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March 2, 2018 www.intellinews.com I Page 11
They cite the last EBRD-World Bank Business Environment and Enterprise Performance Sur- vey (BEEPS) which showed a substantial labour productivity gap between the Western Balkans countries and the CEE EU member states; on average aggregated firm level labour productiv- ity in Western Balkans companies is about 60% of the level in the CEE member states.
The disparity is somewhat greater in manufac- turing, where productivity in the WB6 is just 55% of that in EU members from the region, al- though both Bosnia and Serbia are a little more advanced than their neighbours, both having strong industrial bases. In the services sector, productivity is around 70% of the level in the CEE member states.
Aside from the continuing fallout of a decade
of war and later economic upheavals, the re- port identifies corporate over-indebtedness and market concentration as obstacles to boosting productivity. It also cites a survey of firm owners and senior managers that shows competition from the informal sector is a problem, especially for small businesses, with other hindering fac- tors including cumbersome tax administrations and limited access to finance. The weak rule of law is an enduring problem across the region.
Along with poor transport infrastructure, these kinds of administrative hurdles also keep investment and trade below their potential; the Western Balkans countries again lag their CEE
peers in terms of openness to trade and as
a result are not well integrated into European supply chains.
There are some positive signs; despite their persistent political differences, the authors say that “encouraging progress has been made
in the past two decades in terms of regional cooperation”. This has the dual benefits of increasing regional stability, and giving an economic boost from higher levels of intra- regional flows of people, goods, services
and capital, enhanced competitiveness and a better image as an investment destination.
But still, the authors say, “it is clear that countries in the Western Balkans fall short of being considered well-functioning, sustainable market economies,” and the pace of reform needs to be stepped up.
“Countries in the region are a long way from embracing a sustainable market economy, defined as one that is competitive, well- governed, green, inclusive, resilient and integrated,” says the report. “Comprehensive reforms are needed to promote a dynamic, vibrant private sector, backed by strong investment flows, both domestic and foreign. The state must play an important growth- enabling role by providing the rule of law,
a stable macroeconomic environment and clear rules of the game for businesses.”
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