Two research papers by staff of the European Bank for Reconstruction and Development (EBRD) published today highlight the potential of the countries of south-eastern Europe (SEE) as investment destinations and the role of tourism in the region’s economic development.
“Tourism is an increasingly important source of revenue and driver of growth in many countries in the EBRD region and especially in south-eastern Europe,” the focus piece “Tourism in south-eastern Europe – driving the recovery?” states. While the sector in the region still faces challenges in terms of competitiveness, “in light of the security risks in other popular markets, SEE can expect to see further rises in tourism in the coming years.”
Tourism is a major source of economic activity in many SEE countries, with receipts from foreign tourist arrivals accounting for more than 5 per cent of GDP in Montenegro, Croatia, Albania, Cyprus, Bulgaria and Greece. In 2014, 59 million tourists were registered in the region, an increase of almost 25 per cent since 2010. This has contributed to making the sector a major source of employment.
Given the importance of tourism for SEE economies there is no room for complacency, the paper finds. According to a study by the World Economic Forum a comparison of 90 indicators shows the countries lagging significantly behind competing holiday destinations such as Spain, France, Italy and Portugal. Only Greece, Croatia and Cyprus are among the top 40 economies in the world, ranked in 31st, 33rd and 36th position, respectively. The report finds room for improvement in various areas, for instance price competitiveness, the business environment and infrastructure development.
Infrastructure is a key sector for possible Chinese investment in SEE as the second focus piece: “China and south-eastern Europe: infrastructure, trade and investment links” finds. “In recent years, China has become a major sponsor of flagship projects in the transport and energy sectors of the region,” the paper says. The increasing role of China “is seen by both sides as mutually beneficial.”
For China, the attractiveness of SEE derives from its wider effort to integrate into the global economy. Investments in ports, railways and highway infrastructure in the region provide China with access to new markets. These markets have significant catch-up potential, which is attractive to Chinese investors. They also benefit from the prospect of EU integration.
For the SEE countries Chinese investments are a welcome complement to EU funds. Ambitious infrastructure projects are currently under development which will require a pooling of resources. Here China’s plans can play an important role, with the extension of the “Belt and Road Initiative” as the major undertaking. As sea shipping remains the cheapest route from the Far East to Europe, China plans to establish a rapid transport connection from the Greek port of Piraeus through the Balkans further to EU markets – the Balkan Silk Road, which constitutes a part of the “Belt and Road Initiative”.
In addition to infrastructure and foreign direct investment, south-eastern Europe has also benefited in recent years from growing trade links: SEE exports to China increased seven-fold between 2004 and 2014 (in US dollar terms), from around US$ 320 million in 2004 to more than US$ 2.2 billion in 2014. Over the same period, the share of SEE imports from China rose markedly as well. In US dollar terms, imports from China more than doubled, from around US$ 5 billion in 2004 to more than US$ 11 billion in 2014.
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