SOFIA (Bulgaria), March 7 (SeeNews) – The strong economic growth potential of Western Balkan countries is heavily hampered by unfair competition from the informal sector, political instability and widely spread corruption, the European Bank for Reconstruction and Development said on Tuesday.
One in four firms in the region see the long-standing problem of unfair competition from the informal sector as a very severe obstacle, the EBRD said in a working paper “Firm performance and obstacles to doing business in the Western Balkans” published on the bank's website.
The paper, focused on six countries – Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro and Serbia – is based on the responses received in the latest round of the Business Environment and Enterprise Performance Survey (BEEPS) conducted by the EBRD and the World Bank and examines the linkages between company performance and perceived obstacles to doing business.
Competition from the grey economy is seen as the biggest obstacle to doing business by respondents from Albania, Kosovo and Macedonia. Companies from Bosnia and Herzegovina and Serbia place political instability as the number one challenge they face, while high tax rates are seen as the biggest obstacle by respondents from Montenegro.
Unfair competition is more likely to affect smaller companies, the authors of the working paper conclude. Also, companies in the services sector find competition from the informal sector significantly less costly than companies in manufacturing, as well as those with an international market orientation, the authors add.
Corruption also appears to be a bigger problem for smaller and more innovative firms, while political instability seems to concern mainly firms, which are part of a larger group due to their broader geographical presence and higher transaction costs.