Balkan businesses may hold key to stable future

Coming to an Ikea near you: A Swiss investor saw potential in a Bosnian furniture manufacturer, Standard, that is expected to grow 15 per cent in 2009 despite the economic downturn

The western Balkans are still not as prosperous as before the wars of the 1990s, but sweeping reforms are starting to make the region more interesting for investors.

This content was published on November 6, 2009 - 21:56

The financial crisis has created a "high noon" scenario for Albania and the former Yugoslavia. Whether they prosper or crumble depends largely on how well the region's economic potential is developed, experts say.

Those were key topics at a forum in Bern earlier this week, when Swiss Foreign Minister Micheline Calmy-Rey joined business owners, bankers, cultural leaders and investors from around Europe to discuss problems and solutions in the west Balkans.

The message: Tapping into the region's young workforce and wealth of natural resources is not only key for stability, curbing nationalism and reintegrating the Balkans into the European fold, but Switzerland also remains committed to supporting the transition.

"This region is no longer making headlines because of conflicts, destruction or death," Calmy-Rey said. "That does not mean that these countries no longer need support. The path they have chosen - toward European accession, a calling in the entire region that Switzerland fully supports - is still long and difficult."

Corruption, stifling bureaucracy and unemployment plague much of the Balkans, but burgeoning regional trade, improved training centres and an increased capacity to reach new markets are creating opportunities especially for small- and medium-size businesses.

High noon

In the nearly 15 years since the Bosnian war ended – and a decade after Kosovo - the Swiss Agency for Development and Cooperation (SDC) and the State Secretariat for Economic Affairs (Seco) have worked to foster growth in the region, where the average per capita GDP is less than a tenth of Switzerland's.

Next year the SDC will spend upwards of $50 million (SFr50.86 million) on projects to promote that growth.

The agencies have also contributed Swiss expertise in financing small start-ups and helping local communities to streamline wildly varying and cumbersome laws.

"Balkan regulations had become something like a pool that you don't pay attention to for a long time that has a lot of debris in it when you come back," said Margo Thomas, a regional programme coordinator in Serbia for the International Finance Corporation. "We need to clean that water with good, quality regulation and then set up a filter to make sure any new regulations are also of a good quality."

The situation has grown more severe with the financial crisis, said Hido Biscevic, secretary general of the Regional Cooperation Council based in Sarajevo.

"I personally have no doubt that it really is high noon for southeastern Europe as this current crisis must be turned into an opportunity to respond to strategically important challenges," he said.

"The choice before a large segment of the region is starkly simple. It is a choice between durable stability and European Union inclusion or turning parts of the region into a prolonged crisis spot that will affect us all."

Success story

Despite the problems – 50 per cent unemployment in some regions, a thriving grey market, fragile laws and poor environmental standards – efforts to create a more business-friendly climate are slowly starting to pay off.

Companies can now get permits to build offices and factories more quickly in parts of Serbia. Bosnians are buying Serbian goods once again. Macedonian wine is distributed all over. Sea ports have been upgraded to handle an increase in goods flowing through the Balkan corridor that links east with west.

One guest speaker, Edin Dacic, is a Swiss investor who has capitalised on the potential of the region.

"One big advantage is that a lot of things can be done in a simple catching-up process," he said. "You don't have to reinvent the wheel. You can copy and paste what you've seen work in other places."

Dacic, a Swiss born in Serbia, founded an investment group called Daccomet in Zurich that started looking at businesses to finance in Croatia and Bosnia.

In 2000 his company started pouring upwards of €5 million (SFr7.5 million) into a furniture company called Standard, about 50km outside of Banja Luka in northern Bosnia. At the time the company had 60 employees but zero turnover. "It was standing still," he said.

Ten years later, Daccomet owns about 85 per cent of Standard, which now hums with 250 workers building CD racks, coffee tables and drawers for multinational furniture giant Ikea. This year Standard expects to grow about 15 per cent compared to 2008, with roughly €8 million in turnover. By 2010, new investments in machinery should boost turnover another 20 percent, he said. As for a profit, Dacic says the investment is still "long term".

"There were a lot of problems at first," he said. "But we knew how to fix them and saw the potential. We consider ourselves a success story."

Tim Neville,

In brief

The 2009 Annual Conference on Cooperation with Eastern Europe centred on the theme, Entrepreneurship and Innovation in the Western Balkans. It was held at the Westside centre in Bern.

Speakers included Swiss Foreign Minister Micheline Calmy-Rey, the director general of the SDC, Martin Dahinden, Hido Biscevic, general secretary of the Regional Cooperation Council, and Beatrice Maser, head of economic cooperation and development at Seco.

The event was moderated by Susanne Brunner of Swiss Radio DRS.

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Key facts

The west Balkans: Albania, Serbia, Montenegro, Kosovo, Macedonia, Croatia and Bosnia and Herzegovina.
150 million people live in the region
330,000 people from the west Balkans live in Switzerland
GDP per capita in Switzerland: $59,475
GDP per capita in west Balkans (average): $3,827

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Talking points

Emina Ganic, a Bosnian who started the country's largest film festival and runs a foundation tied to Sarajevo's first private university, argued that all countries of the former Yugoslavia must enter the European Union more or less at the same time to avoid exacerbating already large economic disparities and creating more tension.

Mobility and free movement are critical for reintegration into Europe, several panelists argued.

"Before the war, I thought I was a European," Ganic said. "After the war, suddenly we were on an island called the Balkans. We want to reclaim our identity."

But be careful, argued Edin Dacic, a Swiss investor who was born in Serbia. "The tendency is to go back to nationalism," he said. A thriving grey market is also undermining cooperation and forcing businesses to work for politicians instead of the other way around.

Despite that, the region has made "massive improvements" in creating a better business environment, said Beatrice Maser of Seco. Governments need to encourage start-ups that create jobs for young workers now forced migrate to find work.

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