The Western Balkans could benefit from Europe relocating production from Asia

Economists believe that investors coming to Serbia are looking for cheap labour and state subsidies, while the country needs those who bring more added value such as the IT sector.

The Western Balkan countries could benefit from the ongoing trend of production relocating from Asia to Europe, the Vienna Economic Institute estimates, as this trend could benefit the countries in the region and lead to direct investments worth several billion euro. However, in order to achieve this, money should be investing in improving the education system and in the construction of transport infrastructure.

“Due to protectionist tendencies in world trade, the return of production from Asia to the vicinity of the traditional industrial countries has already been initiated in the past decade,” said Branimir Jovanović, economist at the Vienna Institute, pointing out that the return of production will intensify in Europe after the pandemic.

“Lower wage costs and low taxes no longer play a decisive role. Foreign investors are mainly looking for a qualified workforce and good infrastructure,” Jovanovic said. According to him, this requires more spending on the education system, a greater focus on dual education and the construction of transport infrastructure.

However, Serbian economists do not share his opinion. Goran Radosavljevic says that investors, who usually come to Serbia, are looking for cheap labour, state subsidies and legislation that is completely on their side. And this is difficult to change, because the investors refuse to come unless they are given generous state subsidies.

In order for investors to come Serbia for other reasons, and not just the cheap workforce, he believes that we should start attracting those companies that bring higher added value, such as the IT sector, which also pays out higher salaries. It would be nice if such a company came from South Korea, someone like Samsung, and not just automotive cable factories, although desirable, or mining companies from China. In this way, according to the expert, the average salary in Serbia could reach 900 euro.

Jovanovic adds that the problem is that Serbia is going through the transition slowly. Of course, investments that require cheap labour will be made first, but this has to change in the future. The moment when Serbia can pick and choose which investors to have in the country is only when unemployment drops to an acceptable level, to single digits or about 10 per cent. That is the moment when you say that someone who offers a salary of 200 euro cannot have a preferential status with the state. The current situation is such that the state gives huge subsidies to foreign companies that generate low added value.

“With the current structure of our economy, the average salary can be around 600 euro the most. We cannot rely forever on EPS (Electric Power Industry of Serbia) and three other public constantly being responsible for boosting the average salary. This has its limits, just as the increase in the minimum wage has its limits. We now need organic growth. We need a car company that adds value, not just produces components. In Slovakia, the Czech Republic and Poland, this has helped to raise salaries from 500 to 1,000 euro, on average,” Jovanovic adds.

(Politika, 06.06.2021)


This post is also available in: Italiano

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