4. Defence‑industrial base and production potential A legacy of self‑reliance dating back to Yugoslav times has left the region with an unusually broad industrial spectrum for its size. Around 200 companies in the Western Balkans produce defence goods, with Serbia and Bosnia and Herzegovina accounting for the bulk of output and exports. Capabilities range from small arms and large‑calibre ammunition to artillery systems, armoured vehicles and increasingly unmanned systems. Crucially, producers can manufacture to both NATO and Soviet standards—a differentiator for Ukraine‑related demand. Serbia combines established state‑owned enterprises(e.g., Jugoimport‑SDPR, Zastava Arms, Krušik) with dynamic private firms, exporting a wide portfolio from howitzers and rocket launchers to armoured vehicles and missile technologies. Bosnia and Herzegovina employs thousands across more than twenty companies, with firms such as BNT, Pretis and Binas scaling up 155mm shell production and other high‑demand lines; BNT alone cites the capacity to produce on the order of hundreds of thousands of artillery rounds annually(up to half a million). Elsewhere, Albania is implementing a strategy to revive domestic production—starting with explosives, SALW, ammunition and drones, as well as armoured vehicles in a joint venture with the UK. Kosovo and North Macedonia are partnering with Turkish companies to build ammunition and propellant capacity and to seed a drone ecosystem respectively. Cost competitiveness and proximity are the two headline advantages: output can be priced below many Western equivalents and delivered quickly to European end‑users. With predictable demand signals and limited EU investment, these plants could expand further and plug specific bottlenecks in the Union’s supply chains. Defence Industry Snapshot— Western Balkans Country Serbia Bosnia and Herzegovina Albania Kosovo North Macedonia Industry overview Key firms/ partnerships Production capacity/ notes Combines established state­owned enterprises with dynamic private firms, exporting a wide portfolio. Jugoimport-SDPR, Zastava Arms, Krušik(state-owned)+ private exporters. Exports howitzers, rocket launchers, armoured vehicles, missile technologies. Large industrial workforce across dozens of companies; scaling up ammunition and artillery production. BNT, Pretis, Binas and others. BNT cites capacity on the order of hundreds of thousands of artillery rounds annually(up to ~500,000). Implementing a revival strategy for domestic defence production. Joint ventures(e.g., with the UK) for armoured vehicles; local projects for explosives, SALW, ammunition, drones. Early stage—focus on rebuilding capacity across multiple product lines. Building indigenous capacity through international partnerships. Partnerships with Turkish firms for ammunition and propellant production. Capacity-building and technology transfer aimed at regional supply. Seeding a local drone ecosys‑ tem and ammo capability through partnerships. Cooperation with Turkish com‑ panies to develop ammunition/ propellant and drone projects. Emphasis on drones and muni‑ tions as emerging sectors. 4