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Sector Specific Sources of Competitiveness in the Western Balkans

Recommendation for a Regional Investment Strategy

image of Sector Specific Sources of Competitiveness in the Western Balkans

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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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.

English

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