Trying to Bring Tangible Benefits to Serbia

On July 8, 2019, the United States Government and the Government of Serbia signed agreements under which the United States will provide an additional $20.8 million in assistance to Serbia. “This assistance will allow USAID to strengthen its cooperation with the government of Serbia, the private sector, and civil society to help the country to continue growing its economy, which means more Serbians are working and putting food on the table for their families. The assistance funding will also let us work together to bolster the capacity of Serbia’s key democratic institutions. Ultimately, our aim across the board is to help Serbia achieve its goal of EU membership. That will take some time and effort. But we’ll strive to do this through a firm partnership, supporting those reforms and helping those organizations that make Serbia’s economy more competitive, strengthen rule of law, improve the regulatory environment, and combat corruption,” says Mike de la Rosa, USAID Mission Director.

“I would like to note that since 2001, the U.S. government has provided over one-billion dollars in assistance, not including loans and credit agreements. And with its well-educated and talented workforce, Serbia has attracted four billion dollars in investment on top of that.”

Knowing that USAID constantly and consistently supports these areas of work (rule of law, SMEs, etc.), what would you outline as the biggest achievements of your engagement in these fields recently?

– There are so many good examples, so it’s hard to talk about just one or two achievements. However, one area of progress in recent years that really resonates with me is centred on making it easier to do business in Serbia. I’m talking about the dramatic streamlining of business inspections and attainment of construction permits. With these reforms, supported through USAID’s Business Enabling project, Serbia has become the tenth best country in the world in terms of the ease of obtaining required permits. And there are very tangible benefits to Serbia and the Serbian people.

For example, this reform enabled IKEA to become the first foreign investor in Serbia to receive an electronic construction permit in 2015, a full 25 years after their first attempt to enter the Serbian market. What does that mean to the average Serbian? Well, IKEA’s investment in Serbia is worth more than EUR 70 million and has created hundreds of jobs. We are proud to have played a role in this change in the business environment, which will also serve to mitigate the brain drain from Serbia.

Another crowning achievement, in my opinion, is USAID’s assistance in helping renovate misdemeanour courts throughout Serbia, including the largest one in the country, namely the Belgrade Misdemeanour Court which was previously spread across 13 different locations. Working alongside partners like the Ministry of Justice, High Court Council, and the Judicial Academy, USAID helped improve court operations with case-management systems and electronic registries.

The integrated program is now used by over 2,000 misdemeanour judges and staff in 153 locations throughout Serbia. It facilitates real-time monitoring of individual court and judge performance, increasing both the efficiency and transparency of court proceedings, and it resulted in reducing the case backlog by over 80% in some courts.

We are proud to have played a role in important changes in the business environment, which will also serve to mitigate the brain drain from Serbia

In June, USAID organized a business forum to look at ways various financial technological solutions could be adapted to ensure greater access to financing for small businesses in Serbia. What can SMEs expect to come out of the discussions at that event?

– At the Financial Technologies Business Forum, USAID focused on how to expand access to financing. For Serbia to more aggressively grow its economy, entrepreneurs require greater access to financing so they can adequately meet the demands of the private sector, while at the same time, create more jobs.

When starting a business, nearly three-quarters of Serbian entrepreneurs either use their own savings or rely on help from family and friends. Aspiring entrepreneurs are forced to do this because most small businesses do not qualify for bank loans. And banks aren’t particularly interested in small loans because it’s simply too administratively burdensome for banks to process a loan, to determine if a small customer can pay the loan back, monitor the loan, and finally, to collect on it.

FinTech, which is short for “financial technologies,” is the term commonly used to describe 21st-century methods to improve and automate the delivery and use of financial services. For example, FinTech would allow someone to apply for a loan online, provide the required documentation and digital signatures, and in the end, save significant amounts of time for all parties. A bank could more easily monitor payments and cash flow from lenders, making the financial institutions more confident that small lenders have the cash flow to repay loans. Technically, these new approaches are possible; realistically, we need to find a way for the regulatory framework to embrace these new, cost-saving approaches are accepted and legislated.

In the same fashion, USAID intervention is focused on boosting agriculture exports as well as lending for agribusinesses. How do you cooperate with the businesses and the government on these issues?

– When people think of “agriculture,” many, especially city dwellers, just picture a farmer on some piece of land. But in today’s competitive markets, it’s much more than that. If you want to export, say, ajvar, on a large scale, someone needs to grow the peppers, transport them to a plant for cleaning and processing, ship the cases of jars, clear them through customs, and get them into the hands of foreign buyers who can enjoy this amazing Serbian product. This is a very simplified explanation that doesn’t capture all the intricate steps required to export that ajvar, or raspberry jam, or other processed foods. What USAID is trying to do is help streamline and optimize every step along the value-chain to bolster Serbia’s ability to compete on the world stage.

A couple of successes that come to mind are the four USAID-supported facilities that provide support services that have helped 20 food start-ups enter both domestic and international markets. Over 30 new products are now found on the retail shelves of major domestic chains. To name just a few examples with which you might be familiar — there’s “Real Red Raspberry” whole fruit raspberry spread, there’s “NatBar” raw energy bars, and who can forget those delicious “Dolovac Organic” dried fruit rolls.

Just one more example that I’d like to mention before moving on is the export of Serbian apples to the United Kingdom. They’ve actually now increased ten-fold in value. This is due in large part to two key issues that USAID has helped the start-ups focus on: improved quality control of their products and improved marketing.

To what extent is the institutional framework ready to accept new fundraising techniques and players?

– As I mentioned earlier, the current regulations and laws have not kept up with the rapid change in technology. As one stark example, only banks can legally provide loans. Why only banks? Other countries are not nearly as rigid, and that means that Serbian companies have a harder time competing in the world economy.

The good news is that the Ministry of Finance is one of our partners in developing a Law on Alternative Investment Funds that we all hope to see adopted this year. This law alone would markedly increase access to finance, including for innovative start-ups and digital-based businesses.

Earlier this year, USAID helped launch the Really Important Community Card as a way of supporting local businesses and financing local community projects. Could you please explain the concept of the card and who benefits from it?

– The Really Important Community Card is an innovative customer loyalty card developed through our Framework for Giving Project, implemented by the Ana and Vlade Divac Foundation. As you mentioned, it’s also interestingly enough a fund-raising tool.

Here’s how it works. Citizens receive a discount if they show the card when making purchases at participating stores. One per cent of purchases made using the card will be donated to fund local community projects nominated and voted on by people of the same community.

We try to respond to local needs and empower local actors through different interventions

So, the great thing about this initiative is that everyone really does benefit. Individuals now receive a discount on their purchases at participating stores, which build up a larger base of customers. Citizens can also nominate initiatives and projects to be funded through purchases made with the card; they get to vote and decide which ones should be supported, and they are also the beneficiaries of the local initiatives that receive the funding. The card is already being used in Sremska Mitrovica, Novi Pazar, Leskovac, Obrenovac, and Krusevac. We hope to see the card used nationwide within three years.

How else do you cooperate with local communities?

– We believe that the road to self-reliance begins with locally-led development. As such, we try to respond to local needs and empower local actors through different interventions.

Let’s look at our civil society portfolio. We are all about engaging citizens to focus on issues they think are important to their communities. This can include everything from fighting corruption to improving the media environment. According to World Bank’s and European Commission’s recent reports on citizens’ experiences with and perception of the justice system in Serbia, only one in four citizens trust the justice system, identifying citizens’ access to justice and access to information as major issues of the judicial reform process.

With our local partners, we helped bring the judiciary closer to the citizens it serves by establishing several mechanisms of communication between citizens and representatives of the judiciary. Just a couple of examples include the initiation of local council meetings across 15 Basic Courts and the development of the online ‘Gateway to Justice’ educating people on their rights and how to optimally utilize them as they navigate the justice system.

We work with industry leaders and associations on developing cooperative economic models in order to help contend with the challenge of consolidating the fruit and vegetable processing sector while increasing exports. For example, we partnered with the Sirogojno company, one of the largest exporters of frozen fruit from central Serbia, to improve product quality and meet food safety requirements of their supplier networks utilizing more modern technology. As a result, Sirogojno has added 15 cold storage facilities and increased its frozen and dried fruit supplier base by over 300 SMEs and farms.