Serbia and Croatia have the potential to work together better than has been the case to date, from joint investments to joint exports. On the global scale, our economies are both small, but through joint forces, we can count on larger markets, simpler business start-ups on third markets and better references
“In the following period, we would like to see fewer sparks flying between the politicians from our respective countries, because they cast a shadow over regional cooperation. At the same time, I am absolutely convinced that the stronger and better our economic ties are, the more political passions will subside” – says Marko Čadež, President of the Serbian Chamber of Commerce.
If you were to compare the period from a decade ago to the present juncture, do you think that the economic relations between the two countries have become so much stronger than they have become immune to the recent political tensions?
The economy has always suffered under politics, to a lesser or greater extent, here or abroad, just as economic trends affect political ones. Although political relations between Serbia and Croatia have developed greatly in the last ten years, they are still marred by certain unresolved issues from the past and occasional tension.
However, trade between the two countries has been growing year-on-year and Croatian companies continued to invest in Serbia even during the time of the biggest political tension. Also, Serbian companies are slowly penetrating the Croatian market and there are more and more joint bilateral projects and regional initiatives, especially those that involve the chambers of commerce from both countries. Our companies have a natural inclination toward cooperation. Business is like water – it always finds its way around, be it a shorter or a long way.
Businesspeople are much faster at finding a common language and more easily remove barriers than politicians. Businesspeople solve problems by seeking points of mutual interest, placing an emphasis on that which brings mutual benefit, profit and success. The principles and practices that prevail in the business world can do a lot to help the process of political normalisation.
As representatives of the business community, chambers of commerce in the region have provided a significant contribution to the normalisation of relations – with shared messages about the importance of preserving political stability and tangible activities. It is our wish that there be as few sparks as possible in the future, which have not been in short supply in the past, and which cast a shadow over regional cooperation.
At the same time, I am deeply convinced that the stronger and better our economic ties, thus our communities will better recognise economic interests and reap the rewards of regional cooperation and that political passions will lose their intensity.
On the other hand, how does the current economic situation in both countries affect the overall pace and volume of trade, and how much did Croatia’s accession to the EU impact on trade between the two countries?
Serbia’s trade with Croatia has been growing steadily in the last ten or so years – from €365 million in 2005 to €864.3 million in 2015. In the last three years, the volume of trade has gone up, but the trading structure hasn’t changed much. In 2014, the first year after Croatia’s accession to the EU, bilateral trade grew by 13.4%, to €756.9 million (or over a billion dollars), which improved Croatia’s rank on the list of Serbia’s biggest trading partners from 14th place in 2013 to 10th place.
Last year saw overall trade grow by another 14.2% to €864.3 million, with Serbian exports to Croatia growing by 15.9% and Croatian exports to Serbia up by 12.7%. This upward trend continued in the first four months of this year too, with total trade amounting to €269 million. This is very important for Serbia, because we previously had a deficit in trading with Croatia for years, while now that trade is completely balanced, with Serbia even recording a slight surplus worth almost €3 million.
Also contributing to this was certainly the implementation of the Stabilisation and Association Agreement, which was signed on 1st September 2013 and is asymmetrically in Serbia’s favour, but also strengthened the export capacities of the Serbian Chamber due to a significant shift in the economic situation in our country.
In truth, our desire and our goal are for the export lists in the coming years to be dominated, instead of by raw materials, by-products with higher phases of processing. In short, bearing in mind what we have left behind us in this region, we have achieved a major breakthrough, but the potential of mutual trade and overall economic cooperation, as with other countries in the region, is a long way from being fully exploited, not in terms of bilateral relations, nor when it comes to entering markets beyond the region, which is especially important.
Of course, every euro in exports means a lot to all of us in this region, and the markets in the region are natural export destinations, and that it is important to increase the mutual exchange, to trade as much as possible and remove all barriers to the free movement of goods and capital.
However, the core issue for small domestic economies from the former Yugoslavia, regardless of them being EU members – like Croatia and Slovenia – or CEFTA members – like Serbia and the other countries, is not how we can sell more to each other, but how we can develop higher forms of cooperation and join our forces to gain common access to third markets.
Of key importance is how to implement joint infrastructure projects, in order to improve the business climate of each country and the region as a whole, to strengthen our capacities, export as much as possible and attract as many investors as possible.
Trade between Serbia and Croatia continued to grow in the first four months of this year, amounting to €269 million. Completely balanced trade is important for Serbia because the country had previously recorded a trade deficit for many years
What about the level of mutual investments?
For years we have spoken only about Croatian investments in Serbia and how there are no Serbian investors in Croatia. And that is a fact. There are over 200 companies in Serbia that are either founded or bought with Croatian capital.
These companies opened branch offices, participated in privatisation and invested in new factories and production facilities. The statistical data about Croatian investments differ, due to a discrepancy in the way national institutions calculate the value of FDIs. As such, their value ranges from €340 million net (as calculated by the NBS per country of payment) to over €700 million (as calculated by the Croatian National Bank, which monitors initial and subsequent investments), to over €1 billion, which is the total value of investments made by the ten biggest Croatian investors in Serbia according to the data collected in direct communication with these companies.
Serbia has an open and attractive business environment: from a lower tax burden and incentives for investment and employment, to free trade agreements that open the doors to markets with more than a billion consumers
The fact remains that both Croatia and Slovenia have had strategic access to Serbia as an investment destination; that they entered our market at the height of privatisation, and that they launched certain greenfield projects. On the other hand, the participation of Serbian companies in privatisation in Croatia, which was completed earlier, was negligible. Apart from non-economic reasons that we have been mentioning a lot, this is one of the viable explanations of why Serbian investments are not present in the western parts of our former common state.
In addition to that, Serbia has an open and attractive business environment: from a lower tax burden and incentives for investment and employment to free trade agreements that open the doors to markets with more than a billion consumers. We were recently declared one of the five most attractive countries in Europe for foreign direct investments in manufacturing. Such economic reasons always prevail in the end.
In the other direction, the number of Serbian companies operating in Croatia is, unfortunately, still low – only about a dozen, so their participation in this market and the impact on trade between the two countries is negligible, and for years we have spoken only about three Serbian investments, which have actually transformed in the meantime. Nevertheless, I believe that the aforementioned statistical data will change in favour of mutual trading and investments.
Last year, a Serbian businessman and owner of Matijević Meat Company, Petar Matijević, invested €15 million in acquiring Croatian agribusinesses, along with their farms, machinery and land, thus becoming the biggest owner of arable land in Croatia, as he stated. It has been reported recently that MK Group is interested in investing in Croatian tourism.
However, what is most important for us, and for Croatia and all the countries in the region, is that we are constantly improving the business climate, that in economic terms we are not closed within our national frameworks; that we do not perceive each other as competition, but rather we stick together and work together to change the image of the region that has followed us for two decades; that we appear to the world and before serious investors representing individual projects, but also the region in which they will be realised.
That’s because when measuring the justification for investment, investors look at the possibilities of the regional market, not just domestic markets, and the possibility of spreading to neighbouring countries…
Why did the initial ideas about business consolidation and joint access of third markets fail to take off?
Today’s businesspeople have a clear message for their politicians – remove the barriers. This brings a whole new quality to regional business cooperation. For instance, when our border with Croatia was blocked last September, that same night the president of the Croatian Chamber of Commerce and I gave statements urging the reopening of borders. We also got our companies involved and appealed to Brussels for help.
The most important thing is that we don’t create barriers for ourselves; that we continue to remove the ones that we have inherited, to network and jointly access regional and third-country markets. This is important for large companies and even more important for SMEs.
That’s why we have established the Chamber Investment Forum and that’s why we have been working on connecting branches of our companies, which, individually, have insufficient resources to become serious competitors to large companies globally in regional and international tenders. We have been working on forming a construction consortium that could participate in tenders for large-scale infrastructure projects funded by the EU and other partners.
We have been the link between metal processing and military industry companies, energy companies and others. One of the projects pertains to creating a joint regional tourism product, which is particularly important when it comes to attracting tourists from far away destinations, who certainly won’t travel thousands of kilometres just to sit idly on Kopaonik Mountain or on the beach.
We also want to form a group of wine producers, who are going to jointly approach consumers in far-away markets. At the same time, we are building a mutual platform for SMEs, with the goal of improving their capacities and facilitating networking. We also have an idea for regional politicians to go to major countries – like the U.S., Russia or China – to pave the way for regional economic forums with the participation of businesspeople from the entire region.
What is the cooperation between the two chambers like?
The Serbian Chamber of Commerce and the Croatian Chamber of the Economy are the first institutions to make an important step towards the normalisation of relations between the two countries following the civil war. Today we have excellent regular bilateral and daily communication at all levels (through the organisation of the Serbian-Croatian business forum, which discusses the real interests and needs of companies to cooperate, via B2B meetings, to participation in European and regional projects).
Recently, for example, the SCC was a partner of the franchise fair “Franchising Exhibition Croatia 2016”, at which we successfully presented the Serbian franchise systems, while only a few weeks earlier, together with the CCE, we supported and participated in a gathering within the framework of the Novi Sad Agricultural Fair on the topic of European Integration in the field of agriculture.
The information and experience of Croatian colleagues and experts who participated in Croatia’s negotiations with the EU are important to Serbia. They are now consultants to institutions and valuable support for the SCC and the economy on the road to the EU, especially for the chapters that are directly related to the economy.
A special quality of inter-chamber cooperation in the past year has been provided by the joint work and initiatives within the framework of the multilateral chamber platforms – the Chamber investment forum
A special quality of inter-chamber cooperation in the past year has been provided by the joint work and initiatives within the framework of the multilateral chamber platforms – the Chamber investment forum, which consists of eight national chambers of the region – apart from the six chambers of the countries of the Western Balkans, the member of the Berlin Process and the chambers of Croatia and Slovenia.
On the proposal of our two chambers, the CIF (Chamber Investment Forum) formed a joint council with the Regional Centre for Entrepreneurial Learning for SEE countries – SEECEL, based in Zagreb, with the aim of improving inter-chamber cooperation in the field of entrepreneurship and the development of human potential.
For the SCC it is very important that we have in this way become more actively involved in the SEECEL platform, in order for us to become acquainted as well as possible with examples of good practices, developed incentive schemes for the development of the entrepreneurial spirit and encouraged mutual visits of those responsible for the development of entrepreneurship from all countries of Southeast Europe (both in terms of chambers, as well as government institutions and bodies, commercial, industrial and other associations).
The SCC and CCE are planning a number of new joint projects within the CIF, in order to support the development of SMEs and e-commerce. The Croatian Chamber supported our initiative for a five-year extension of autonomous trade measures of the European Union for the countries of the Western Balkans.
What are the biggest achievements in regional cooperation?
The biggest achievement is that we, under the auspices of the Chamber Investment Forum and on behalf of 350,000 companies, have been constantly sending an important message to our respective politicians and have been raising awareness about the need for regional cooperation, the removal of all obstacles to doing business, trading and investing; establishing links between our economies and improving stability in the region. Europe has already commended us for being the strongest cohesive factor in the region, while state officials show us due respect wherever we go.
The doors to meet the top officials in Brussels or the region are open to us. Most importantly, business people really appreciate our work, because they can feel the benefits of inter-chamber cooperation and initiatives from month to month.