21 June 2021
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Primary focus of the Western Balkan countries should be on lower taxes in short term, better infrastructure in medium term and quality education and health in the long term, says Gavin Serkin, emerging markets specialist and founder and managing director of Frontier Funds Media & Intelligence.

According to Serkin, frontier markets – developing countries which are too small, risky, or illiquid to be generally considered an emerging market – are yet to be discovered by bigger investors despite offering great potential and business opportunities for investments. These include countries such as Romania, Argentina, Nigeria, Egypt, and Saudi Arabia.

Although frontier markets represent almost a quarter of the world’s territory and are populated by one fifth of the world’s population, »they generate only 8% of the world’s GDP,« says Serkin.

Some regional countries like Serbia and Bosnia and Herzegovina in a way fit the definition of the frontier markets, says Serkin. One of the reasons is lack of stock exchange liquidity. “There is not a diversity of stocks you can pick from when you have a bigger scale available, so that you could choose stocks from different sectors, like, for example, in Romania, which has the biggest market in the wider Balkan region. There are also a lot of other industries that should be represented in the stock exchange, but so far haven’t managed to do it yet. That’s where Serbia and Bosnia and Herzegovina fit the definition of the frontier markets.”

There are countries in the region that represent successful stories, such as Slovenia, Serkin says, pointing to a solid and well-established partnership between the country’s recognisable solutions for German car producers and many other industries abroad.

Countries in the Western Balkans should follow Slovenia’s example, Serkin suggests. “Opportunities come in when a country starts focusing on going up a value chain, which is always a goal for a developing country from the frontier market. It is the same with, for example, the food industry. For instance, production of coffee beans is necessary but the real business value comes from the browning and packaging. The same is with car markets. The money doesn’t come from putting car parts together but from branding and delivering the final product.”

Serkin adds there is plenty of room for improvement in the region, particularly in attracting more foreign direct investments. He argues that particular solutions need to be delivered by the governments, especially in the region’s less developed countries. “It comes down to low taxes and incentives, and governments should find a way to deliver that. They should consider the implications of these type of measures in the long term. It is also important to strengthen the institutions of democracy and to provide a proper level of education and a good health system. When businesses are considering where to establish their next base, they tend to take into account a well-educated and healthy population.”

But there is another aspect to attracting investors, important as much as others, says Serkin: workforce efficiency. “You can have the best tax system in the world, but if companies are getting more efficient workers in the neighbouring country, they will go there.”

When considering proper measures aimed at attracting foreign investments and building appealing business environment for foreign companies, Serkin’s advice to the governments would be to think about short-term and long-term policies.
Gavin Serkin, business analyst and emerging market specialist 

“Short term policies are the ones that make sure you are competitive with other countries. It is about taxes, efficiency of processes, and bureaucracy which should not be strangling companies and processes. Long term policies should include infrastructure, and then health and education.”

Adriatic Journal


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