Competitiveness and Private Sector Development

ISSN :
2076-5762 (online)
ISSN :
2076-5754 (print)
DOI :
10.1787/20765762
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This series of publications addresses different aspects of private sector development in non-OECD regions, including the Middle East and North Africa, South East Europe and Eurasia. Reports provide recommendations at the national, regional and sector level to support countries in improving their investment climate, enhancing competitiveness and entrepreneurship, raising living standards and alleviating poverty.

Also available in: French
 
Sector Specific Sources of Competitiveness in the Western Balkans

Sector Specific Sources of Competitiveness in the Western Balkans

Recommendation for a Regional Investment Strategy You do not have access to this content

Authors:
OECD
Publication Date :
14 May 2009
Pages :
229
ISBN :
9789264055698 (PDF) ; 9789264053632 (print)
DOI :
10.1787/9789264055698-en

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The Western Balkan region benefits from a cost-competitive labour force and geographic and cultural proximity to EU markets. However, cost competitiveness as a source of differentiation is not sustainable. Cost levels are increasing gradually in some sectors, reducing firms’ profitability. In order to sustain competitiveness, the Western Balkans needs to move up the value chain, from investing in automated technology to producing higher-quality goods and enhancing its human capital. This report examines the apparel manufacturing, automotive components and business process and technology outsourcing sectors, focusing on market competitiveness factors, industry key success factors and policy recommendations.

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  • Introduction
    In view of the European Union’s wider strategy to promote growth and stability in the Western Balkans on the road to EU accession, attracting a growing share of foreign direct investment (FDI) is a key priority for the region. FDI inflows help to sustain economic growth. They generate employment in the formal sector, promote exports, rebalance growing trade deficits and maintain the process of economic reconstruction. By global standards, FDI in the Western Balkans has been limited. In addition, it has focused more on privatisation deals than on much needed greenfield investment. 
  • Executive Summary
    The examined sectors in the Western Balkans are cost competitive and have EU proximity advantages. In terms of cost, labour costs in services (e.g. business process and technology outsourcing) are up to five times lower than in Eastern Europe. Manufacturing companies’ cost structures (e.g. in the apparel manufacturing and automotive components sectors) are up to four times lower than in Central and Eastern European countries.
  • Approach and Methodology
    The identification of the sectors covered by the project "Defining and Strengthening Sector Specific Sources of Competitiveness" (the SSSC project) was carried out based on the Sector Prioritisation Framework (SPF) methodology. This approach is based on a three-step process involving stakeholder consultation; data collection and quantitative analysis; and validation of results with key stakeholders .
  • Apparel Manufacturing
    The apparel industry has experienced profound transformation over the past few decades. On the demand side, consumers are looking for greater range of clothing products more customised to their individual tastes and sizes at the lowest prices. At the same time, consumers are spending a smaller portion of their income on apparel, opting instead for consumer electronics, entertainment, etc. On the supply side, apparel retail outlets are faced with increasing competition, not only from the emergence of mass retailers, but also from increased internationalisation of the most successful apparel retail chains. 
  • Automotive Components
    In recent years the global automotive industry has experienced sweeping changes. On the demand side, consumer requirements are evolving from better performance and reliability to a wider range of features at low prices. Styling and environmental awareness, in particular, have emerged as important drivers of consumer demand. On the supply side, rising material costs, falling car prices and ever stricter environmental regulations have increased pressure on carmakers to reduce costs in order to remain competitive. Focusing on cost reduction has led to important changes in the industry, in particular consolidation and increasing competition between major car brands. Stagnant worldwide sales, consolidation and product proliferation have contributed to excess capacity throughout the industry. In addition, increased competition has forced carmakers to shift their main focus from vehicle manufacturing to design, brand management and customer relationships. Carmakers are also shortening product lifecycles to compete for customer loyalty.
  • Business Process and Information Technology Outsourcing
    Business process and technology outsourcing (BPTO) refers to sharing organisational control of any company process including information and communication technology (ICT), human resources (HR), finance and accounting (F&A), sales, marketing, customer service and supply chain management to reduce costs. The BPTO sector includes firms either specialised in a segment such as call centres or finance or offering a full range of outsourcing services including HR, accounting, payroll, IT etc. Examples of such full service BPTO firms are EDS, Accenture, Capgemini. 
  • Regional Competitiveness Initiative
    Sustaining competitiveness in the longer term at both the country and regional level is vital. The OECD recommends addressing the cost trap the region is currently facing by developing institutions, mechanisms and processes to increase its competitiveness with limited outside support. To enhance competitiveness and sustain it in the longer run, the OECD proposes an approach based on three self-reinforcing pillars. 
  • Annex A
  • Annex B
  • Annex C
    The five questionnaires of the Regional Capability Survey (apparel manufacturing, automotive components, back office functions, call centres and software development) are available on the website www.oecd.org/daf/psd. 
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