Regional cooperation and competitiveness in the Western Balkans: alternative approaches to industrial policy and skill formation

This article argues that industrial policies and strategies towards skill formation are key to improving productivity, competitiveness and growth in the Western Balkan region. It demonstrates the emergence of alternative growth models, namely (i) FDI-led growth with less attention to labour force skills and (ii) skills-led growth with less attention to attracting low-technology FDI. The authors discuss the options for a more balanced approach to regionally cooperative policies that would integrate FDI attraction policies with support for local innovative small business networks and the development of appropriate labour force skills. They argue that this approach would improve growth prospects by integrating regional value chains into global markets while simultaneously reducing the scope for state capture, which thrives in small closed national markets. The authors offer some recommendations on how regional cooperation on industrial and educational policies can be shaped to provide sustainable and inclusive economic growth for the future.