1. Industry Concentration and Supply Chains in CEFTA 2006
Rainer Lanz
Private Sector Development Division, OECD
SEE IC
Sarajevo, 25 April 2012

2. Outline Motivating Questions Industry Concentration Supply Chains
Conclusions and Discussion

3. Motivating Questions Industry Concentration Supply Chains
How is manufacturing distributed over space in CEFTA?
What is the size and hence importance of different manufacturing industries?
Relative Concentration: How are industries distributed over space compared to manufacturing?
What are the most important supply chains in CEFTA economies?
What is the position of CEFTA economies in supply chains?
How important are intra-CEFTA versus extra-CEFTA supply chains?
Next Generation RCI
Sector Competitiveness
Trans-national Clusters
Regional Supply Chains

4. Industry Concentration

5. How is manufacturing distributed over space in CEFTA?

6. Manufacturing Concentration in CEFTA Economies
Serbia and Croatia account for 73% of turnover and 58% of employment in CEFTA
Manufacturing in CEFTA – Turnover: 42.5 bn EUR – Employment: 1.07 m
Shares of CEFTA Parties:
(by turnover)
Albania bn
BIH bn
Croatia bn Kosovo * 0.6 bn
fYR Macedonia bn
Moldova bn Montenegro bn Serbia bn

7. Manufacturing Concentration in CEFTA: Map
Absolute concentration of manufacturing in CEFTA (based on turnover)

8. Manufacturing Concentration in CEFTA: Top 10 Regions
The top 10 regions in CEFTA concentrate 43% of turnover and 27% of employment.
Top Regions of Manufacturing Agglomeration (by turnover, EUR)
Belgrade
SRB
4.6 bn
Zagreb (city)
HRV
2.9 bn
South Backa
2.0 bn
Skopje
MKD
1.8 bn
Primorje-Gorski Kotar
1.7 bn
Sisak-Moslavina
1.3 bn
Zenicko-Dobojski
BIH
1.0 bn
Podunavlje
Istria
Zagreb (county)

9. What is the size and hence importance of different manufacturing industries?

10. Industry Specialisation of CEFTA 2006: Top 5 Industries
The low tech food and beverages industry is the leading manufacturing sector in CEFTA, with the basic metals industry a distant second.
Top Manufacturing Industries (by turnover, EUR) 15
Food and Beverages
Low Tech
11.8 bn
28%
Belgrade (SRB), South Backa (SRB), Zagreb – city (HRV) 27
Basic metals
Medium
3.5 bn 8%
Podunavlje (SRB), Skopje (MKD), Hercegovacko-Neretvanski (BIH) 28
Fabricated metal products
3.4 bn
Zenicko-Dobojski (BIH), Belgrade (SRB), Hercegovacko-Neretvanski (BIH) 24
Chemical Products
High Tech
South Banat (SRB), Zagreb – city (HRV), Belgrade (SRB) 23
Petroleum Products
2.8 bn 7%
Primorje-Gorski Kotar (HRV), Sisak-Moslavina (HRV), Skopje (MKD)

11. Relative Concentration: How are industries distributed over space compared to manufacturing?

12. Relative Concentration of Manufacturing Industries in CEFTA
Top 6 industries which are the most concentrated relative to overall manufacturing
Food products is the largest industry in CEFTA and is therefore not surprisingly concentrated in a similar way than manufacturing

13. Within or between country concentration?
Differences in the distribution of turnover between single industries and overall manufacturing are mainly observed within countries rather than between countries.

14. Supply Chains

15. What are the most important supply chains in CEFTA economies?

16. CEFTA Exports of Manufacturing Industries (2009)
Top 3 Exporting Industries:
Textiles
Food Products
Basic Metals

17. CEFTA Exports: Intermediate and Final Goods
Top 3 Exporting Industries for Intermediates (Value):
Basic Metals
Chemical Products
Coke and Petroleum Products

18. What is the position of CEFTA countries in supply chains?

19. Supply Chains and Revealed Comparative Advantage
Revealed comparative advantage (RCA) captures relative trade specialisation dividing an industry market share by the manufacturing market share for exports (or imports):
Market share of country c in world exports in industry k
Market share of country c in world
exports in manufacturing
An RCA higher than 1 implies that country c has a RCA in industry k.
For example, CEFTA has a RCA in exports of intermediate food products, if its share in world exports is greater in intermediate food products than in overall manufacturing.

20. What is a Country’s Position in Supply Chains?
No RCA in imports of intermediates but RCA in exports of final goods
RCA in imports of intermediates and in exports of intermediate goods
RCA in imports of intermediates and in exports of final goods
First Stage
Intermediate Stage
Final Stage
Low Tech Industries
First Stage
Intermediate Stage
Final Stage
BIH
HRV
MKD
MDA
MNE
SRB
Food, Beverages and Tobacco
First Stage
Intermediate Stage
Final Stage
ALB
SRB
BIH
HRV
MKD
MDA
Textiles, Leather and Footwear
First Stage
Intermediate Stage
Final Stage
BIH
HRV
MNE
SRB
ALB
Wood and Products of Wood

21. Examples of Potential Intra-Industry Supply Chains
First Stage
Intermediate Stage
Final Stage
BIH
ALB
SRB
HRV
Pulp, Paper, Printing and Publishing
Medium-Low Tech Industries:
First Stage
Intermediate Stage
Final Stage
ALB
MKD
SRB
MNE
BIH
Basic Metal Products
First Stage
Intermediate Stage
Final Stage
HRV
ALB
BIH
MKD
SRB
MDA
Fabricated Metal Products
Medium-High Tech Industries and ICT:
First Stage
Intermediate Stage
Final Stage
BIH
Motor Vehicles
Other Transport Equipment
Chemicals and chemical products
ICT
First Stage
Intermediate Stage
Final Stage

22. How important are intra-CEFTA versus extra-CEFTA supply chains?

23. CEFTA Manufacturing Exports (2009)

24. CEFTA Exports: Intra- vs. Extra-CEFTA
Top 3 Industries (Value):
Intra-CEFTA: 1. Food Products; 2. Chemical Products; 3. Basic Metal Extra-CEFTA: 1. Textiles; 2. Basic Metals; 3. Food Products
Overall Shares for Manufacturing Exports: Intra-CEFTA: 28%
Extra-CEFTA: 72%

25. CEFTA Exports of Intermediates: Intra- vs. Extra CEFTA Shares
Overall Shares for Manufacturing Exports of Intermediates:
Intra-CEFTA: 29% Extra-CEFTA: 71%

26. Conclusions How is manufacturing distributed over space in CEFTA?
Manufacturing activity is highly agglomerated, i.e. the top 10 regions (out of 102) in CEFTA concentrate 40% of the manufacturing activity
What is the size and hence importance of different manufacturing industries?
Low and medium-low tech industries account for about 80% of manufacturing activity, e.g. Food and beverages account for 28% of manufacturing turnover
Relative Concentration: How are industries distributed over space compared to manufacturing?
Industry concentration occurs mainly within countries rather than between countries

27. Conclusions
What are the most important supply chains in CEFTA economies?
Medium-low tech industries, i.e. basic metals
What is the position of CEFTA economies in supply chains?
Entire supply chain: Food products as well as Basic metals (first and intermediate stage) and fabricated metal products (intermediate and final stage)
Intermediate and final stage: Textiles, Wood products and cork, Paper and publishing
No specialisation in medium-high tech industries and ICT

28. Conclusions
How important are intra-CEFTA versus extra-CEFTA supply chains?
Extra-CEFTA exports dominate accounting for 71% of intermediate exports
For Food products, beverages and tobacco, intra- and extra-CEFTA supply chains are of similar importance
For Basic metals and Fabricated metal products, intra-CEFTA supply chains account close to one third of intermediate exports
For Paper products and publishing, and Wood products and cork, intra-CEFTA supply chains account for 26% and 34% of intermediate exports.

29. Thoughts for Discussion
Common interests and scope for cooperation of regional working groups will vary by sector
Not to forget: Importance of inter-industry linkages and supply chains
Services are often significant inputs for manufacturing production and hence crucial for sector competitiveness
Is extra-CEFTA trade of higher quality than intra-CEFTA trade? Where is more value added incorporated?
Where do SEE countries have the potential to “move up the value chain”? Between sectors or along stages or functions within a given sector?

30. Thank you for your attention!