Western Balkan Integration with the EU: An Agenda for Trade and Growth (Directions in Development)

208 Pages·2008·0.81 MB·English

by  Sanjay Kathuria

DIRECTIONS IN DEVELOPMENT
Trade
Western Balkan Integration
and the EU
An Agenda for Trade and Growth
Sanjay Kathuria, Editor
Western Balkan Integration and the EU

Western Balkan Integration
and the EU
An Agenda for Trade and Growth
Sanjay Kathuria, Editor
© 2008 The International Bank for Reconstruction and Development / The World Bank
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This volume is a product of the staff of the International Bank for Reconstruction and
Development / The World Bank. The findings, interpretations, and conclusions expressed in this
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ISBN: 978-0-8213-7472-6
eISBN: 978-0-8213-7473-3
DOI: 10.1596/978-0-8213-7472-6
Cover design: Quantum Think.
Library of Congress Cataloging-in-Publication Data has been requested.
Contents
Foreword xi
Acknowledgments xiii
Executive Summary xv
Abbreviations xxiii
Chapter 1 Motivation and Macroeconomic Context 1
Motivation for the Study 1
The Implicit Theoretical Framework 6
A Preliminary Analysis of Current Account
Imbalances in Southeast Europe 10
Chapter 2 Trade Trends and Patterns and Labor
Competitiveness 25
Introduction 25
Trends and Direction ofTrade in SEE countries 27
Composition of Trade 39
Global Production Sharing Networks and FDI 42
Labor Costs and Competitiveness 48
v
vi Contents
Chapter 3 Deepening Integration 65
Introduction 65
Accession to the WTO and MFN Tariffs 66
The European Dimension 67
Deepening Integration at the Regional Level 69
Chapter 4 Services as an Engine of Growth: The Regional
Dimension of Trade in Services 87
Introduction 87
Trade in Specific Services Sectors 90
Conclusions 111
Chapter 5 Attracting Private Investment 117
Introduction 117
Business Perceptions 119
Case Studies 124
Key Bottlenecks: Human Development, Quality of
Telecommunications, and Power Availability 126
The Regional Institutional Dimension 136
Conclusions 139
Annex 143
Bibliography 167
Index 173
Boxes
1.1 Exchange Rates in the Western Balkans 11
2.1 Network Trade Helps, but Is Not the only Source of
Skills and Technology 45
2.2 Eastern Europe Hit by Shortage of Workers 49
3.1 Regulatory Convergence and AcquisCompliance 68
3.2 CEFTA and Other Regional Agreements in SEE 70
3.3 Intraregional FDI Flows in the Western Balkans 77
3.4 The Privatization of Zenica Steel Mill and its Impact
on Regional Supply Chains 77
4.1 Private Sector Airlines: Grupo Taca (Central America)
and Sky Europe (Slovak Republic) 95
4.2 Significant Investments Have Occurred in the Telecom
Sector in the Western Balkans 99
Contents vii
4.3 National Sovereignty and Cross-Border Institutions 102
4.4 The Knock-on Effects of Erste Bank’s Entry into the
Serbian Market 107
4.5 Temporary Worker Agreements: Win-Win 110
5.1 Higher Quality Helped This Romanian Firm to Expand
Clothing Output 125
5.2 Privatization and EU Prospects Have Seen Contrasting
Fortunes of Leskovac (Serbia) and Stip (FYR Macedonia) 127
5.3 Availability and Cost of Labor is Manifesting
Itself Differently in Different Countries 128
Figures
1.1 SEE: Change in Current Account Deficits and Change
in Investment Rates 16
2.1 Export Coverage of Imports and Share of Exports in
Total Trade, Bulgaria, Croatia, and Romania (BCR)
and SEE5, 1996–2005 28
2.2 Share of Exports Destined for EU27 in 2005 35
2.3 FDI and Exports in SEE, 2005 48
3.1 Logistics Perception Index and GDP Per Capita (PPP) 76
4.1 Mobile and Fixed-line Penetration Rates in SEE 98
5.1 SEE Countries: Key Gaps in Perceptions of Business
Constraints Compared with the Slovak Republic, 2005 120
5.2 SEE Countries: Key Changes in Perceptions of
Business Constraints Compared with the Slovak
Republic, 2005 121
5.3 Private Sector Share in GDP (%) vs. Skills and
Education Constraint, 2005 129
5.4 Average Rank on Mean Achievement in Six Tests vs.
GDP per Capita, 2003 and Gross Secondary
Enrollment Ratios 131
5.5 Logistics Perceptions Index 2006: Overall Rank vs.
Infrastructure Rank 132
5.6 High Payoffs to Telecom Quality Improvement 134
5.7 Cost of a Ten-minute Call from the United Kingdom 134
5.8 Electricity Consumption Per Capita (Coefficient of
Variation, 1994–2004) vs. Electricity Production
Per Capita, 1994–2004 Average 136
viii Contents
Tables
1.1 Key Economic and Social Indicators, SEE and Slovakia 2
1.2 Key Indicators, Montenegro and UNMIK/Kosovo 9
1.3 Current Account Balances 13
1.4 SEE: Exports of Goods and Services 14
1.5 Net Inflows of Foreign Direct Investment 15
1.6 Gross External Debt 16
1.7 Gross National Savings 17
1.8 Public Savings 17
1.9 Private Savings 18
1.10 Gross Domestic Investment 20
2.1 Growth of Goods and Services Trade in SEE 28
2.2 Developments in Trade in Goods and Services in SEE
Countries, 1996–2005 30
2.3 Exports and Total Trade in Goods and Services as
Percent Share of GDP-PPP (Openness) by SEE
Country, 1996–2005 31
2.4 Comparisons of Applied Tariff Rate
(Simple Average in %) on SEE Imports by Product Type 33
2.5 Intraregional Merchandise Exports and Imports by
SEE7 Country, 1996–2005 36
2.6 The Structure of SEE Exports by Major Product
Category, 1996 and 2005 40
2.7 Trade in Parts and Components by SEE Country and
Other Selected Comparators, 1996–2005 43
2.8 Stock of Foreign Direct Investment (FDI) by SEE
Country and Other Selected Comparators, 1995–2005 47
2.9 Trends in EU27 Market Shares of Apparel and Clothing
by SEE and Other Selected Countries, 1996–2005 50
2.10 Gross Labor Costs 52
2.11 Alternative Sources for Gross Wages in Industry 54
2.12 Ratios of Cost of Labor Relative to Albania, 2005 54
2.13 Index of World Bank Wages 55
2.14 “Returns” to Skills 57
2.15 Wages and Capital- and Skilled-Labor Intensity of
Exports 58
2.16 Employment Protection Legislation, 2007 59
3.1 Doing BusinessData for Trading across Borders 74
3.2 Clearance Times for Import Shipment 75
3.3 P&C Trade to Total Manufactured Exports 76
Contents ix
4.1 EBRD Reform Indicators and Selected Infrastructure
Performance Data 92
5.1 Share of Firms Reporting Constraints in Infrastructure,
Human Development, and Land Markets 130
5.2 Telecom Indicators in SEE and Comparators 135
5.3 Investment Reform Index (IRI) Scores for Education
and Training of Workforce 138