Despite adverse global trends and forecasts, the dynamics of Swiss-Serbian economic relations remain intact and continue strengthening. In 2021, Switzerland figured as the second largest foreign direct investor in Serbia. Conversely, Switzerland has emerged as a top investment location for Serbian companies, mostly in the ICT sector. Despite the pandemic, bilateral trade has grown by 16% in the last year ~ Urs Schmid, Ambassador of Switzerland to Serbia.
The Covid-19 pandemic and the war in Ukraine will impact negatively on the global economy, while the energy crisis is also being felt in Switzerland, which has been importing electricity during the winter period for years. Nevertheless, causes for optimism exist and the Swiss-Serbian relations remain strong. It is against this background that CorD had the opportunity to meet Swiss Ambassador H.E. Urs Schmid, to discuss the current development of bilateral relations, the launch of the Swiss Cooperation Programme for Serbia 2022-2025, his expectation regarding the economic outlook, as well as the Swiss concept of neutrality in the context of Russia’s military attack on Ukraine.
Your Excellency, it was announced recently that cooperation with Serbia remains part of Switzerland’s New Strategy for International Cooperation until 2024. Can you tell us about the priorities of the new programme, which is worth approximately 90 million euros?
– What began as Swiss humanitarian aid to Serbia during very difficult times, in 1991, has developed over the last 30 years into a comprehensive cooperation programme. Switzerland is ranked among Serbia’s most important bilateral donors, with over 400 million euros of official development assistance committed and spent to date. Such an important and continuous presence has left many footprints, which also constitute the foundation of our current engagement during the 2022-2025 period.
As a highly decentralised country, Switzerland traditionally seeks to establish a strong presence at the local level, working with municipalities to improve services and participatory practises. Local governance reform will remain in focus during the period ahead. Private sector development and employment is another longstanding field of Swiss engagement.
During the next four years, we will significantly step up our efforts to assist Serbia in turning dual vocational education and training into a success story. In addition, a new substantial programme will be dedicated to facilitating the participation of local SMEs in the value chains of larger foreign direct investments.
Finally, though importantly, engaging in the fight against climate change is a must. Switzerland will complement its current portfolio in renewable energy, energy efficiency and sustainable urban planning with more comprehensive climate mitigation and adaptation measures, in line with the Green Agenda for the Western Balkans.
Switzerland will complement its current portfolio in renewable energy, energy efficiency and sustainable urban planning with more comprehensive climate mitigation and adaptation measures, in line with the Green Agenda for the Western Balkans
Switzerland has provided significant assistance to capacity building efforts for local governments in Serbia over previous years. One of the ongoing programmes is dedicated to improving energy efficiency in cities like Vrbas, Užice, Kruševac and Paraćin. Could we talk about the positive effects of this process to date?
– Municipalities in Serbia are facing big challenges in energy management, in terms of costs, greenhouse gas emissions and air quality. Switzerland is providing support in establishing interdisciplinary planning approaches and implementing concrete measures for the sustainable management of energy, cutting across different municipal sectors, such as spatial planning, mobility and public buildings. Introducing the European Energy Award (EEA) was instrumental in this regard. The EEA is a quality assurance and labelling tool that was established in Switzerland in the early 1990s and is applied in more than 1,500 cities across Europe.
In Serbia, the label helps municipalities comply with national legal requirements on energy matters that are under their jurisdiction and align with EU legislation and the EU Green Deal. Concrete renovation projects are important showcases of how energy efficiency in buildings can be applied, resulting in positive impacts on energy bills, comfort and health. Switzerland is supporting energy efficiency measures in 16 schools and nurseries in these four municipalities, which will be finalised by the end of 2022.
The issue of energy efficiency and savings on the consumption of electricity has become one of the key topics under the conditions of war in Ukraine and sanctions against Russia, which have led to the hampering of gas supply lines to European countries. We’ve been hearing recently that Switzerland could also face electricity supply problems and will very likely have to increase electricity prices for businesses and citizens. How serious are these problems and what kind of plan does Switzerland have to overcome them?
– The risk of electricity shortages in winter has been known for some time, because Switzerland has been an electricity importer for many winters. That risk has been exacerbated in recent months, due to the shutting down of an important number of nuclear power plants in France for technical reasons and the current prospect of limited supplies of electricity from gas-fired power plants in Europe as a result of reduced Russian gas exports.
Electricity prices for Swiss captive consumers (households, SMEs) are usually set each autumn for the following year. Prices will certainly increase, although probably less than elsewhere in Europe, as many retailers are able to produce locally and because of the current favourable exchange rate of the Swiss Franc against the Euro.
You are the ambassador of a country that has environmental protection and so-called Green transition high on its list of priorities. Europe paid great attention when your country closed one of its five nuclear power plants, after almost half a century of continuous operations. Are you concerned over announcements that the need to maintain the economy under the conditions of this energy crisis could see large European economies, like Germany’s, return to producing electricity from coal and other traditional but dirty technologies?
– Today’s situation is absolutely exceptional. There is a serious risk of gas shortages this winter, which could have drastic consequences for citizens and may negatively impact the entire economy. Some EU countries are planning to fire up mothballed coal-fired plants or defer their closure. The resulting spikes in emissions are acceptable under current circumstances, especially if the deployment of non-emitting energies will also accelerate, which is exactly what the EU plans to do with its REPowerEU plan.
Today’s situation is absolutely exceptional. There is a serious risk of gas shortages this winter, which could have drastic consequences for citizens and may negatively impact the entire economy
Swiss financial support to Serbia to date has also included assistance for the digitising of public administration. One particularly interesting project should enable citizens to gain insight into the operations of public companies that experts assess as having major inefficiency issues. Could you tell us more about this?
– Swiss support for digitising the oversight of public enterprises is leading to improvements in both planning and reporting. Namely, public enterprises will save significant time set aside for the physical preparation of documents, freeing up more capacities for data analysis and decision-making. Additionally, it also improves capabilities to provide more transparency regarding the operations of public enterprises.
The respective companies, local governments, and the Government of Serbia are better equipped to inform citizens about development plans, goals and key performance indicators, as well as progress as compared to the annual plan. Overall, digitalization will allow for a more strategic approach in developing public services, as well as for better aligning the different activities conducted by public enterprises.
Switzerland is often singled out here as a country whose policy of military neutrality serves as a model for the Serbian government to define its own foreign policy. However, it seems that Switzerland nonetheless decided, with unexpected speed, to join the Western sanctions against Russia. Swiss Confederation President Ignazio Cassis says that this does not bring into question Swiss neutrality, but how can picking a side still be characterised as remaining neutral?
– The law of neutrality, as defined by international treaties like the Hague Conventions of 1907, prohibits neutral states from entering into a military conflict and obliges neutral states, in the case of an inter-state war, not to support any of the parties to the conflict militarily. Switzerland has been strictly adhering to the law of neutrality in the current war in Ukraine.
Neutrality, as an instrument of Swiss foreign and security policy, does not impede the Swiss Government from expressing political opinions and working for the respect of fundamental values like peace, democracy and human rights.
Russia’s military attack on Ukraine, a sovereign state, is a serious violation of international law. With this in mind, the Swiss Government took the decision to adopt the sanctions imposed by the European Union. It is important to emphasise that, prior to taking this decision, the Swiss Government examined the EU sanctions package with regard to its compatibility with a neutral state’s obligations under the law of neutrality and concluded that the measures are compatible. It also examined the neutrality policy within the scope of its political room for manoeuvre. The extraordinary developments of Russia’s military aggression against Ukraine were taken into account. Finally, Switzerland has enforced sanctions in the past under various circumstances, without this bringing its neutrality into question.
Do you have understanding for Serbia’s argument that the need to preserve its national interests and ensure economic stability during uncertain times means that it cannot fully support the EU’s policy towards Russia by imposing economic sanctions?
– It is not for me, as ambassador of Switzerland, to comment on how Serbia should be pursuing its policy of integration into the European Union and defining its national interests in this context. Certainly, for both of our countries, the Russian aggression presents a challenge to the conducting of our foreign policy and we exchanged on these matters during the recent talks between our two state secretaries for foreign affairs that took place at late June’s bilateral meeting in Belgrade.
Given that you come from a country that represents one of the world’s main financial centres, are you concerned over signs of a global economic growth slowdown and rising inflation? Are there grounds for the announcements we hear of a new economic crisis?
– All indicators indeed show that the compounding of the damages caused by the Covid-19 pandemic and Russia’s military attack on Ukraine will slow the global economy considerably. The World Bank’s latest Global Economic Prospects report raises the risk of stagflation, with potentially harmful consequences for middle- and low-income economies alike. Switzerland will also face the consequences of the new reality, although perhaps to a lesser extent than many other countries.
On the world markets, prices of important export goods from Russia and the Ukraine – namely, energy sources and certain food staples and fodder – have risen sharply. The associated inflationary pressure is weighing on demand in important trading partner countries, with dampening effects on the exposed areas of the Swiss economy.
As far as the Swiss and Serbian economies are concerned, it seems that they will both continue their recovery from the Covid crisis with above-average GDP growth for the time being, but less dynamically than expected by previous forecasts.
Recent examples of Swiss investments in Serbia include the opening of a production site of Regent Lighting in Svilajnac, the establishment of TX Services in Belgrade, the construction of the Barry-Callebaut chocolate factory in Novi Sad and Nestlé’s new factory for plant-based products in Surčin
Upon arrival in Serbia, you said that you were planning the strengthening of economic cooperation between our two countries with great enthusiasm. To what extent will the economic turmoil in Europe and around the world impact on economic cooperation between Switzerland and Serbia?
– I am happy to say that I remain very optimistic about the further development of our economic cooperation, and with good reason! Despite adverse global trends and forecasts, the dynamics of Swiss-Serbian economic relations have remained intact and continued to strengthen. In 2021, Switzerland ranked as the second largest foreign direct investor in Serbia. Conversely, Switzerland has emerged as a top investment location for Serbian companies, mostly in the ICT sector. Despite the pandemic, bilateral trade has grown by 16% over the last year and, when it comes to the trade in services, Switzerland has become Serbia’s fourth most important partner.
Recent examples of Swiss investments in Serbia include the opening of a production site of Regent Lighting in Svilajnac, the establishment of TX Services in Belgrade, the construction of the Barry-Callebaut chocolate factory in Novi Sad and Nestlé’s new factory for plant-based products in Surčin. The number of jobs created by Swiss companies in Serbia is estimated at over 12,000. I would also like to add that the large Serbian diaspora resident in Switzerland plays an important and increasing role in facilitating Swiss investment activities in Serbia.
The Swiss Embassy in Serbia has been recognised for many years for the support it provides to culture and art, particularly authors from the younger generation and emerging artists who’ve yet to establish themselves. Do you intend to continue work in this area?
– Cultural ties are a very important part of relations between our two countries. Encouraging and promoting young artists and performers has indeed been a focus of our activities for some years and will continue to be an important objective. Moreover, in order to provide more comprehensive support to the cultural scene in Serbia, in October 2021, Switzerland launched its first long-term intervention in the field of culture called ‘Culture for Democracy’. Under the scope of this project, worth one million euros, we intend to protect and enlarge a social space where pluralistic and democratic values can be expressed, intercultural dialogue triggered and tolerance promoted. This project looks beyond supporting the production of art and culture, valuing exchanges, mutual learning processes and innovation. This instrument focuses in particular on independent cultural actors at the local level, with a special emphasis on disadvantaged municipalities. For all these instruments, we will be implementing annual open calls in collaboration with our partner, Heartefact Foundation. Switzerland has so far already supported 19 projects with a total of 232,000 euros.
Switzerland is ranked among Serbia’s most important bilateral donors, with over 400 million euros of official development assistance provided
During the next four years, we will significantly step up our efforts to assist Serbia in turning dual vocational education and training into a success story
Swiss support for digitising the oversight of public enterprises is leading to improvements in both planning and reporting