Remarks by Angel Gurría
4 July 2019 - Poznan, Poland
(As prepared for delivery)
Dear Ministers, Dear Director-General Danielsson, Ladies and Gentlemen,
Welcome to this joint OECD-Poland High-Level Conference on The Western Balkans in Global Markets: New Opportunities for trade and Investment. It is my pleasure to be here with Ministers Jacek Czaputowicz and Jadwiga Emilewicz of our host country. I would also like to take this opportunity to thank the Poland for contributing to the Berlin Process by hosting this year’s Summit and furthering efforts to enhance regional co-operation and well-being in the Western Balkans.
Today we will be discussing new opportunities for trade and investment, how to reap economic benefits, and how to optimise growth and well-being in the region. We will also be launching the latest OECD publication on the region: Global South East Europe: Unleashing the Transformation Potential for Growth in the Western Balkans.
Over the past two decades the Western Balkan economies have implemented substantial reforms aimed at integrating into global markets and developing their economies. During this time, governments of the region improved business environment conditions and climbed world “doing business” rankings. Business conditions have tangibly improved across the region when it comes to starting a business, dealing with construction permits and getting credit, also thanks to efforts in reducing non-performing loans in recent years.
Despite this impressive progress however, important challenge persist. Regional growth (around 3.8% annual growth rates ) is much below other emerging countries (e.g. China, South East Asia) and productivity levels remain low. GDP per capita in the Western Balkans stood at around 1/3 of the OECD/EU20 average in 2018 . Young and talented workers seek better job opportunities abroad. This brain-drain is hampering the development of knowledge-intensive sectors which are crucial for added value and for the economy to flourish. Consequentially, economic convergence with the European Union (EU) is not being achieved quickly enough.
The Western Balkans economies are also facing challenges in the global context. Growing trade tensions create uncertainty for businesses around the world. This negatively impacts their willingness to invest and expand production, ultimately reducing new employment opportunities and undermining people’s well-being around the globe. While these developments involve the main global players, these trends trickle down to the rest of the world, affecting the Western Balkan economies as well.
It is in this context that the OECD is launching the study Global South East Europe: Unleashing the Transformation Potential for Growth in the Western Balkans, which has been financially supported by the Government of Poland. The study highlights strategic paths to development and growth in the region, analysing trade, investment and sectoral opportunities in the Western Balkans. Let me briefly outline some of the study’s key insights.
First, exports have boomed, upgraded and diversified. Over the past decade, the Western Balkans exports have boomed – growing by more than 80%, almost three times faster than in OECD countries. This massive increase is driven by export-led FDI projects mostly from EU countries, embedding the region into European supply chains.
They have also made progress diversifying their exports capacity. While the EU remains the region’s major trading partner, trade with other major players such as the US, China, the Russian Federation and Turkey is growing as well. The quality of exports has also improved, and products are more likely to be of higher added value than twenty years ago.
Second, FDI shapes the export basket of the region. The Western Balkans are among the most open economies to FDI as found in the OECD FDI Regulatory Restrictiveness Index. The level of FDI net inflow is around 6% of GDP, three times higher than that of the EU and OECD countries. A large share of FDI is targeted to the manufacturing sector, which transfers new technology and knowhow to the region.
Third, trade and investment are creating opportunities for new sectors to develop. FDI inflows have enabled the development of more added-value production and exports. This has modernised certain economic sectors and has generated major opportunities in the most knowledge and capital intensive sectors. In particular, FDIs have boosted the automotive and machinery sectors, diversifying the production output, increasing productivity and creating thousands of new jobs.
Last but not least, the limited size of the Western Balkan economies calls for greater regional co-operation. This would give the region a certain weight and voice on the global level and would also help to achieve much needed economies of scale. A common investment framework, the alignment of standards and procedures with those of the OECD and the EU, trans-national infrastructure investment and the creation of a common economic area are crucial elements for maximising the benefits of trade and investment.
Ladies and Gentlemen,
The young and vibrant economies of the Western Balkans have demonstrated their resilience and their capacity to surmount important challenges. Looking ahead, the Western Balkans can become an engine for the region’s economic, sustainable and inclusive growth.
Now is the moment to seize the economic opportunities. Rest assured that as you forge ahead, the OECD stands with and for you to design, develop and deliver better policies for better lives in the Western Balkans and beyond. Thank you.