When more technology companies understand that Serbia possesses a rich pool of intelligent and creative technology talent, and that the government is sincerely interested in boosting the growth of the sector in Serbia, then success will feed on success, and the number of new investments and new startup ventures will grow at an increasing rate.
New York-based video game company Take-Two Interactive recently acquired privatelyheld Serbian mobile games developer Nordeus, marking the latest of several Serbian startups or innovative companies to have been acquired by U.S. giants. We took the opportunity to explore the new venues of growth of the Serbian innovative industries, and to discuss the U.S. support to them, with Baron Lobstein, Economic Section Chief, U.S. Embassy to Serbia.
Are examples like Nordeus rare, or could we talk about a pronounced interest in exploring the Serbian startup market among U.S. investors?
Take-Two’s acquisition of Nordeus is simply the latest example in a growing wave of interest in the Serbian market. We have other examples in the past, like 3Lateral and Frame. And we should certainly expect more in the future. Since I arrived in Serbia nearly two years ago, I have been inspired by Serbia’s progress in creating a nurturing environment for the digital economy. It is especially encouraging that the private sector has taken on the responsibility of pressing for improvements in laws and regulations to facilitate new investment in technology firms. I recently discussed this issue with the CEO of Nordeus, Branko Milutinović. He explained the critical role of the Digital Serbia Initiative – which he co-founded – in gathering the voices of private companies to work in partnership with government to make these regulatory changes. By the way, this is similar to the role that industry associations play in the United States, and it is consistent with the approach that we have encouraged through our economic development assistance.
Is it only from the Serbian perspective that talk about the Serbian economy increasingly leads to discussion of artificial intelligence, biotechnology, MedTech and other potential avenues for Serbia to leapfrog competitors in the knowledgebased economy? How do you perceive the changes currently taking place?
I have certainly noticed this trend. But, of course, Serbia isn’t the only country pursuing these avenues for growth. It is competing with many other middleincome European countries to attract new investment from international firms. Investors are seeking not only countries with competitive costs of doing business and attractive investment incentives, but also those with advanced manufacturing facilities and infrastructure, where their senior executives would like to live and work. Artificial intelligence is critical to the future of many industries, including the automotive sector and industrial automation. Biotechnology is critical to the future of agriculture – that is, increasing crop yields and reducing spoilage – as well as to the future of vaccines and other innovative drugs. Thus, Serbia must incorporate artificial intelligence into the traditional industries that have driven its economy if it wishes to remain competitive in these fields. And, as other countries increasingly adopt medical technology – including remote medicine, digital medical records, and e-medicine services – these services will improve the delivery of medical services around the world and improve quality of life for people living in those countries. Serbia must advance in these fields if it wishes to be the kind of place where Serbians want to stay and raise their families.
We provide resources and encouragement, but the Serbian government and people are taking a leadership role in deciding how best to use these resources
What is the role of the U.S. Embassy in supporting and inspiring such initiatives?
The United States has worked in Serbia for many years, through its assistance programs, to encourage an environment that welcomes and nurtures business – especially smaller businesses and technology firms. To take only a couple of examples, USAID has two new programs with ICT Hub and the Digital Serbia Initiative that are helping new startups grow in digital industries, and also helping to build an entrepreneurial mindset in younger generations. In fact, USAID helped to establish NALED, which has provided an enormous contribution to improvements in the legal and regulatory framework for small and medium-sized businesses.
The newest U.S. government agency, the Development Finance Corporation, is dedicated to facilitating investment in the digital economy and other strategic sectors around the world, including through its Balkan regional office at our Embassy in Belgrade. In all these cases, we can provide resources and encouragement, but the Serbian government and people are taking a leadership role in deciding how best to use these resources.
In the context of innovation, which companies do you see as the most likely potential foreign investors when it comes to these technologically innovative parts of the Serbian economy?
How can small countries like Serbia dream about attracting Silicon Valley players? The next investors in a growing economy like Serbia’s are likely to be those whose leaders have noticed the success of other companies in the market, and who want to share in that success. When companies notice their primary competitors enjoying success in Serbia, they will also want to come. However, this question reminds me of another important point that Nordeus CEO Branko Milutinović made in our recent discussion – which echoes a fact that has driven the development of the knowledge-based economy in our own country: a rich source of new innovative companies in Serbia may be companies like Nordeus, which already exist in Serbia and are developing new talent among their own workers. Just as Mr. Milutinović gained important experience by working at Microsoft, other bright young workers may now be working at Nordeus, gaining the skills and inspiration to start their own companies. When that happens, it is important that Serbia supports them with financing – through banks and angel investment – as well as through a constantly evolving and improving legal and regulatory environment.
Considering your knowledge of the Serbian economy, what would you single out as the major changes that have occurred since 2019, when you began your mandate in Belgrade?
In the past two years, I have been impressed at how the Serbian government has continued to evolve in a positive direction in improving the legal and regulatory environment for business. It has not been so much a case of major changes, but rather of a continuing trend, consistent with a clear strategy on the part of Serbia’s leadership to encourage development of the knowledge-based economy. It is well known that the central goal of the U.S. Embassy in Serbia is to support Serbia’s own goal of European integration; and Serbia’s government ministries have worked consistently over the past two years to continue harmonizing the country’s laws and regulations with those of the European Union.
I have been especially impressed at the rapid work that certain ministries have done to update laws and regulations since the most recent general elections. When a government has limited time to show results, it is important to make quick process. But, of course, it is still critical to do so deliberately, so that the business community and the public can participate in the process. And ultimately, enforcement of these laws and regulations is critical.
How, if at all, has the position of the U.S. evolved when it comes to identifying possible avenues of cooperation with Serbia?
This year we are celebrating 20 years of USAID assistance to Serbia. Over that time, our approach to cooperation has certainly evolved. But one important change has stood out in the past few years: Serbia is no longer struggling to stabilize its economy, to deal with runaway inflation, or to reduce massive unemployment throughout the country. Serbia has successfully addressed these urgent problems and is now focused on the challenge of positioning its economy for long-term sustainable growth. Thus, our relationship is changing from a focus on stabilization to a focus on supporting future economic growth. A good example of this is the establishment of the Development Finance Corporation office in Belgrade, which aims to facilitate new strategic investment to help integrate the Western Balkan countries.
We also have new consultations with the Ministry of Mining and Energy on improving the legal and regulatory framework to support new investment in renewable energy, as well as to ensure environmentally sound and sustainable mining practices. These are the types of cooperation that Serbia has identified as being most important at this stage in the country’s development.
We strongly support the initiatives of the Regional Cooperation Council, the Mini-Schengen initiative, and the new Common Regional Market as a way to facilitate trade, transportation, and labor mobility within the Balkans
Given that the U.S. strongly supports the EU accession process of Serbia and the countries of the region, how do you view the current stalemate, especially from the perspective of the region’s economic opportunities?
We certainly recognize that the slow pace of the EU accession process is frustrating. However, we are encouraged that Serbia is looking for new ways of advancing economic integration in spite of this situation. The initiatives of the Regional Cooperation Council, the Mini-Schengen initiative, and the new Common Regional Market have given us reason to hope that the countries of the region can work together to facilitate trade, transportation, and labor mobility within the Balkans.
We strongly support these initiatives. They are important not only for improving economic growth and living standards throughout the region, but, if successful, they will demonstrate to Brussels that the EU candidates of the Western Balkans can work together to support their mutual goals of economic advancement despite political differences. This cooperation will be crucial to eventual EU accession.
How has the COVID-19 pandemic impacted on the objectives of your department, if at all; and what do you see as the most important milestones for your work in 2021?
While the pandemic has been a painful struggle for us all, it has not affected our goals or our overall work. If anything, Serbia’s response to the pandemic has demonstrated how much progress the country has made in stabilizing its economy and preparing for such emergencies. Serbia’s pandemic response also included implementation of the CEFTA-EU Green Lanes initiative, which helped ensure continued delivery of critical medical supplies and equipment throughout the pandemic. These important successes have simply confirmed our view that the Embassy’s economic engagement with Serbia should remain focused on the policy steps I have outlined above, which will position Serbia for long-term sustainable economic growth.
Serbia has successfully addressed urgent problems from the past and is now focused on the challenge of positioning its economy for long-term sustainable growth.
I have been impressed at how the Serbian government has continued to evolve in a positive direction in improving the legal and regulatory environment for business.
The newest U.S. government agency, the Development Finance Corporation, is dedicated to facilitating investment in the digital economy and other strategic sectors .