construction (12 percent). Greenfield FDI projects in the last five years have also concentrated in real estate (The Financial Times FDI Markets, 2019). Overall, the manufacturing sector still contributes a smaller share of GDP than in ASEAN and EU new member states. Manufacturing value-added as percentage of GDP is about ten percent in the Western Balkans, though in Albania and Montenegro it is five percent. In ASEAN and new EU member states it is about 20 percent.

There are at least three ways in which FDI can help the Western Balkans integrate into GVCs and boost growth, jobs, technology transfer:

  1. Attracting FDI into manufacturing sectors such as automotive and machinery (which is relatively knowledge-intensive) could stimulate GVC integration, generating productivity spillovers through extensive linkages, transfer of knowledge and technology. Automotive already contributes to 48.7 percent of total exports in North Macedonia, 22.6 percent in Serbia and 16.6 in Bosnia and Herzegovina. Machinery contributes to 7.2 percent of total exports in the region (10 percent in Serbia).
     
  2. Focusing on specific industry segments that are relatively labor-intensive, investors seeking to improve the efficiency of their value chains could be attracted by competitive production costs. For instance, in metal machining, electronics assembly, and plastics injection molding, the region has a competitive advantage based on cost vis-a’-vis key competitors (see graphs 1.1, 1.2 and 1.3 below). FDI in these segments can create medium and high skilled jobs, while strengthening the industrial base.
     
  3. FDI in tourism services, in addition to providing jobs, could improve travel infrastructure, bring in more international travelers and move towards higher-end segments, particularly in economies with a competitive advantage on tourism, such as Albania and Montenegro. In the latter, tourism already contributes to more than half of total exports.
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Graph 1.1: Western Balkans competitive position in electronics assembly:
Graph 1.1: Western Balkans competitive position in electronics assembly:
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Graph 1.2: Western Balkans competitive position in metal machining
Graph 1.2: Western Balkans competitive position in metal machining
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Graph 1.3: Western Balkans competitive position in plastics injection molding
Graph 1.3: Western Balkans competitive position in plastics injection molding

The World Bank Group’s Western Balkans Regional Investment Policy and Promotion Project (funded by the European Union and implemented in collaboration with the Regional Cooperation Council) is helping the Western Balkans attract FDI and integrate in GVCs addressing some of these recommendations. The project supports the Western Balkans with the implementation of the South East Europe 2020 Strategy and the Multiannual Action Plan to establish a Regional Economic Area. Key areas include: the establishment of a Regional Investment Reform Agenda; the horizontal implementation of investment policy reforms; and targeted investment promotion efforts.

Looking forward, the ongoing COVID-19 crisis may be both a challenge and an opportunity for FDI and value chains in the region. Global FDI was weak before the outbreak and is expected to fall more than during the 2008 financial crisis. Initial estimates suggest that the future decline in global FDI caused by COVID-19 will range from 30-40 percent to possible 50 percent (OCO Global) in 2020-2021. The main source markets of FDI in the Western Balkans (including Austria, Germany, Italy and the United States) have all been affected. The key sectors and industry segments recommended for FDI attraction are very exposed to COVID-19. On the other hand, this crisis may be leading to the “near-shoring” of some value chains, such as medical equipment and other manufactured items, including some of the Western Balkans target industry segments. Ongoing research by the World Bank Group is focusing on these developments along with the impact of COVID-19 on FDI and target value chains in the region.

Authors

Yassin Sabha's picture

Yassin Sabha

Private Sector Consultant

Yan Liu

Yan Liu

Young Professional

Harald Jedlicka's picture

Harald Jedlicka

Senior Investment Policy and Promotion Officer

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The Coming Of The Police State In America

The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now…

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The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now patrolling the New York City subway system in an attempt to do something about the explosion of crime. As part of this, there are bag checks and new surveillance of all passengers. No legislation, no debate, just an edict from the mayor.

Many citizens who rely on this system for transportation might welcome this. It’s a city of strict gun control, and no one knows for sure if they have the right to defend themselves. Merchants have been harassed and even arrested for trying to stop looting and pillaging in their own shops.

The message has been sent: Only the police can do this job. Whether they do it or not is another matter.

Things on the subway system have gotten crazy. If you know it well, you can manage to travel safely, but visitors to the city who take the wrong train at the wrong time are taking grave risks.

In actual fact, it’s guaranteed that this will only end in confiscating knives and other things that people carry in order to protect themselves while leaving the actual criminals even more free to prey on citizens.

The law-abiding will suffer and the criminals will grow more numerous. It will not end well.

When you step back from the details, what we have is the dawning of a genuine police state in the United States. It only starts in New York City. Where is the Guard going to be deployed next? Anywhere is possible.

If the crime is bad enough, citizens will welcome it. It must have been this way in most times and places that when the police state arrives, the people cheer.

We will all have our own stories of how this came to be. Some might begin with the passage of the Patriot Act and the establishment of the Department of Homeland Security in 2001. Some will focus on gun control and the taking away of citizens’ rights to defend themselves.

My own version of events is closer in time. It began four years ago this month with lockdowns. That’s what shattered the capacity of civil society to function in the United States. Everything that has happened since follows like one domino tumbling after another.

It goes like this:

1) lockdown,

2) loss of moral compass and spreading of loneliness and nihilism,

3) rioting resulting from citizen frustration, 4) police absent because of ideological hectoring,

5) a rise in uncontrolled immigration/refugees,

6) an epidemic of ill health from substance abuse and otherwise,

7) businesses flee the city

8) cities fall into decay, and that results in

9) more surveillance and police state.

The 10th stage is the sacking of liberty and civilization itself.

It doesn’t fall out this way at every point in history, but this seems like a solid outline of what happened in this case. Four years is a very short period of time to see all of this unfold. But it is a fact that New York City was more-or-less civilized only four years ago. No one could have predicted that it would come to this so quickly.

But once the lockdowns happened, all bets were off. Here we had a policy that most directly trampled on all freedoms that we had taken for granted. Schools, businesses, and churches were slammed shut, with various levels of enforcement. The entire workforce was divided between essential and nonessential, and there was widespread confusion about who precisely was in charge of designating and enforcing this.

It felt like martial law at the time, as if all normal civilian law had been displaced by something else. That something had to do with public health, but there was clearly more going on, because suddenly our social media posts were censored and we were being asked to do things that made no sense, such as mask up for a virus that evaded mask protection and walk in only one direction in grocery aisles.

Vast amounts of the white-collar workforce stayed home—and their kids, too—until it became too much to bear. The city became a ghost town. Most U.S. cities were the same.

As the months of disaster rolled on, the captives were let out of their houses for the summer in order to protest racism but no other reason. As a way of excusing this, the same public health authorities said that racism was a virus as bad as COVID-19, so therefore it was permitted.

The protests had turned to riots in many cities, and the police were being defunded and discouraged to do anything about the problem. Citizens watched in horror as downtowns burned and drug-crazed freaks took over whole sections of cities. It was like every standard of decency had been zapped out of an entire swath of the population.

Meanwhile, large checks were arriving in people’s bank accounts, defying every normal economic expectation. How could people not be working and get their bank accounts more flush with cash than ever? There was a new law that didn’t even require that people pay rent. How weird was that? Even student loans didn’t need to be paid.

By the fall, recess from lockdown was over and everyone was told to go home again. But this time they had a job to do: They were supposed to vote. Not at the polling places, because going there would only spread germs, or so the media said. When the voting results finally came in, it was the absentee ballots that swung the election in favor of the opposition party that actually wanted more lockdowns and eventually pushed vaccine mandates on the whole population.

The new party in control took note of the large population movements out of cities and states that they controlled. This would have a large effect on voting patterns in the future. But they had a plan. They would open the borders to millions of people in the guise of caring for refugees. These new warm bodies would become voters in time and certainly count on the census when it came time to reapportion political power.

Meanwhile, the native population had begun to swim in ill health from substance abuse, widespread depression, and demoralization, plus vaccine injury. This increased dependency on the very institutions that had caused the problem in the first place: the medical/scientific establishment.

The rise of crime drove the small businesses out of the city. They had barely survived the lockdowns, but they certainly could not survive the crime epidemic. This undermined the tax base of the city and allowed the criminals to take further control.

The same cities became sanctuaries for the waves of migrants sacking the country, and partisan mayors actually used tax dollars to house these invaders in high-end hotels in the name of having compassion for the stranger. Citizens were pushed out to make way for rampaging migrant hordes, as incredible as this seems.

But with that, of course, crime rose ever further, inciting citizen anger and providing a pretext to bring in the police state in the form of the National Guard, now tasked with cracking down on crime in the transportation system.

What’s the next step? It’s probably already here: mass surveillance and censorship, plus ever-expanding police power. This will be accompanied by further population movements, as those with the means to do so flee the city and even the country and leave it for everyone else to suffer.

As I tell the story, all of this seems inevitable. It is not. It could have been stopped at any point. A wise and prudent political leadership could have admitted the error from the beginning and called on the country to rediscover freedom, decency, and the difference between right and wrong. But ego and pride stopped that from happening, and we are left with the consequences.

The government grows ever bigger and civil society ever less capable of managing itself in large urban centers. Disaster is unfolding in real time, mitigated only by a rising stock market and a financial system that has yet to fall apart completely.

Are we at the middle stages of total collapse, or at the point where the population and people in leadership positions wise up and decide to put an end to the downward slide? It’s hard to know. But this much we do know: There is a growing pocket of resistance out there that is fed up and refuses to sit by and watch this great country be sacked and taken over by everything it was set up to prevent.

Tyler Durden Sat, 03/09/2024 - 16:20

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate…

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.

(Shutterstock)

A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.

Long COVID Patients Have Low Iron Levels

Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.

In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.

According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.

But it can jeopardize a person’s recovery.

When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”

The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.

It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”

The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.

1 in 5 Still Affected by Long COVID

COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.

Tyler Durden Sat, 03/09/2024 - 12:50

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February Employment Situation

By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…

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By Paul Gomme and Peter Rupert

The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

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