Western Balkans with the largest inflow of greenfield investment

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In 2018, the Western Balkans recorded the largest inflow of greenfield direct investment (FDI) with the value of USD9.36bn in 2018, the highest amount since 2003, according to the fDi report

A green field investment is a type of FDI where a parent company creates a subsidiary in a different country, building its operations from the scratch. Despite the fact that Western Balkan countries have attracted significantly less greenfield FDI projects than rivals in the Central and Western Europe, the outcome of this region is very good, bearing in mind its share in global GDP, the fDi report says. The analysis states that, despite political tensions that have hit the region since the fall of communism, there has recently been a move towards greater regional economic integration and co-operation.

Despite remaining outside of the EU, the region attracted 147 greenfield FDI projects in 2018, the highest number of investments for six years, according to fDi. Serbia, the largest Western Balkan country by landmass and population, led the region in 2018 with a record of USD5.98bn invested into 105 greenfield projects.

Serbia accounts for most (70 per cent) Western Balkan greenfield projects in 2018, Bosnia-Herzegovina accounted for 11.6 per cent, despite attracting four fewer greenfield projects than in 2017, according to fDi. On the other hand, Montenegro performed well in 2018, attracting a record 11 greenfield FDI projects.

According to the latest fDi data, from June 2018 to May 2019, North Macedonia and Albania attracted USD184.4m and USD809.9m of inbound greenfield investment, respectively, as the number of inbound greenfield projects rose by 200 per cent and 80 per cent, compared with the same period a year earlier.

Serbia’s prime minister, Ana Brnabić, said at the June 2019 FT Western Balkans Forum: “In 2018, Serbia attracted EUR3.5bn in FDI, compared with EUR2.6bn in 2017. In the first five months of 2019, we attracted EUR1.2bn, which is 17 per cent better than in 2018. I think the future is bright as we continue with structural reforms.”

Despite political tensions that have plagued the region since the fall of communism, there has been a recent movement towards more regional economic integration and co-operation. Positive recent developments include North Macedonia’s name change under Zoran Zaev’s government which resolved a 28-year dispute with Greece, judicial reforms in Albania and structural reforms in Serbia.

The WB6 CIF, a private sector body which represents about 350,000 companies across the Western Balkans, is trying to spur foreign investment through focusing on particular success stories. WB6 CIF president, Marko Čadež hopes the organization will promote FDI into the region leading it to become “more and more part of the European economy and economic system”. Despite these efforts, EU membership for Western Balkan countries seems unlikely in the near future.

EIB plays the major role

The European Investment Bank (EIB) plans to grow its investment portfolio in the region, prioritizing competitiveness, innovation and climate projects, were announced by the EIB President, Werner Hoyer at the Poznań Summit for the Western Balkans. The EIB will continue to support projects allowing increased competitiveness of the Western Balkan economies, which improve transport connectivity links, but also better access to finance for entrepreneurs. Investment in climate will mean the EIB as Europe’s Climate Bank, will sustain the region’s energy transition to modernize infrastructure, reduce emissions, and diversify the energy mix to increase the security of supply.

During the Poznan Summit, the EIB signed its first urban regeneration project in the Western Balkans investing EUR11m in the Lana river project in the Albanian capital city of Tirana. The project will bring flood protection, public transport and climate change resilience for 65,000 citizens of the capital. A portion of the investment — grant of EUR2.4m — comes from the EIB’s Economic Resilience Initiative Fund (ERIF). Mr. Hoyer said: “Projects like this support towns and cities that are the engines of the Western Balkans’ economies and act as catalysts for creativity, innovation, and entrepreneurship throughout the region.”

In July in Belgrade, the EIB signed similar project under ERIF, the EUR1.1m grant with the City of Belgrade to support improvements in water and sewage system in Serbia’s capital. “We look forward to working with our partners in the Western Balkans to bring tangible improvements in the quality of life for all the citizens in the region,” concluded the EIB President.

ERIF supports countries in the EU’s Southern Neighborhood and Western Balkans to tackle migration and other challenges by stimulating investments in jobs creation and services. In doing so, the EIB initiative increases the economic and social resilience of target countries and helps them to better deal with future crises and shocks, while maintaining stronger growth.

Apart from receiving guarantees from the European Commission, ERIF benefits from individual donations of the EU member states, including Croatia, Italy, Luxembourg, Poland, Slovakia, Slovenia and the United Kingdom.

The EIB is the lead financier in the Western Balkans; the bank invested EUR8bn in the region since 2008. Only in 2018, the EIB support reached over 1000 SMEs, sustaining over 59,000 jobs. In 2018 alone, EIB committed the EUR1.1bn to the region.

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