MAKING REGIONAL VALUE CHAINS HAPPEN IN THE WESTERN BALKANS Paris, 13 June 2013 This project is funded by the European Union
May 20, 2015
MAKING REGIONAL VALUE CHAINS HAPPEN IN THE WESTERN BALKANS
Paris, 13 June 2013
This project is funded by the European Union
2
The Next Generation Competitiveness Initiative (NGCI)
Funding and implementation
• Project funded by the European Commission• Implemented by the OECD Investment Compact
Geographical coverage
Albania, Bosnia and Herzegovina, Croatia, Kosovo*, FYR Macedonia, Montenegro and Serbia
Objective
Strengthening the competitiveness of the WBs through better integration in value chains:
• Deeper integration in value chains (“quantity” challenge)
• Upgrading in value chains (“quality” challenge)
Rationale for a sector focus
• Allows to generate greater interest and involvement from the private sector
• Useful approach to understand obstacles to doing business
• With limited resources, a sector-specific approach can have impact
3
Project timeline
Preparatory Phase April – November 2013
Implementation PhaseJanuary 2014 to April 2016
• Sector identification based on analysis and consultations with stakeholders• Establishment of sectoral working groups
• Identification of barriers to value chain development
• Pilot projects to support regional value chains
4
Value chains in a global context
• Post-Washington Consensus world – Global economic recession of 2008-09 and rise of contending centres of economic and political power
• Large emerging economies like China, India and Brazil are both export platforms and turning inward
• Small economies are seeking specialized niches in the global economy and regional economic blocs
• Lead firms in global value chains are streamlining and consolidating their sourcing and production networks
Source: Presentation by Gary Gereffi, Duke University, October 31, 2012Tapping into International Value Chains, Opportunities & Challenges for Latin America, San Jose, Costa Rica
5
FDI in the Western Balkans: comparable to central Europe but more resilient
Source: UNCTAD (2013)
Western Balkans Central Europe
MNE ALB SRB HRV MKD BIH CZE HUN SVK SVN0%
5%
10%
15%
20%
25% FDI inflows as % of GDP (average)
2009-2011 2000-2008
6
Export performance has been below potential
Source: WDI (2013) - NB: Czech Republic, Hungary, Slovakia and Slovenia are included in Central Europe. Poland is not included because it is a significantly larger market.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Exports of Goods and Services (% of GDP)
Average Central Europe Average WB
7
Motives for relocations suggest that the region could attract more FDI
0%
10%
20%
30%
40%
50%
60%
70%
80%72%
27% 26%
13% 12% 11%8%
4%
Main motives for production relocations
Source: European Manufacturing Survey, 2009
A combination of factors makes the region attractive
ALB BIH HRV XK MKD MNE SRB Benchmarkcountries
Labour costs Unit labour costs(2009, Index SVK=100)
? 106 117 ? 114 159 122 SVK: 100
Time to market (h)Road transport. time to Frankfurt
18h 13h 8h 18h 16h 16h 12hSVK: 7h
TUR: 23h
Cost of energy Industrial electricity tariff EUR per MWh (2009)
60 50 90 60 60 70 40SVK: 140TUR: 80
Natural resourcesMain natural resources available in the economy
Coast,Metals,
Metals, Wood,Coal
Coast,Wood,Land,
Petroleum
Metals,WoodCoal-
Lignite
Metals,Land
Coast,Metals,Wood
Metals,Wood,Land
Skills Enrollment in tertiary education in 2009 (%)
30% 36% 49% ? 40% 45% 50%SVK: 54% TUR:46%
9
Objectives of the workshop
Identify sectors where regional
value chains exist or could be developed
Discuss ways to identify barriers limiting value
chain development in these sectors
Examine concrete policy actions to
address these barriers
1 2 3
10
Session 1
Identify sectors where regional
value chains exist or could be developed
Discuss ways to identify barriers limiting value
chain development in these sectors
Examine concrete policy actions to
address these barriers
1 2 3
11
Key question of the session
How do we identify 3 sectors for further value chain analysis?
12
Potential for regional cooperation
Competitiveness of the Western Balkans sectors in the global marketplace
Value-added potential
Analytical framework for sector selection
13
Analytical framework for sector selection
Potential for regional cooperation
Competitiveness of the Western Balkans sectors in the global marketplace
Value-added potential
14
Services account for the largest and increasing share of GDP
2000 20100
10
20
30
40
50
60
70
80
90
100
Sectors' share of GDP in the Western Balkans
Agriculture Industry Services
Western Balkans
Central Europe0
20
40
60
80
100
Sectors' share of GDP in 2010 in the WB and CE
15
Food, metals and chemicals account for most of manufacturing turnover
Top 10 manufacturing sectors in CEFTA by turnover (yearly average 2008-10)
Source: OECD (2012)Nb- CEFTA includes Moldova as well as the Western Balkan economies.
IndustryTurnover (EUR bn)
Share Employment Share
Food products and beverages 12.0 28% 222521 21%
Basic metals 3.7 9% 46582 4%
Fabricated metal products 3.5 8% 98772 9%
Chemicals and chemical products 3.4 8% 46816 4%
Non-metallic mineral products (glass, ceramics, cement, stone products, etc.)
2.8 7% 60206 6%
Coke, refined petroleum and nuclear fuel
2.8 7% 10593 1%
Textiles, apparel and leather 2.0 5% 207988 19%
Rubber and plastic products 1.7 4% 43452 4%
Electrical machinery and apparatus, nec
1.4 3% 37509 3%
Furniture and other manufacturing 1.2 3% 52953 5%
16
FDI has been mainly market-seeking and concentrated in services
NB: Data include Albania, Bosnia and Herzegovina, Croatia and the FYR Macedonia
33.1%
15.5%
9.9%
2.2%
7.0%2.3%
2.3%
3.9%
23.7%
FDI Stocks by Activity in 2010 (% of Total FDI Stocks)
Financial intermediation
Wholesale, retail trade, repair of motor vehicles etc
Transport, storage and commu-nication
Construction
Real estate, renting and business activities
Mining and quarrying
Hotels and restaurants
Other
Manufacturing
17
Coke/petroleum, food and metals have attracted most FDI in the past years
Source: Vienna Institute for International Economic Studies. NACE REV. 1
Economy SectorSum of inflows from 2007 to 2010 (EUR mn)
Bosnia and Herzegovina
Coke, and petroleum products 311
Metals 127
Food products 92
Croatia
Coke, and petroleum products 1045
Other non-metallic mineral products 269
Metals 101
Serbia
Food products 489
Metals 413
Transport equipment 161
The FYR Macedonia
Transport equipment 124
Food products 69
Metals 27
Data for FDI inflows in the FYR Macedonia in 2008 are not available so only the inflows in 2007, 2009 and 2010 are summed up.
18
The top exporting industries are basic metals, machinery and equipment and textiles
Source: based on OECD STAN BTD - NB- No data available for Kosovo*
Basic Metals
Machinery and Equipment
Textiles, Leather and Footwear
Food, Beverages and Tobacco
Chemicals
Transport Equipment
Coke and Petroleum Products
Fabricated Metal Products
Rubber and Plastics
Wood and Cork
Paper Products, Printing and Publishing
Pharmaceuticals
Other Non-Metallic Mineral Products
0 2,000,000 4,000,000Total exports in 2011 (bn USD)
Iron and steel, non-
ferrous metals
Major trade deficit in
petroleum: WBs net importer
Electric appliancesIndustrial machinery
and equipmentClothing accessories,
Footwear, Leather goods
19
Travel accounts for the largest share of service exports
Travel
Other business services
Transportation
Communications services
Construction services
Computer and information servicesPersonal, cultural, and recreational
servicesFinancial services
Royalties and license fees
Insurance services
Service exports in 2011 (bn USD)
ALB BIH HRV MNE SRB MKD
Source: UN Service Trade Database
Includes business and
personal travel
Legal, accounting, consulting,
architectural, etc. services Road, railway,
sea and air passenger and
freight transport
20
Exports in chemicals, rubber and plastics and machinery have grown faster than other sectors
Source: based on OECD STAN BTD NB- No data available for Kosovo*
500 1000 1500 2000 2500 3000 3500 4000 4500 5000 55000%
2%
4%
6%
8%
10%
12%
14%
16%
5.8%
14.9%
10.9%
7.9%
8.4%
11.0%
5.9%
3.5%
10.5%
10.8%
11.0%
5.9%
6.2%5.1%
Exports in 2011 and annual growth (2006-2011)
Western Balkans exports in 2011 (mn USD)
WB
export
s (a
nn
ual
gro
wth
2006-2
011)
21
RCA indices show the export specialisation of WB economies
CEFTA ALB BIH HRV MKD MNE SRBWood and Cork 3.91 1.32 7.50 5.07 0.51 5.54 2.38Textiles, Leather and Footwear 2.29 8.75 2.09 1.45 5.00 0.12 1.66Other Non-Metallic Mineral Products 2.25 2.33 1.47 3.31 2.24 0.25 1.33Food, Beverages and Tobacco 1.92 0.80 0.97 1.51 2.02 2.08 2.61Fabricated Metal Products 1.68 2.09 2.69 1.71 0.99 0.75 1.48Basic Metals 1.61 0.93 1.89 0.48 3.77 8.71 2.22Electrical Machinery and Apparatus n.e.c 1.23 0.63 0.56 1.71 0.48 0.07 1.19Rubber and Plastics Products 1.16 0.37 0.73 0.63 0.84 0.08 2.33Pulp, Paper, Printing and Publishing 1.09 1.00 1.17 1.07 0.32 0.64 1.45Coke, Petroleum Products 1.06 0.27 0.92 2.02 0.20 0.42 0.43Other Transport Equipment 0.92 0.02 0.20 1.96 0.08 0.23 0.45Machinery and Equipment, n.e.c 0.67 0.11 0.61 0.86 0.30 0.82 0.67Chemicals and Chemical Products 0.50 0.06 0.40 0.63 0.46 0.09 0.52Motor Vehicles, Trailers and Semi-Trailers 0.29 0.04 0.51 0.27 0.10 0.12 0.32Pharmaceuticals 0.23 0.05 0.04 0.21 1.34 0.03 0.06Medical, Precision and Optical Instruments 0.21 0.04 0.10 0.28 0.16 0.03 0.20Radio, TV and Communication Equipment 0.20 0.07 0.02 0.34 0.03 0.04 0.20ICT 0.19 0.07 0.04 0.28 0.06 0.04 0.22Office, Accounting and Computing Machinery 0.15 0.10 0.02 0.16 0.05 0.04 0.27
RCA indices in 2009
Source: Based on OECD STAN BTD. CEFTA also includes Moldova. No data available for Kosovo*
22
Which sectors have potential for future growth?
Source: based on OECD STAN BTD
0% 2% 4% 6% 8% 10% 12%0%
2%
4%
6%
8%
10%
12%
14%
16%
5.8%
14.9%
10.9%
7.9%8.4%
11.0%
5.9%
3.5%
10.5%10.8%
11.0%
5.9%
6.2%
5.1%
Growth in WB exports and EU27 import demand
Growth in EU27 imports (annual growth 2006-2011)
WB
export
s (a
nn
ual
gro
wth
2006-2
011)
23
Analytical framework for sector selection
Potential for regional cooperation
Competitiveness of the Western Balkans sectors in the global marketplace
Value-added potential
24
Depending on the industry, supply chains tend to be more or less regional
Other Non-Metallic Mineral Prod.
Office, Computers
Paper, Printing and Publishing
Fabricated Metal Products
Basic Metals
Electrical Machinery n.e.c
Machinery and Equipment, n.e.c
Textiles, Clothing
Other Transport Equipment
Manufacturing n.e.c; Recycling
0 20 40 60 80 100
Intermediate exports: Intra vs. Extra-CEFTA (2009)
intra-CEFTA extra-CEFTA
Source: OECD (2012). CEFTA also includes Moldova. No data available for Kosovo*
25
The RCA matrix helps identify economies’ positions in supply chains
No RCA in intermediate goods
imports
RCA in intermediate good exports
RCA in intermediate goods imports
No evidence of supply chains
First stage supply chains
Final stage supply chains
Intermediate stage supply
chains
RCA in final good exports
Source: OECD (2012)
26
An example: Serbia’s industries’ positions in supply chains
Year: 2009
4
3
2
1
0
1
2
3
4
352580.75105161.79
790686.83181245.32
269691.91
96091.08
134926.64
153675.05
65830.71
542308.7170822.23801187.89
Manufacturing n.e.c.
No RCA in intermedi-ate goods imports
No Evident InternationalSupply Chains
RCA in final goods exports
Final StageSupply Chains
RCA in intermediate goods imports
First StageSupply Chains
Intermediate StageSupply Chains
RCA in intermediate goods exports
27
Industry First stage
Intermediate stages Final stages
Food, beverages and tobacco SRB BIH HRV MKD MNE
Textiles, Clothing ALB BIH HRV MKD SRB
Wood and Cork BIH HRV MNE SRB ALB BIH
Paper, Printing and Publishing ALB BIH HRV SRB BIH SRB
Coke, Petroleum Products HRV
Rubber and Plastics MKD SRB
Basic Metals BIH MNE MKD SRB
Fabricated metal products BIH ALB HRV MKD
SRB SRB
Electrical machinery, nec HRV SRB
Motor vehicles, Trailers BIH
WB economies present supply chain complementarities in selected sectors
Economies’ positions in supply chains (2009)
Source: OECD (2012). No data available for Kosovo*
28
ALB BIH HRV XK MKD MNE SRB
Metal industry
Textile, Apparel
Wood processing
Agro-food
Mining
Construction
Automotive
Pharmaceuticals
ICT
Tourism
Banking
Energy
Governments in the region support similar sectors
Sectors prioritised by WB economies
Source: based on National Strategies and Investment Promotion Agencies
29
Multidimensional view of the analysis
0 0.5 1 1.5 2 2.5 3 3.5 4 4.50%
5%
10%
15%
20%
25%
30%
2.9%
4.6%
28.1%
2.8%
6.7%
16.7%
4.1%
6.5%
2.1%2.9%
7.9%
1.3%
3.4%
14.0%
RCAs in exports (2009)
FD
I st
ocks
(% o
f m
an
ufa
ctu
rin
g F
DI,
2010)
The size of the bubble represents the size of the sector as a % of manufacturing output.The colour of the bubble represents the extent to which governments in the WB prioritise the sector.
0-2 economies prioritise the sector 3-4 economies prioritise the sector
5-7 countries prioritise the sector
30
What could be the shortlist of sectors: Food, beverages, and tobacco; Travel; Metals; Textiles?
How much weight should we attach to RCA, FDI stocks, size of sector as % of manufacuting input, growth in demand and existing government priorities?
What other factors should be considered (e.g., employment, R&D capacity, etc.)?
Is there potential for moving to higher value added?
Discussion questions
31
Session 2
Identify sectors where regional
value chains exist or could be developed
Discuss ways to identify barriers limiting value
chain development in these sectors
Examine concrete policy actions to
address these barriers
1 2 3
32
What are the main obstacles which limit Western Balkan economies’ integration and upgrading in regional and global value chains?
What approaches should be used to identify barriers to value chain development?
What is the feasibility of different types of upgrading in different sectors (process, product, functional, upgrading)?
Key questions
33
Session 3
Identify sectors where regional
value chains exist or could be developed
Discuss ways to identify barriers limiting value
chain development in these sectors
Examine concrete policy actions to
address these barriers
1 2 3
34
How can Western Balkans co-operate to create regional value chains which can successfully compete in the global market?
Where could the OECD Investment Compact achieve the greatest impact through an 18 month pilot project?
Have projects in the past aimed at helping firms join or upgrade in regional/global value chains?
Key questions
35
ANNEX
36
Multidimensional view of the analysis (II)
0 0.5 1 1.5 2 2.5 3 3.5 4 4.50%
2%
4%
6%
8%
10%
12%
2.9%
4.6%
28.1%
2.8%
3.5%
5.8%
4.1%
6.5%
3.5%
7.9%
RCAs in exports
Gro
wth
in
EU
dem
an
d (
an
nu
al
gro
wth
, 2006-
2011)
The size of the bubble represents the size of the sector as a % of manufacturing output.The colour of the bubble represents the extent to which governments in the WB prioritised the sector.
0-2 economies prioritised the sector 3-4 economies prioritised the sector
5-7 countries prioritised the sector
37
FDI inflows, bn USD
Source: UNCTAD (2013)
2000 2001 2002 2003 2004 2005 2006 2008 2009 2010 2011
-2000
0
2000
4000
6000
8000
10000
12000
ALB BIH HRV MNESRB MKD SVK CZE
38
Share of total EU imports by selected trade partners (% total EU imports)
Source: Eurostat
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
0%
5%
10%
15%
20%
TUR Western Balkans North African countries Russia
United States China (except Hong Kong)
39
Central Europe 2011
Western Balkans 2011
Central Europe 2001
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Exports by industry (% of manufactured exports)
Food products, Beverages and Tobacco Textiles, Textile Products, Leather and Footwear Wood and Products of Wood and Cork Pulp, Paper, Paper Products, Printing and Publishing Manufacturing not elsewhere classified; Recycling Coke, Refined Petroleum Products and Nuclear Fuel Rubber and Plastics Products Other Non-Metallic Mineral Products Basic Metals
WB exports are concentrated in low and medium-low tech industries
Source: based on OECD STAN BTD - NB- No data available for Kosovo. Poland is not included in the Central European economies because it is a significantly larger market.
Low tech industries Medium-high tech High-techMedium-low tech
40
Exports from Kosovo*
Source: Kosovo Agency of Statistics
Manufactured goods classified chiefly by material
Crude materials, inedible, except fuels
Food and live animals
Mineral fuels, lubricants and related materials
Machinery and transport equipment
Beverages and tobacco
Miscellaneous manufactured articles
Chemicals and related products, n.e.s.
Commodities and transactions not classified else. in the SITC
Animal and vegetable oils, fats and waxes
0 50,000 100,000 150,000
Exports from Kosovo* (thousand EUR)
2007 2011
41
FDI stocks by manufacturing industry (2007)
Source: Vienna Institute for International Economic Studies. NACE REV. 1
ALB
BIH
HRV
MKD
-20% 0% 20% 40% 60% 80% 100%
Food, beverages and tobacco Textiles and leather productsWood products Pulp, paper products, publish. & printingCoke, petroleum products Rubber and plasticsOther non-metallic mineral products Basic metals and fabricated metal productsMachinery and equipment n.e.c. Electrical and optical equipmentTransport equipment Chemical productsOther
42
Source: Vienna Institute for International Economic Studies. NACE REV. 1
FDI stocks by manufacturing industry (2010)
ALB
BIH
HRV
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Food, beverages and tobacco Textiles and leather productsWood products Pulp, paper products, publish. & printingCoke, petroleum products Rubber and plasticsOther non-metallic mineral products Basic metals and fabricated metal productsMachinery and equipment n.e.c. Electrical and optical equipmentTransport equipment Chemical productsOther
43
FDI Stocks by Manufacturing Sector (EUR mn)
Source: Vienna Institute for International Economic Studies. NACE REV. 1. NACE 2 digit manufacturing
26 Other non-metallic mineral products
19 Tanning and dressing of leather, mfr. of rel. articles
28 Fabricated metal products, ex machin. and equip.
27 Basic metals
25 Rubber and plastic products
20 Wood, products of wood and cork, ex furniture etc
17 Textiles
37 Recycling
-20 0 20 40 60 80 100 120 140Albania
2007 2010
44
FDI Stocks by Manufacturing Sector (EUR mn)
Source: Vienna Institute for International Economic Studies. NACE REV. 1
23 Coke, refined petroleum products and nuclear fuel15 Food products and beverages
26 Other non-metallic mineral products27 Basic metals
21 Pulp, paper and paper products24 Chemicals and chemical products
34 Motor vehicles, trailers and semi-trailers28 Fabricated metal products, ex machin. and equip.
20 Wood, products of wood and cork, ex furniture etc29 Machinery and equipment n.e.c.
19 Tanning and dressing of leather, mfr. of rel. articles37 Recycling
25 Rubber and plastic products31 Electrical machinery and apparatus n.e.c.
36 Furniture, manufacturing n.e.c.30 Office machinery and computers
17 Textiles18 Wearing apparel, dressing and dyeing of fur
22 Publishing, printing, reproduction of recorded media33 Medical, precision, optical instr., watches & clocks
Other not elsewhere classified industries (15-37)
0 50 100 150 200 250 300 350 400 450
Bosnia and Herzegovina
2007 2010
45
FDI Stocks by Manufacturing Sector (EUR mn)
Source: Vienna Institute for International Economic Studies. NACE REV. 1
23 Coke, refined petroleum products and nuclear fuel
15 Food products and beverages
24 Chemicals and chemical products
32 Radio, TV and communic. equipment and apparatus
36 Furniture, manufacturing n.e.c.
17 Textiles
29 Machinery and equipment n.e.c.
25 Rubber and plastic products
35 Other transport equipment
27 Basic metals
37 Recycling
0 500 1000 1500 2000 2500 3000Croatia
2007 2010
46
RCAs with the EU by industry in 2007
Industries ALB BIH HRV MKD MLD MNE SRBTechnological intensity
Radio, television, communication 0.02 0.03 1.27 ↔ 0.08 0.04 0.01 0.11 High
Machinery and equipment, n.e.c. 0.25 0.66 1.03 ↑ 0.11 0.21 0.1 0.48 Medium - high
Other transport equipment 0.09 0.06 4.11 ↔ 0.12 0.05 0.38 1.24 ↑ Medium - high
Electrical machinery and apparatus 0.06 0.57 1.38 ↔ 0.19 0.72 0.01 1.37 Medium – high
Motor vehicles 0.03 1.02 ↔ 0.28 0.04 0.03 0 0.1 Medium -high
Fabricated metal products 0.43 2.04 ↔ 1.89 ↔ 0.33 0.58 0.37 1.6 ↔ Medium - low
Other non-metallic mineral products 2.19 ↑ 0.14 2.07 ↔ 1.21↔ 4.82 ↔ 0.03 1.3 ↑ Medium - low
Rubber and plastics products 0.19 0.55 0.42 0.17 0.43 0.01 1.89 ↔ Medium - low
Basic metals 0.28 1.86 ↔ 0.45 5.21 ↔ 0.66 11.54 3.71 ↔ Medium – low
Coke, refined petroleum products, nuclear fuel 0.4 2.04 1.17 ↔ 0.04 0.23 NA 0.06 Medium – low
Food products and beverages 0.44 0.47 0.92 0.64 2.92 ↔ 0.35 1.67 ↔ Low
Furniture 0.97 4.84 ↔ 2.36 ↔ 0.21 1.11 ↑ 0.07 0.8 Low
Paper and paper products 1.84 ↔ 0.48 0.87 0.15 0.93 0 0.61 Low
Textiles 1.35 ↔ 0.62 1.30 ↔ 1.51 ↔ 2.18 ↔ 0.19 1.01 ↑ Low
Tobacco products NA 0.01 0.5 0.04 0.21 NA 0.01 Low
Wearing apparel 18.99
↔ 3.77
↔ 2.40 ↔ 18.08
↔11.11
↔ 0.29 2.05 ↔ Low
Wood and products of wood 1.3 ↔ 5.64 ↔ 3.48 ↔ 0.35 0.21 1.4 1.87 ↔ Low