What is the scope of OECD's work in the Western Balkans and what is OECD's role?

The OECD work in the Western Balkans is to a large extent coordinated and implemented by the OECD South East Europe (SEE) regional programme, which I work in and which is led by Ms. Marzena Kisielewska. The programme is based in the OECD’s Global Relations Secretariat, which focuses on cooperation with economies that are not members of the OECD. Our programme has been working with the Western Balkans since 2000 to ensure peace, stability and prosperity. We work with these economies on reforms in favour of stronger growth, higher investment and full employment. This support has ranged from policy analysis and monitoring to policy design, capacity building and implementation support. The OECD has also been active in facilitating policy dialogue at technical and high political level and in transferring good policy practices across various policy areas from OECD member states to the SEE region. The OECD’s policy analysis and diagnosis is widely leveraged by its international development partners and feeds into strategic documents such as the European Commission’s annual Progress Reports or international development agencies’ resource prioritisation.

Can you give us an example of the OECD's hands-on approach to innovation in the Western Balkans?

Our programme’s approach to working with the Western Balkans generally aims to be “hands on” through close consultation mechanisms with government representatives at various levels, as well as regular exchanges and partnerships with non-governmental stakeholders. In fact, my colleagues and I conduct amongst the highest number of country-visits on average within the OECD to ensure our findings and recommendations are clearly communicated, taken on board and eventually implemented by stakeholders. Furthermore, our activities are complementary, with some projects focusing on monitoring and policy analysis, others strengthening the capacity of governments based on the findings from our monitoring work.

The most “hands on” work I have been involved in was probably a project supporting the Government of Montenegro to design and implement an SME voucher scheme. Voucher schemes provide small amounts of public subsidy to SMEs to help them access external support for the development of specific competencies. Reviews of international experiences with voucher schemes suggest that they can help SMEs by improving their innovation capabilities and in helping overcome specific barriers to their development, such as risk aversion. Underpinning the justification for voucher schemes is the idea that the diffusion of knowledge is central to the effective operation of innovation systems.

During the project I worked for over a year hand in hand with a small team of the Directorate for SMEs on:

• Reviewing international best practices in the design and implementation of voucher schemes, including a study trip to Slovenia.
• The feasibility of the implementation of a voucher scheme in Montenegro based on the current economic conditions, existing policy and institutional framework, the state of the local consultancy market, and the needs of export-oriented SMEs in Montenegro, analysed through a survey of 150 respondent firms.
• Examining alternative policy measures.
• Designing the scheme’s objectives and priorities while considering the potential risks that could hamper the successful implementation of the scheme.
• Developing and supporting the implementation of a specific proposals for a pilot implementation phase.

The highly specific topic of the project, the small project team, the single-country focus, the capacity-building nature made this a very “hands-on” project. The study can be accessed here .

What is the OECD's perspective on the Western Balkan countries' current smart specialisation processes?

Smart specialisation has an important role to play in the Western Balkans’ further economic development. If successfully designed and implemented, smart specialisation will help the economies of the region leverage their respective areas of strength and grow into prosperous, knowledge-based economies. The process is a demanding one but will itself prove fruitful through the extensive public-private dialogue that it entails. Although Serbia and Montenegro started their smart specialisation journey a few months earlier and are currently more advanced, all Western Balkan governments seem to have recognised the value of the exercise and are now starting theirs. Along the way, all six economies will face challenges. Their smart specialisation processes will need to be designed in an inclusive, yet efficient manner, and fully articulated with already existing industrial or innovation policies. In addition, in economies with limited funding available for research and innovation activities, the role of international research and innovation partnerships, but also of technology transfer through foreign direct investment will be key.

What are the major insights gained from the recent Western Balkans Competitiveness Outlook related to research and innovation?

Overall research and innovation outcomes remain modest in the Western Balkans. Investment in R&D is very low, particularly in the business sector. Scientific outputs and production of high-technology goods and services lag as a consequence. Foreign direct investment rarely targets knowledge-intensive sectors, due to skills gaps, fragmented labour markets and low levels of integration into global knowledge flows and value chains. The situation is aggravated by endemic brain drain. Having said that, SMEs in the Western Balkans do have a strong propensity to innovate, albeit in non-technological ways. There is a dynamic information and communications technology service sector, and medium-high technology automotive and machine tool industries. Furthermore, some of the SEE governments have adopted increasingly holistic innovation strategy frameworks to effectively coordinate and implement sound innovation policy. These are positive indications in our opinion and make us optimistic for the future.

What are the main developments since the previous Western Balkans Competitiveness Outlook? What kind of progress do you see in Western Balkan countries' innovation landscape?

Innovation policy has gained prominence in the Western Balkans in the last two years. Serbia and Montenegro have established holistic innovation strategies, with Serbia establishing a ministerial-level council to co-ordinate innovation policy in Serbia, while the innovation fund of the former Yugoslav Republic of Macedonia has started operation. Kosovo* has taken steps towards drafting an innovation law. The first venture capital fund in the region – South Central Ventures, established under the Enterprise Innovation Fund  – has realised its first eight portfolio investments in the region. Incubator infrastructure has expanded to all six Western Balkan economies. Serbia and Montenegro have set up science and technology parks, although they have yet to develop activities to facilitate knowledge transfer and linkages between business and academia.

What are the OECD's main recommendations for Western Balkans policymakers in terms of research and innovation?

Our publications contains a raft of recommendations, which are too detailed to outline here. In essence the overarching challenges include: finding resources to increase investment in R&D, and improving the overall governance of innovation at the policy and institutional level, finding ways to foster technology diffusion and absorption, and developing business academia linkages and incentives to individuals to unleash their creative potential.

Do you see potential for peer-to-peer learning within the Western Balkans or from other South Eastern European countries?

The OECD is a strong advocate for peer-to-peer learning, which is evident in its many peer reviews, which we see as enabling policy makers to look past their own plate, and pick up pitfalls and good practices from their peers. The regional nature of our South East Europe programme strives to foster this peer learning / peer pressure dynamic, which is heightened by specific mechanisms, such as the scoring of policy performances and resulting direct comparability between peers. We believe that the Western Balkan economies have tremendous potential for peer-to-peer learning, given their geographic, economic, linguistic, cultural and historical ties. For more information on OECD peer reviews and what this work entails, readers can visit: https://www.oecd.org/site/peerreview/  

How do you think Western Balkan countries could benefit from the OECD's general work and research?

The OECD stretches across more than 20 bodies and directorates and hundreds of Committees on practically any topic relevant to economic policy and cooperation today. Western Balkan economies can apply to participate in and join these Committees. The Committees, bringing together technical experts from all OECD countries, assess the country’s willingness and ability to implement OECD legal instruments and evaluate its policies and practices as compared to OECD best policies and practices. Committees may recommend changes to bring the candidate country’s legislation, policy and/or practices into line with OECD legal instruments or to bring its policies closer to OECD best practices.

Let me mention just a few illustrative examples of the OECD’s general work, which may be of interest to the Western Balkans:

• The Policy Framework for Investment (PFI) is the most comprehensive and systematic approach for improving investment conditions ever developed. It helps governments to design and implement policy reforms to create a truly attractive, robust and competitive environment for domestic and foreign investment which set important framework conditions for a innovation.
• Services generate more than two-thirds of global GDP, attract over three-quarters of FDI in advanced economies, employ the most workers and create most new jobs globally. The OECD Services Trade Restrictiveness Index (STRI) helps member governments and the business community to identify trade barriers and regulatory obstacles in their own countries, as well as in foreign markets on a sector-by-sector basis. This is important to improve the conditions for service innovation.
• Through the competition assessment, the OECD helps countries identify and reform regulations that unduly hamper competition. For example, if Greece implemented all the recommendations made by the OECD during the assessment, it would generate benefits of about USD 7,000 million.

More information on engagement with non-members can be accessed here: http://www.oecd.org/about/membersandpartners/enlargement.htm