A better credit rating of the surrounding countries and the delay in joining the World Trade Organisation represent obstacles to a more dynamic inflow of foreign investment in Serbia. The applying of laws and bylaws should be improved
We spoke with Vlatko Sekulović, from the Sekulović Law Office, about changes in the legal framework and practices that would contribute to better organising of the business environment in Serbia.
Which issues do foreign investors consider as particularly troublesome when they consider Serbia as an investment destination?
– I believe that the main obstacle to higher foreign investment inflows is primarily the country’s credit rating, i.e. the assessment of risk related to investment in Serbia. We have witnessed the credit rating improving year-on-year, and at the beginning of this year, Serbia moved from category 6 to category 5 according to OECD classification.
However, as an investment destination, Serbia is in competition with countries like Bulgaria and Romania, which are in category 3 in terms of risk assessment, which handicaps Serbia in advance as a destination compared with its main competitors, without even mentioning Slovakia or Hungary, which are beyond these categories.
It is also essential to continue integrating into the international legal framework that regulates foreign trade, and the main goal of this, which has remained unrealised for more than 10 years already, is joining the World Trade Organisation. Our country’s inclusion in this organisation would further enhance its legal credibility and security, and would also provide additional mechanisms to settle trade disputes.
Alongside these general comments, it is essential to do more to remove and harmonise certain provisions of the Companies Act, such as, for example, regulations relating to the reduction of the capital of companies, extending the freedom to make contractual agreements between parties in cases of special duties between company members or shareholders, or the introduction of new forms of organisation, such as economic interest groups. A special problem is represented by bylaws, many of which have not changed for decades, thus it is necessary to harmonise these documents with real life, and not just EU rules.
The 2014 Law on Planning and Construction, as well as the Ordinance on the implementation of unified procedures electronically, represent examples of the best practice of the Serbian legislature
Which moves of the legislature would you single out as good examples and what do they say about the ability of the domestic legislative system to adapt to modern working standards?
– In terms of good legislative practise in the economic domain, it is certainly worth highlighting the 2014 Law on Planning and Construction, as well as the Ordinance on the implementation of unified procedures electronically. The particular significance to the progress achieved with these acts is the fact that there is no common legal framework at the EU level that regulates this area, rather it is left entirely, with the exception of the part related to standards, down to the will of individual members.
In this sense, the established legal mechanism represents the best practice of the Serbian legislature without the mechanistic applying of good, tried and tested, solutions in the EU, which is the case in the greatest number of acts that are adopted, and thus represents a kind of “domestic common sense” in the field of rights.
Today, when domestic legislation is largely formally harmonised with EU standards, what are the key challenges in the functioning of the legal framework?
– It is primarily necessary to point out that Serbia’s legal system is not yet fully harmonised with the norms that apply within the framework of the European Union and that it is essential to further harmonise in the process of joining this community. However, the main problem is still the application of laws and bylaws on the part of state bodies, both executive and judicial, along with bureaucracy that burdens companies’ operations.