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Industrial restructuring in Central and South-Eastern Europe:

Difference of degree or kind?

Gabor Lux PhD, Research Fellow

Hungarian Academy of Sciences

CERS Institute for Regional Studies

lux@rkk.hu

Territorial Cohesion in Europe – International Conference for the 70th

Anniversary of the Transdanubian Research Institute

Pécs, 27-28 June 2013

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Questions to be addressed:

Post-socialist industrial development De-industrialisation

Regional restructuring

Reorganisation

Development lag with identical processes or fundamentally different development paths? (Periphery vs. Periphery)

Country groups: Visegrad Four + Slovenia

Croatia, Serbia, Bosnia-Herzegovina, FYROM, Montenegro, Romania, Bulgaria, Albania

Is this classification valid?

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Post-socialist industrial restructuring: main trends

Sectoral transformation of the economy: shift towards services

Tertiarisation: differentiated meanings

structural correction of „overindustrialised” economies (general)

modernisation process, „post-industrial society” (C-P)

a symptom of peripherisation (C-P)

Neglect of the third phenomenon in social and scientific discourse

Inequal distribution of positive and negative outcomes

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20%

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De-industrialisation 1990–2008 (1990=100%)

Visegrad group + SLO South-Eastern group

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Patterns of de-industrialisation

Transformation recession

lighter in Visegrad group, Slovenia and Croatia

severe is Serbia, Albania and Bosnia-Herzegovina

A core issue: the preservation of human capital

long-term unemployment

black/grey economy

emigration More serious losses in SE Europe

wartime disruption

temporary ruralisation

The „post-industrial” periphery:

dissolution of industrial specialisation

loss of productive traditions low-level equilibrium?

the „homogenisation of space”

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Patterns of de-industrialisation II.

Post-industrial but underdeveloped:

Bosnia-Hercegovina, Noth-Eastern Montenegro, South Serbia, North-Eastern FYROM, Kosovo: low rate of return to the formal economy

Serbia’s industrial centres, 1996–2008 (Zeković 2008):

20-50 ths. employees: 8 1 (Novi Sad)

10-20 ths. employees : 17 4 (Pančevo, Kragujevac, Niš, Subotica)

5-10 ths. employees : 26 18

1-5 ths. employees: 125 55 (without Kosovo!)

Bosnia-Herzegovina: military industry complex, chemical and metal industry

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Regional restructuring patterns: industrial employment in 1990 and 2008

Forrás: Author’s construction based on national statistical yearbooks & EUROSTAT

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The concentration of advanced business services

in central regions

Financial intermediation, real estate, renting and business activities

Tied to the urban network (monocentric vs. polycentric development)

Split between industrial production and industry-related services

Strong agglomeration of added value

high tertiary employment does not imply a developed service economy

Source: Author’s construction based on national statistical yearbooks & EUROSTAT

0%

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Industrial or service-based competitiveness?

Correlation analysis: sectoral employment rate GDP/capita

In Visegrad countries, competitiveness in central regions is mainly service-based;

outside them, it is industrial South-East: slower structural change, weaker

capitalisation, role of traditional industries

Implications differentiated meaning of industry

Agriculture

(NACE A – B)

Industry & C.

(NACE C – F)

Services

(NACE G – Q)

Non-central regions -0.47 0.42 0.30

Visegrad countries + Slovenia -0.49 0.71 -0.10

South-Eastern countries -0.10 -0.14 0.21

Central regions -0.62 -0.58 0.76

Forrás: Author’s construction based on national statistical yearbooks & EUROSTAT

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Regional restructuring patterns II.

Lower share of industry in Gross Value Added (statistical, but not structural similarity to the EU average) Visegrad group, heavier industrialisation, weak business services

Comparative advantages of low- and low-medium tech industries

Comparative disadvantages in high-GVA segments, trade deficit highest here

Strong external dependency and low VA in international value chains (textile industry)

Differentiated integration forms across regions:

dynamic central regions, strong tertiary functions and high-VA industry

robust intermediate regions – too few

weakly integrated peripheries

hollowed-out (depopulating) super-peripheries, distant regions

10

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Forms of industrial reorganisation

Post-2000 reintegration:

strenghtening common characteristics

catching-up in per capita FDI

slow progress in factor intensity (labourscaleknowledge), both higher and lower forms are found

Very strong relationship between FDI and export performance

Weak preparedness for knowledge-based development; Croatia’s similarity to Visegrad group. Disrupted research and innovation networks, lack of strong domestic corporate research.

The spread of EU-influenced development policy

special economic zones, industrial estates

cluster development

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Example: Knowledge Economy Index

in selected countries (1 – 10)

Source: Author’s construction based on data from the World Bank’s Knowledge Assessment Methodology

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Example: the free trade zone & industrial estate

network in Croatia and Serbia

Forrás: Author’s construction

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Deeper disruption of industry, disadvantageous forms of de-industrialisation

National differences are stronger than sub-national ones (Croatia)

Re-emerging historical development gaps and core areas; advantages of national capitals

Lower inflow of FDI, but convergence towards the Visegrad group

Strong duality of industry, lower embeddedness („cathedrals in the desert”?), weak opportunities for endogenous development

Increasing EU-integration with persisting development gaps

strongly path-dependent, but „going in the right direction”

will the crisis have a long-term effect on the region?

Conclusions

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Thank you for your attention!