State Department leadership gives Balkans another chance
France and Serbia have signed a landmark deal to buy three billion euros worth of Ra-fale fighter jets from Dassault. This is the largest ever purchase of military equipment for a Balkan country. It is also a major shift from the past, when Serbia relied exclusively on Russian arms supplies. With the war in Ukraine, these are becoming less and less available. Moreover, Serbian President Aleksandar Vucic has long frustrated European politicians by his disinterest in getting involved in sanctions against Vladimir Putin’s regime. This move is an indication of a change in Serbia’s policy towards its European partners.
“Our economic relations have indeed revived. And we can go further,” Emmanuel Macron said after visiting A. Vučić in Paris. Discussions on defence contracts and energy projects “are a sign of political trust and a desire to expand our relations”. The Serbian official noted a change in French rhetoric: “Before, Paris was not particularly interested in this part of Europe. But that has changed,” the Financial Times reports. “The Rafale is an important milestone, but it is not the whole story,” he writes.
Although Serbia applied to join the European Union in 2009 and negotiations for accession began in 2014, there has been no real progress in a decade. So far, 22 out of 35 chapters have been opened, but only two have been closed. Despite the fact that the Serbian Government identifies EU membership as its strategic goal. Currently, 40 per cent of Serbs support it. However, the military agreements may be the first step towards faster membership of the European Union. A similar vision applies to the other Balkan countries, which may find that there is no relevant alternative to the EU.
Encouraging trade with the Balkans
The accession of these countries to the Union would also be a significant opportunity for Slovak companies, which would open up a new, larger market. The potential is great even without the current EU membership, it is only exploited to a small extent. “The current state of trade does not reflect the efforts and resources we have devoted to the Western Balkan countries. These countries are our political priority, but we have not been able to make an economic impact so far, with a few exceptions. That is why my colleagues and I have agreed that we will try to increase the interest of Slovak entrepreneurs in the Western Balkans. If we fail to do so, we will have to reconsider our very active presence in the region,” said Rastislav Chovanec, State Secretary of the Ministry of Foreign and European Affairs of the Slovak Republic.
That is why at the end of March the Export Club discussion forum on the Western Balkans was held at Vígľaš Castle, organised by Eximbanka SR with the active participation of representatives of the Ministry of Foreign Affairs, the Slovak Agency for Investment and Trade Development and the European Bank for Reconstruction and Development. The aim of the event was to provide Slovak companies with an overview of opportunities for their expansion into the Western Balkan territories.
“Personally, I see a lot of room for Slovak companies in countries with which we share a similar past and geographical proximity, such as Serbia or Bosnia and Herzegovina, in sectors such as engineering, food, energy, real estate and development or digital and innovative technologies,” continued R. Chovanec. “Entrepreneurs in particular have cited the Western Balkans as a territory that interests them and in which they would like to potentially do business.”
The reality, however, is not satisfactory. “We have an embassy and an economic diplomat with a shared agenda in every country in the region. This is not exactly the norm. We are interested in intensifying relations and contacts with these countries, which is why we are planning to send separate economic diplomats to Belgrade and Sarajevo. Their role will be to raise awareness of the opportunities to operate in these countries, but also to help companies to establish themselves in these markets. We also plan to increase the intensity of B2B business seminars and missions,” Chovanec added.
The Slovak government is focusing on two countries in the region. In addition to Serbia, it is also Bosnia and Herzegovina. These are countries with which Slovakia shares a similar past, language and values. At the same time, Serbia is home to a significant Slovak minority. These facts indicate that the potential for expanding relations between Slovakia and Serbia is great. At present, there are basically only a few large investments in energy projects in the country from the Slovak side.
Trade with Serbia
Last year, Slovakia exported $563 million worth of goods to Serbia, which is less than one percent of its exports. Gro exports, two hundred million, are electrical equipment, 51 million are mineral products and distillates, 42 million equipment and machinery, 37 million plastics and 23 million iron and steel.
Serbia exported slightly more, $673 million worth of goods, accounting for more than two percent of its exports. The basis of Serbia’s exports is electrical equipment worth a total of 370 million euros, followed by railway trainsets worth 57 million, plastics worth 31 million and other commodities worth 22 million euros.
Serbia has an increasingly close trade relationship with other Eastern European countries, especially Hungary. Slovakia has the smallest trade balance of the V4 countries, with less than a two per cent share.
Trade with Bosnia and Herzegovina
A positive feature of the last three years has been the increase in exports to Bosnia and Herzegovina, where Slovakia exports mainly electrical and electronic equipment worth 48 million euros and mineral oils and distilled products worth thirteen million euros. The main export commodity of Slovakia to this country is automobiles. Reciprocally, Slovakia imports from Bosnia and Herzegovina mainly footwear worth EUR 43 million and paper and paper products worth EUR fifteen million.
Nevertheless, trade is low, which is also true for the other V4 countries. In none of them did exports exceed three per cent of the total. With Slovakia, it is only at the level of one per cent.
Bosnia and Herzegovina is a significant growth market, with GDP growth reaching 42 per cent over the last decade. Slovakia grew by 22 percent in the same period. Yet it is still a relatively poor country, with GDP per capita in 2022 at roughly $7,600. By comparison, Slovakia’s was $21,300.
Support from Eximbanka
“The forum in Vigľaš was important from an informational point of view. Both active and potential exporters had the opportunity to hear detailed information about the market, the opportunities offered by Eximbank within its instruments, they had the opportunity to personally communicate and consult their questions with our colleagues working directly at the embassies. I believe that they will translate this experience into the implementation of activities in the Balkan countries,” said R. Chovanec.
How to apply in the region? It is important to have a reliable local partner who can help companies navigate local legislation and knows the market, as this region is quite specific and very difficult to navigate. Eximbanka can help with the rest, as it has tools and opportunities to help exporters interested in the Balkans with financing, guarantees and insurance support.
“Strengthening cooperation and mutual synergy of state instruments is one of the visions with which I took the helm of Eximbank. Slovak production already has a very good reputation and position in the Western Balkans. I am convinced that also thanks to the information gained at the Export Club, we will be able to successfully build on the tradition of Made in Slovakia,” said Rastislav Podhorec, CEO of Eximbanka SR.
Source: TREND