The Balkan Region: Europe’s workshop

In the wake of the combined EU Recovery Fund and previously-communicated EU Cohesion Funds for 2021 – 2027, the likes of Bulgaria and Croatia will receive funding equivalent to 35% of their 2019 GDP, while Greece, Romania and Slovenia will get support amounting to 27%, 26% and 17% of their 2019 GDP respectively. This means an additional 2.5% to 5% of GDP annually, a number that will be extremely supportive for the mid-term economic outlook, particularly when combined with pandemic induced supply chain compression.

European business must take stock of its supply chain options.

There are a few jurisdictions to consider, like heading down to Turkey or across to Northern Africa. The very latter is likely to be a viable option but only in conjunction with developing other routes in the Western Balkans. The data supports this as being worth much more than a passing consideration.

If one takes the comparable World Population Review¹ education rankings data for maths and science² it’s clear the Western Balkans represents, on average, 89.1% of the top EU³ comparables making the regions workforce more than capable.

The World Bank’s Human Capital Index⁴ measures what a child, born today, can expect to attain by their 18th birthday with 1.0 being the highest score. The point of the exercise is to see what countries are best at mobilising the economic and professional potential of their populations. Using the same comparables, the Western Balkans rank 0.65 against the EU at 0.78 which means, again, the region is very close to its European neighbours when it comes to its ability to develop its labour pools.

The most telling is the comparable cost. The average monthly salary⁵ for the Western Balkans is €1,325 against €4,023 for the European sample set.

The infrastructure costs (land, rents, utilities etc) also compare very favourably and, in most cases, are at the lower end of the cost quartile.

So basically, if Europe is serious about achieving strategic economic autonomy in practical terms, the Western Balkans have to be considered. This is before consideration is given to reducing the worlds carbon footprint due to in part to extended supply chains.

How can Greenhouse help?

Greenhouse has been operating across Europe’s emerging and developing economies for more than 13 years and has, in the process, developed deep commercial and political networks across these markets where proactive, localised transaction and stakeholder management is critical to success.

Greenhouse can quickly understand and make comprehensive sense of structural and cultural complexity, conduct sound critical analysis to determine optimal solutions with the capability to then oversee implementation.

The scope of some of the supply chain services we offer covers the following;

• Requirements analysis
  We will take the time to understand your business needs that will cover subjects like your strategic requirements, key business plan objectives, local process and skills requirements.

  If the interest is direct establishment, the scope would be extended to infrastructure and utility needs and the extent to which any operational or environmental permitting will be required. Greenhouse will also give consideration to an implementation plan and timetable in this phase.

  These are just the headlines as there will be a quite a lot of detail that will need to be pulled together and budgeted that will collectively form the report, or business plan, that you will need for a final make or buy decision.

• Materials supply chain
  This forms part of the initial report as there may be an opportunity to source raw or intermediate materials from local or regional sources, if your interest is direct establishment. This will also need to be considered when looking at supplier sourcing to understand the extent of any potential supply constraints.

• Supply chain partner research and due diligence
  Should a local operational partner be required, Greenhouse will conduct the initial search and analysis. This covers both direct establishment or supplier sourcing.

  An important component of this process involves a comprehensive due diligence exercise on the prospective supply chain partner management. This isn’t necessarily meant to replace your own process but provide pathfinder from which you can, if needed, conduct some deeper due diligence using other more specialist services.

• Incentives and grants
  The region is awash with localised tax incentives and grants for businesses setting up manufacturing or assembly operations across the region. There are also a number of state owned or controlled banks that provide various forms of debt and grant capital. This is before looking at various European Union incentives, particularly if this is due to redirecting supply-side inputs from Asia.

  In the case of a chosen supplier needing to invest in additional capacity, Greenhouse will help them secure the requisite equity, debt or grant funding using your contracted off-take as its basis.

• Implementation
  This will mostly be applicable to direct establishment where interacting with various contractors, government agencies, funding sources, corporate establishment process etc will be needed. This will also include identifying and managing local legal and tax advisors.

• Stakeholder management
  Post implementation will need to include an ongoing management and monitoring of various stakeholder relationships that you regard as important. This is critical if you’ve elected to do a direct establishment but should be no less important if you’ve contracted with a third-party as monitoring of activity or issues that could affect supply continuity is critical.

• Corporate Social Responsibility
  There is likely to be a need, as some point, to consider your CSR obligations. Greenhouse believes in developing and implementing CSR that delivers economic sustainability and we have not-for-profit foundation that is dedicated for the design, structuring and delivery of these programs.

The nature and scope of these services will vary as it depends on whether you’re aiming to implement a direct establishment strategy or strategic supplier sourcing. We can help with both which can include migrating manufacturing capacity across jurisdictions.

If you would like some help in reviewing your options together with implementation support, please don’t hesitate to contact us on hello(at)greenhouse-international.com.

References

• ¹ World Population Review: https://worldpopulationreview.com/countries/education-rankings-by-country/
• ² The ensuing analysis of Western Balkans countries of Albania, Bulgaria, Croatia, Montenegro, Romania, Serbia, Slovenia and Slovakia were compared to France, Germany, Ireland, Finland, Spain, Sweden, Portugal, United Kingdom.
• ³ Finland, the highest scoring state in the EU, ranks third behind China and Hong Kong
• ⁴ World Bank Human Capital Project: https://www.worldbank.org/en/publication/human-capital
• ⁵ Sources for average monthly salary varied: https://destinationscanner.com, https://tradingeconomics.com