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BERLIN PROCESS SERIES / BERLIN PROCESS / 2 / 2017
Under these conditions, WB6 SME can expand and diversify existing production base in order
to increase their offer and improve the quality of their product(s). They will be able to invest in
local human resources and modern technology to increase the added value of their production
activity, contributing in upgrading welfare and social cohesion in WB6. This foresees “smart
specialisation strategies”55 in key economic production sectors in WB6 and making them
competitive in terms of cost and quality in compliance with EU standards.
The current challenges that the WB6 enterprises face regarding their inclusion in EVC are weak
networking with their EU pairs, low knowledge of their market in the EU, low reputation regarding
market environment and contract enforcement in WB6, lack of highly skilled workforce and the
technology and innovation trends. The existing trade-infrastructure and connectivity obstacles
remain key factors in determining the costs of sourcing from and supplying to European markets.
The Connectivity Agenda with its investments in hard and soft measures and the economic
reform plans engaged under the Berlin process, can play a vital role in tackling those challenges
and bringing WB6 business closer with their EU peers. To achieve this, the economic policy in
the WB6, and especially the design of industrial policy, should create an enabling environment
for EU companies to identify suitable local firms and establish long-term relations with them.
This support may take the form of public aid covering the “sunk costs” that an EU company
incurs when exploring and investing in a potential WB6 value chains.
WB6 governments can support the participation of SMEs in EVCs by encouraging the
development of linkages with EU-based companies, fostering their production capacity and ability
to innovate, and facilitating the adoption of EU standards. WB6 local firms must be exposed to
and supported to go beyond market-bound contracts and establish long-term relationship with
their EU partners. This kind of business behaviour change is very difficult especially for local
SME - or even micro enterprises - that need to adopt modern management and contracting
rules. WB6 SMEs should be encouraged to invest in their workforce development in line with
technical skills needed to make use of latest production technologies. This will allow them to set
and implement new regulatory frameworks that would standardize quality of production in full
compliance with EU requirements.
WB6 countries should no longer compete on low cost labor-intensive processes only, but look
ahead and further develop to supply ready-made final products under own in-house brand or
manufacture for other private labels. They should increase the reciprocity in their trade flows
with the EU moving up the value chain. This will also impact directly the level of income, and
finally the support and commitment of local communities and citizen in the WB6.56
Many of those challenges can be tackled through Western Balkans Enterprise Development
and Innovation Facility57 (WB EDIF). WB EDIF offers different EU financial instruments IPA or bilateral - promoting the scoping, presentation, establishment of contracts, technical
assistance, and follow up of business partnerships. To support the local production, Vienna
Summit conclusions already pinpoint a number of potential instruments, such as special
economic zones, cross-border economic zones, export processing zones, industrial parks, etc.,
in addition to the prospective instruments related to the policy areas of transport, energy, trade,
ICT, industry, access to finance and mobility of professionals. It is high time that industrial policy
takes its place also in the WB6 ERP.
European Commission, “Report from the Commission to the European Parliament, the Council, the European
Economic and Social Committee, and the Committee of Regions on the Implementation of EU macro-regional
strategies”, SWD(2016) 443 final, COM(2016) 805 final, December 2016, available at: http://ec.europa.eu/regional_policy/sources/cooperate/macro_region_strategy/pdf/report_implem_macro_region_strategy_en.pdf
56
For a comprehensive analysis of business interconnections through value chains, see “Interconnected economies: Benefiting from global value chains”, Synthesis report, OECD, 2013.
57
For more information on Western Balkans Enterprise Development and Innovation Facility, please see: http://
www.wbedif.eu/about-wb-edif/
55
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