Dimitrije Knjeginjić, Vice President Of The Foreign Investors Council And Lafarge Serbia CEO:

We Expect The Government To Continue Reforms

The FIC expects the new Government to accelerate important structural reforms, particularly the privatisation and corporatisation of public enterprises, ensure the better implementation of laws and enable the efficient harmonisation of Serbian legislation with the EU acquis

We spoke with Dimitrije Knjeginjić, FIC Vice President and Lafarge Serbia CEO, about the reform process in Serbia and Eurointegration.

What are your expectations of today’s Government, when the three-year stand-by agreement with the IMF is being concluded?

– In the previous two years the Government has significantly advanced the business climate through fiscal consolidation and amendments to laws in the real estate domain, and partly the general legal framework. We welcome the results achieved in fiscal consolidation and good economic indicators (increased export, GDP growth), which have also been recognised by the IMF and the World Bank, and which provide the basis for great expectations regarding the future. The Council has three main expectations: the acceleration of important structural reforms, particularly the privatisation and corporatisation of public enterprises; better application of laws and; further effective harmonisation of Serbian legislation with the EU acquis.

What are the incomplete reform processes that should be finalised as soon as possible, and what new challenges should be given attention?

– We’ve been arguing for many years that it is essential to carry out structural reforms, and here we primarily mean healthcare and education reforms, as well as the process of privatising and corporatising social enterprises, for the country to make further progress. We are aware that this is not an easy task and that it requires great efforts and agreement among all stakeholders in the process, but such reforms are essential for a better future for Serbia and its citizens. When it comes to new challenges, I would like to use this opportunity to emphasise the negative practise of some laws (especially in the area of taxation) being adopted under urgent procedure and without public debate, and with short deadlines given for companies to adjust to the new regulations.

We are aware that conducting reforms requires great efforts and agreement among all stakeholders in the process, but they are essential for a better future for Serbia and its citizens

With 15 years of experience in Serbia, the FIC has witnessed all reform efforts to date, but also the abandoning of some important goals. What is your message to the present reformers?

– Our key message is that they should not give up and that they need to endure on the road of reforms aimed at increasing Serbia’s competitiveness compared to neighbouring countries. To increase the number of new investors, Serbia needs to improve the investment climate, reduce unnecessary bureaucracy and become more attractive to SMEs.

If we view Serbia’s progress through effective changes in the EU integration process, what kind of evaluation should the Government receive?

– Generally speaking, we can say that the process of harmonising laws with the regulations of the EU is solid, but it is not only necessary to adapt laws, rather also to improve their level of implementation. That is precisely where we have expectations, particularly considering that more attention in accession negotiations is paid to the issue of the way laws are implemented, and as such negotiations should help solve current problems related to the inconsistent and inefficient enforcement of laws.

In the meantime, several chapters have been opened or are to be opened dealing with the business sector, such as Chapter 20, on entrepreneurship and industrial policy, Chapter 29, relating to the Customs Union, and Chapter 7, which addresses intellectual property rights. How can the FIC contribute to Serbia’s progress in these areas?

– The Council has a unique capacity to support the European integration process, considering that more than 70 per cent of FIC members come from the EU, while others have a foothold in the EU market. In some areas, which are also primarily dealt with in detail by our White Book, such as intellectual property and customs, we can provide a greater contribution, because we analyse the laws that apply to them in detail and provide specific recommendations for improvement that are available to the public in this publication of ours.

One important issue being debated in Serbia is the extent to which foreign investors can contribute to Serbia’s economic growth and reindustrialisation. What is your opinion?

– We think that all investors are equally important for the economic growth and development of this country, because they are ultimately all registered here and operate according to the laws of Serbia. Every investor can contribute significantly to the betterment of Serbia by disseminating expert knowhow and best practises through the provision of tangible examples.

The FIC has formed a working group with the Serbian Government to advance the White Book’s recommendations. How does the formation of this group differ from FIC members’ participation in numerous other working groups of the government?

– We established this Working Group with the Government of Serbia in January this year with the idea of increasing the level of implementation of White Book recommendations from the current 35-45 per cent up to 50 per cent annually. The key objective is to improve the Serbian market’s competitiveness through the implementation of White Book recommendations and thus encourage the expansion of existing investors and attract new ones, contributing to economic growth and the reducing of unemployment. This differs from the FIC’s participation in other Working Groups in terms of the Council’s role, which is much more significant because this is a joint venture with the Government of Serbia that has a fairly ambitious goal – to increase the overall level of implementation of White Book recommendations to 50 per cent, which is no mean feat.

Inconsistent implementation of the same tax regulations by different organisational units of the Tax Administration and the lack of coordination between the Tax Administration and the Ministry of Finance are key problems that should be overcome

You simultaneously launched the Dialogue for Change initiative, which deals, amongst other things, with taxes and their implementation. In your opinion, why are changes slow in this segment, which is extremely important for business?

– Each company considers the quality of tax regulations when choosing where to invest, on the Serbian market or elsewhere. That is why taxes are the ultimate theme. At the Council, we do not deal with tax rates, but rather regulations and their application, and our message is simple: Serbia needs clear rules of the game that are the same for everyone in order to attract more investment. Changes are slow because they are extremely complex. We see the improving of cooperation in this area through continuous dialogue, which we conveyed at our event, with the goal of the state presenting its plans and draft new legal solutions in a timely manner, which the economy will then respond to by stating whether these solutions are implementable under the suggested deadlines and how they will impact on operations and, ultimately, the country’s GDP.

What are your expectations of Tax Administration reforms?

– Inconsistent implementation of the same tax regulations by different organisational units of the Tax Administration and the lack of coordination between the Tax Administration and the Ministry of Finance are key problems that should be overcome. Furthermore, it is also necessary to reform the Tax Administration, particularly by separating all secondary activities and increasing capacities, as well as by introducing precise guidelines that will be made available to the public.

Among the ten committees that function under the auspices of the FIC, the latest one deals with topics that are close to you: Infrastructure & Industrialisation. What is in its focus?

– This Committee also deals primarily with advancing legislation in relevant areas like construction, transport and the like.

Why did you opt for this combination of topics and which companies does this committee bring together?

– Our members opted to establish this Committee as the tenth in a row, and it currently gathers companies that deal with real estate and construction, as well as legal and consultancy firms etc.

What are this Committee’s priorities in the fields of infrastructure and industrialisation?

– In a sentence, the priority is to adopt laws that will enable the further development of infrastructure and the industrialisation of Serbia.