Western Balkans Copyright © 2006 the World Bank Group/MIGA 1818 H Street, NW Washington, DC 20433
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Benchmarking FDI Opportunities Former Spanish Sahara Investment Horizons: Western Balkans Copyright © 2006 The World Bank Group/MIGA 1818 H Street, NW Washington, DC 20433 All rights reserved Manufactured in the United States of America May 2006 Available online at www.ipanet.net/investmenthorizons_wbalkans For more information, contact: MIGA Operations 1818 H Street, NW Washington, DC 20433 t. 202.458.9309 f. 202.522.2650 European Investor Outreach Program (EIOP) Strauchgasse 3 A-1014 Vienna, Austria t. +43 (1) 535 53 82-2115 f. +43 (1) 535 53 82-5115 [email protected] The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to MIGA Operations at the above mentioned address. Investment Horizons: Western Balkans, a study of foreign direct investment costs and conditions for two industrial sectors in five countries, was conducted by the Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group. The study was designed in conjunction with the ongoing European Investor Outreach Program (EIOP), a MIGA initiative focused on the Western Balkans and funded through a grant from the Austrian Government. MIGA was established in 1988 to promote the flow of private foreign direct investment to developing member countries. MIGA offers political risk insurance coverage to eligible investors for qualified investments in developing member countries. MIGA also offers technical assistance programs to develop and implement effective strategies for attracting and retaining foreign direct investment. This hands-on technical assistance focuses on three primary areas: dissemination of information on investment opportunities and business operating conditions in developing member countries through online services; capacity building of the organizations and institutions involved in the promotion of foreign investment; and investment facilitation activities supporting the efforts of developing countries to identify and attract investment. Investment Horizons: Western Balkans Benchmarking FDI Opportunities A Study of Foreign Direct Investment Costs and Conditions in Automotive Component Manufacturing and Food/Beverage Processing in Five Countries May 2006 One in a Series of Sector Analyses The Multilateral Investment Guarantee Agency is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, site selection, or other professional advice or services, and shall not be responsible for any loss sustained by any person, company, or organization that relies on this publication as a substitute for such professional advice or services. Before making any decision or taking any action that may affect your business, you should consult with a qualified professional advisor. Foreword Developing economies such as those in the Western Balkans are particularly dynamic, which can mean rapidly changing costs and conditions for investors. This benchmarking study reflects the environment for investors during the period of data collection in 2005. MIGA has sole responsibility for the interpretation of this data. Updated information related to country-specific economic data and developments in the investment climate may be obtained through the investment promotion intermediaries in the region, as noted below. MIGA is especially grateful to its agency partners in the European Investor Outreach Program for their comments and insights related to the publication of this study. For more information, contact: Albania: www.albinvest.gov.al Bosnia/Herzegovina: www.fipa.gov.ba Croatia: www.apiu.hr Macedonia: www.macinvest.org.mk Montenegro: www.mipa.cg.yu Serbia: www.siepa.sr.gov.yu INVESTMENT HORIZONS: WESTERN BALKANS i ii INVESTMENT HORIZONS: WESTERN BALKANS Table of Contents Executive Overview ........................................................................................ 1 Project Background ....................................................................................... 1 Regional Perspective on South East Europe....................................................... 2 The Automotive Components Industry ............................................................. 3 The Food and Beverage Processing Industry ..................................................... 4 Country Analyses by Sector............................................................................ 4 CHAPTER I: The Study ...................................................................................11 Introduction............................................................................................... 11 Background ............................................................................................... 11 Objectives ................................................................................................. 12 Report Structure......................................................................................... 12 CHAPTER II: Regional Background ................................................................15 Political and Economic Transformation ........................................................... 15 Recent FDI Trends in South East Europe ........................................................ 16 The Automotive Components Industry ........................................................... 17 The Food and Beverage Processing Industry ................................................... 24 CHAPTER III: Country Findings .....................................................................31 Introduction............................................................................................... 31 Albania...................................................................................................... 31 Bosnia and Herzegovina............................................................................... 35 Croatia...................................................................................................... 38 Macedonia ................................................................................................. 41 Serbia....................................................................................................... 43 Montenegro ............................................................................................... 46 Appendices....................................................................................................49 Appendix 1: Acronyms and Abbreviations .....................................................50 Appendix 2: About EIOP ................................................................................52 Appendix 3: Methodology ..............................................................................54 Appendix 4: Tables of Findings—Costs ..........................................................56 Appendix 5: Tables of Findings—Operating Conditions ..................................59 Appendix 6: Resource Tables on FDI .............................................................63 Appendix 7: Data Definitions and Sources.....................................................67 INVESTMENT HORIZONS: WESTERN BALKANS iii FIGURES Figure 1: Automotive Component FDI Projects in Europe, 1997 to 2004.............. 17 Figure 2: Destination of Automotive Component FDI Projects, by Region, January 2002 to February 2005 .......................................................................... 20 Figure 3: Destination of Automotive Component FDI Projects, by Country, January 2002 to February 2005 .......................................................................... 20 Figure 4: Source of Automotive Component FDI Projects, by Country, January 2002 to February 2005 .................................................................................. 21 Figure 5: Operating Cost Index, Automotive Components Sector, Countries in the Western Balkans and Eastern Europe ....................................................... 22 Figure 6: Average Labor Costs in Manufacturing Industries .............................. 22 Figure 7: National Unemployment Rate in Western Balkan Countries, 2004 ........ 23 Figure 8: Food/Beverage Processing FDI Projects in Europe, 1997-2004 ............. 24 Figure 9: Destination of Food Processing FDI Projects, by Region, January 2002 to February 2005 ...................................................................................... 27 Figure 10: Destination of Food Processing FDI Projects, by Country, January 2002 to February 2005 .................................................................................. 27 Figure 11: Source of Food Processing FDI Projects, by Region, January 2002 to February 2005 ...................................................................................... 28 Figure 12: Operating Cost Index, Food Processing Sector, Countries in the Western Balkans and Eastern Europe.................................................................... 29 TABLES Table 1: Automotive Component FDI Projects in the Western Balkans and Eastern Europe, 1997 to 2004 ............................................................................ 18 Table 2: Examples of Automotive Component FDI Projects in the Western Balkans, 1997 to 2004........................................................................................ 19 Table 3: Food and Beverage Processing FDI Projects in the Western Balkans and Eastern Europe, 1997 to 2004................................................................. 25 Table 4: Examples of Food and Beverage Processing FDI Projects in the Western