Diaspora communities and economic impact in the Balkans

Centre for Enterprise and Entrepreneurship Studies

Dr Nick Williams is Associate Professor in Enterprise. He has been awarded a two-year Leverhulme Trust Research Fellowship.

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Twenty years after the wars of the 1990s and the division of the former Yugoslavia into a number of smaller (and some contested) states, the Balkans still experience significant political and social tensions.

For example, in Kosovo actions such as the sending of a provocative train from Serbia and border tensions in the North of Kosovo have done little to help foster political co-operation. In Bosnia, continued repercussions of the genocide have led some to be nostalgic for the ‘golden age’ of one-party dictatorship under Marshall Tito. While in Montenegro, there is political fallout related to accusations of an attempted coup fermented by Russia as the country seeks closer ties to the European Union.

In addition to political strife, the Balkan countries are all experiencing significant economic challenges, which has led to continued migration away from the region. Trends of migration began before the wars, yet conflict accelerated these movements, with many people fleeing over the mountains to Western Europe to escape violence. This has left the Balkans with sizable diaspora communities scattered around the world.

Through my Leverhulme Trust Research Fellowship, I am examining the role of the diaspora – those who have left their homeland, either by choice or forced, for example, by war - in fostering economic development in their home countries, with a particular focus on the post-conflict economies of the Balkans.

Migrants who operate abroad often gain knowledge and skills that are lacking in their home country. When they return to invest or start a new business, they transfer this acquired human capital back to the home country, thereby turning ‘brain drain’ into ‘brain gain’. However, attracting them home is not easy.

The environment for economic activity in post-conflict economies is often adverse, typically characterised by weak formal institutions, including the poor enforcement of laws, regulations and property rights. This can also lead to negative perceptions among diaspora communities who view the financial risk to investments, lack of support, political fragmentation and weak institutional framework as barriers to investment in their home country.

Yet despite this, significant investment does take place, and is often the result of strong emotional ties to the homeland. Much of this investment comes in the form of remittances – money sent home by migrants - with approximately 17% of Kosovo’s GDP and 14% of Bosnia’s made up from transfers of money.

However, my research demonstrates that at the individual household level the value of remittances is small. Much of the money is used for household consumption in the homeland, rather than being invested in, for example, business activity. At the same time, while emotional ties are strong, these are reducing with the generations.

The generation who fled conflict maintain strong ties, wanting to help out their home country as nascent independent states. Yet their children have less of a tie. While this next generation return home regularly it is often to visit family and friends for summer and winter holidays. They are often highly educated with good careers in more stable economic environments. As such, the impetus to move back to their homeland, or to invest in it, is much less than their parents. This means that new approaches are needed if the potential of the diaspora to make a difference in their home countries is to be harnessed.

In December 2016 I met with the Ministry of Diaspora in Kosovo as well as other government departments to discuss progress of policies aimed at attracting the diaspora back to their homeland. The research finds that reforms are often uncoordinated at home, and this has meant that many members of the diaspora remain economically isolated from their home country as they are unable to access support which would mobilise their investment at home.

Attracting them home is partly driven by acute economic, social and demographic challenges facing Kosovo, which has a young population and low rates of job creation. While the Ministry is making strides in this regard, it is doing so in the context of competing policy pressures, with many demands being made on government finances in order to try to foster economic growth.

On a recent research trip to Bosnia, I met with representatives of the United Nations Development Programme and discussed how millions of euros are being invested (often funded by Western European governments) in engaging with the diaspora. There is, for example, support for investment, conferences and matching grant schemes and this activity is to be welcomed in bringing more investment to the country; yet this often occurs against a backdrop of limited national policy on the issue. Indeed, Bosnia is divided into two Federations - the Bosniak majority Bosnian Federation and the majority Serb Republika Srpska - with both needing to agree on national policy. Thus far, it has not been possible to agree a national diaspora policy.

Another challenge to policy is presented by the European Union. EU policy makers tell the Balkan economies that diaspora and migration policy is a national issue, and not one that needs European wide agreements. Yet when discussing this with policy makers in the Balkans I have encountered the common complaint that EU countries are attracting people out of the Balkans, with, for example, Germany offering thousands of visas to fill specific sector shortages, and thus contributing to further migration away from the Balkans. Reconciling this challenge is a key aim of policy makers seeking closer integration with the EU.    

My research is examining institutional change across Balkan economies and how the Balkan countries aim to attract the diaspora to invest back in their homeland. Engaging the diaspora has significant potential for post-conflict economies, yet policy has been slow to mobilise this valuable resource. Through this work, the project aims to inform policy making in each of the economies being studied so that institutional reforms can be more effective.

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The views expressed in this article are those of the author and may not reflect the views of Leeds University Business School or the University of Leeds.