This year up until now has been a tumultuous one to say the least. What should have been the mark of a new, promising decade instead starts off with a virus gripping the world. It has brought the gears of our economies to a grinding halt, impacted our healthcare in a way that hasn’t been seen in generations and changed the way we stay in touch with each other. The last three months have been difficult months for large parts of the world, and the expectation is that the situation will not return to normal for some time to come. However, every crisis also brings new opportunities along with it. How goes the saying: never waste a good crisis? It is interesting to examine the role of the Western Balkans in the global economy in the context of this crisis, and how this might change in the aftermath of this crisis.
One of the big things which we have noticed with this crisis is how globalised our world has become. Obviously, this isn’t a bad thing in and of itself. Globalisation and a more connected international world has brought societies everywhere more prosperity at a faster rate than ever before. Knowledge, goods and people are moving around all the time, and we learn from each other constantly. However, with the current crisis, when a lot of this – especially the movement of people – comes to a crashing halt, we notice the impact that this can have on society. Globalisation has brought us a massive amount of international interdependence, and when the exchanges suddenly stop, we start ending up with either shortages or surpluses all over the world. Images of full wine cellars which can’t be exported anymore because demand totally collapsed, potatoes and other foods that are dumped on the market, the US oil price turning negative for the first time in history, and the list goes on.
In history, we regularly had crises where a mismatch between supply and demand played a major role in shaping the crisis. However, the unique thing about the current crisis is how abrupt the change was and how widespread the impact is. Countries took far-reaching measures and went into lockdown in a matter of days, and people had to change the way they went about their daily activities instantly. Everybody is feeling the impact of the corona crisis, and this is why we should take the time to consider the underlying mechanics of society and our globalised world which have become painfully clear the last few months.
In our globalised world, countries in the developed world have become used to production lines stretching the globe. With plastic products being made in China, customer care being done in India and fruits hailing from South America, international transport and offshoring has become commonplace. I would argue that our current crisis shows why it is important to have strong relations with your neighbours and to take advantage of opportunities closer to home. It would be very logical if this crisis would be followed-up by a ”local pull-back”, which would force companies and consumers to look towards options closer to home.
A local pull-back after the corona crisis would be the perfect time for the Western Balkans to show why they are an attractive alternative to the usual suspects like China and India. The region offers a lot of production capabilities and highly educated people which, if organised in the right way, could become real replacements for the usual suspects. This is also the reason why we always argue that investors should start looking towards the Western Balkans, as that is a part of the world has a potential for growth that is not found that easily anymore. There are similar cost-competitive advantages to be had, paired up with the main advantage of it being a lot closer to the European countries who now rely a lot on faraway countries for certain products.
It would be interesting to see how this dynamic develops itself for the coming few months. We have seen that the region has been taking steps in making itself more attractive recently, something we have discussed on our podcast The Balkan Talks in ”S2E6: Reputation of the Western Balkans”. It was also hopeful to see that the Western Balkan countries took decisive action during the start of the corona crisis, which shows that if the energy that is present gets organised in the right way, a lot is possible. Now is the time to become a part of this energy and play a role in the region’s future. Choose for ”nearshoring” in the Western Balkans instead of offshoring it far away.