The study on the transformation of the Western Balkan economies through attracting foreign investments and decarbonizing companies was conducted in 2024 under the Chamber Partnership Project by the Western Balkans 6 Chamber Investment Forum (WB6 CIF) and the six national chambers of commerce of the Western Balkans, in collaboration with the Vienna Institute for International Economic Studies (WIIW). The study was promoted at a conference in Budva, Montenegro.

The COVID-19 pandemic and ongoing geopolitical tensions have impacted global supply chains, creating opportunities for German companies to bring their production facilities closer to home markets, a trend known as nearshoring. This study aimed to assess whether this trend occurred in the Western Balkans (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia) since the last study in 2021 and whether the nearshoring trend could be linked to the efforts of local companies to decarbonize, i.e., reduce their carbon emissions (CO₂).

The study's findings are based on surveys conducted with 65 foreign companies from the Western Balkans, 382 local companies, and interviews with 12 German investors in the Western Balkans, one potential German investor, one local company, and three experts. The study emphasizes the role of decarbonization and carbon footprint reduction (CBAM) in enhancing foreign investor attraction and increasing the global competitiveness of companies from the Western Balkan economies.

The study reveals that 72% of foreign companies are satisfied with their investment experience in the Western Balkan economies, representing a 10% increase since the last study conducted in 2021. However, experiences vary. Bosnia and Herzegovina, Kosovo, and North Macedonia saw stronger nearshoring trends, with foreign direct investment exceeding expectations post-pandemic. In contrast, Albania and Serbia recorded lower-than-expected foreign investment and benefited less from nearshoring. Montenegro showed mixed results, with initial gains but a decline in 2023.

According to the study, two-thirds of foreign firms find the region attractive for green investments, seeking suppliers with a low carbon footprint to meet EU Green Deal and CBAM standards. Local companies want to decarbonize but face competitive and operational challenges. The following challenges lie ahead:

➡️ For companies, CBAM is complex due to extensive documentation and a lack of national support. Therefore, the chambers from the Western Balkan economies have launched a comprehensive CBAM guide to assist local companies in the decarbonization process (http://www.ungc.rs/docs/publikacije/CBAM.pdf).

➡️ Infrastructure challenges in increasing the integration of renewable energy sources.

➡️ The public sector needs to improve guidelines and procedures for companies to meet decarbonization requirements.

Key recommendations from the study:

• For investors:

Collaborate with local suppliers investing in their decarbonization to meet sustainability goals.

Increase investments in local Western Balkan companies for decarbonization to optimize supply chains and utilize the skilled workforce.

Share technical expertise to help local companies meet global production standards and improve mutual decarbonization efforts.

• For Western Balkan suppliers:

Invest in green technologies to reduce carbon emissions and become more attractive to foreign investors.

Obtain necessary certifications to meet international standards and integrate into global supply chains.

Seek financial and technical support for decarbonization and improving competitiveness.

• For economic policymakers:

Provide financial incentives and technical support to help local companies decarbonize and meet international standards.

Improve governance, institutions, and infrastructure to attract more investments.

Invest in renewable energy sources to align with global sustainability trends and attract foreign investments.

The full study and detailed conclusions are available at the following link: https://www.wb6cif.eu/wp-content/uploads/2024/09/Report_2024_v3_web.pdf.