We’re confident that the new Serbian government will remain committed to our shared priorities: Serbia’s EU accession and stimulating the economy. We’ll continue assisting government institutions to meet the public’s demand for improved accountability and responsiveness, as well as making Serbia a more attractive place to do business
We spoke with Mike De La Rosa, USAID Mission Director, ahead of the finalization of the new USAID five-year strategy for Serbia. We also took the opportunity provided by this interview to briefly discuss USAID’s accomplishments over the course of almost two decades.
USAID has been in Serbia since 2001. How much assistance has USAID provided and what has changed during that time?
– You’re right, and next year we’ll actually be celebrating 20 years of our successful partnership with Serbia. So far, the U.S. has provided over $1 billion in assistance during this period, with nearly $840 million provided directly by USAID. Our focus has, from the start, been centered on supporting good governance and creating the right conditions for economic growth, but we’ve also provided emergency assistance over the years, to help Serbia with crises such as flooding and, more recently, COVID-19.
One of our biggest initial priorities was to help people to more directly participate in decision making and governance at the local level. We brought people together to discuss pressing needs and to decide which ones they wanted to partner on. Through just one of our programs, for example, we undertook more than 5,000 separate activities ranging from renovating health centers to supporting small businesses. Having garnered trust at the local level, we then began working with forward-looking partners at the national level, to help drive needed reforms. Most people who run for government, and work in government, really do want to be more responsive to the needs of citizens and businesses, but they often lack the right tools to do so. We provide those tools.
On the economic growth side, we’ve always approached the obstacles to doing business from both the supply and demand sides. This means helping the Government to reform policies and regulations to bolster legitimate private sector development, while working with entrepreneurs on the demand side to help them better compete on the local, regional, and international markets. Wherever we work, we consult with our government and non-government counterparts to understand the challenges and to see how best to drive transformation and sustainable change. We then figure out what is doable with the resources we have, roll up our sleeves, and get to work.
What will be your priorities for cooperation with the new Serbian government that’s currently being formed?
– We’re not expecting major changes in how we partner with the Government. We’re confident it will remain committed to our shared priorities: Serbia’s EU accession and stimulating the economy. We’ll continue assisting government institutions to meet the public’s demand for improved accountability and responsiveness, as well as making Serbia a more attractive place to do business.
We’re currently in the process of finalizing a new fiveyear strategy that will build on the work we’ve already done, but we’ll also be looking to explore new opportunities. One of the overriding themes will be to help halt the brain-drain by driving reforms that show youngsters that they can build their futures here in Serbia. We know that improving the environment for doing business will allow innovative companies to create more and higher-paying jobs, but good jobs are only part of the equation. People also want to know that they can enjoy the same rights and opportunities they would have abroad. Stimulating regional economic growth is a U.S. priority, as reflected by this year’s efforts of Special Presidential Envoy Richard Grenell.
One of the overriding themes of our new five-year strategy will be to help halt the brain-drain by driving reforms that show youngsters that they can build their futures here in Serbia
Did your post-COVID strategic priorities change as a result of the pandemic? If so, in what sense?
– We’ve certainly had to adjust the way we work, and while we may be exploring other sectors to work in, such as health, our development priorities have not fundamentally changed. Wherever we work, our goal is to work ourselves out of a job. To do this, we work to help countries along what we call the Journey to Self-Reliance. An excellent example of how this works is one of our largest beneficiaries of U.S. assistance from years ago – South Korea. Today, the Korean equivalent of USAID actually partners with us in some of the other countries where we work, and hopefully our partnership with Serbia will evolve similarly.
The pandemic has actually served to illustrate how much progress Serbia has made on its Journey to Self-Reliance. As with most countries, the Serbian health system endured significant strain, and the economy suffered a big hit – but, overall, Serbia has displayed tremendous resilience. This isn’t a particularly easy time for any country, but the hard work of everyone here – from doctors to street cleaners – has been paying off. We’ve seen civil society organizations and companies, many of which are our partners, delivering food for the elderly or making masks for health workers. With winter coming, Serbia will need to continue to stand strong. Going forward, we’ll work with Serbia to mitigate the impact of this and future crises, and to continue along its path of economic and democratic development.
In addition to helping Serbia become more resilient in the face of future crises, how have you directly assisted Serbia in responding to the challenges of the pandemic during these last six months?
– We’ve actually provided quite a bit of assistance to battle the pandemic during these last several months. USAID funded and partnered with different UN agencies to help meet Serbia’s most pressing needs, including the provision of COVID test kits, oxygen concentrators, pulse oximeters, patient monitors, X-ray machines, and testing containers for health facilities.
We also worked through UNICEF and the Serbian Red Cross to provide food parcels, hygiene, sanitation, and educational kits for thousands of vulnerable families. Ahead of the recent elections in June, we provided the Election Commission with a COVID Risk Assessment and Mitigation Strategy and helped them to inform voters about effective safety measures. And we’re working right now with the regional COVID hospital in Pančevo to get its heating and hot water system working properly and efficiently. Meanwhile, other sections of the U.S. Government, like the Department of Defense, stepped up to send Personal Protective Equipment (PPE) and other items requested by the Serbian Government.
Based on the surveys you’ve conducted during the COVID- 19 pandemic, in which areas do businesses need assistance the most?
– For small and medium-sized enterprises, which we commonly refer to as SMEs, the short answer is financing and digitization. This pandemic has required most businesses to pivot in some significant way. While half of businesses were able to transition some employees to telework, we also saw that 20 percent of respondents reduced business operations and nearly 15 percent had to temporarily shut up shop. Overall, nearly 90 percent of companies expect revenues to drop this year.
We knew that having eCommerce capacities was important for SME growth even before the pandemic. USAID actually helped the Government of Serbia to produce its E-commerce Development Program and Action Plan, which was adopted several months before the pandemic hit Serbia. This capacity for eCommerce has now become indispensable for most businesses. The exponential growth in food deliveries this year shows how this works. Restaurants could keep making food and continue serving their customers. Brick and mortar shops also began dipping their toes into online marketplaces, but this shift is still in its infancy. Buyers need to feel that shopping online is both convenient and safe. In order for this to happen, companies need to invest in things like cybersecurity, which requires financing.
Speaking of financing, helping businesses to more easily access credit would hugely spur Serbia’s economy. In this regard, USAID recently partnered with the Ministry of Agriculture to develop a $91 million loan guarantee for a wide range of SMEs operating in the agriculture sector. In just the first year, the commercial banks with which we’re working have already provided $20 million in loans, and they expect to provide another $20 million in loans in the next couple of months, as a result of our loan guarantee. Given USAID’s tremendous success in the agricultural sector, we’ll also be exploring sizable loan guarantees in the media and energy sectors, where an inability to access credit is also problematic.
Additionally, we assisted the Ministry of Finance in creating the new Alternative Investment Funds Law, which is instrumental in supporting the private equity market. We helped develop the new law along with a novel set of tax incentives to spur local equity investment. Adopted a year ago, this new law represents a cornerstone of the improved financial system in Serbia, since it helped with the establishment of a local investment fund market and broadened the range of available equity financing options.
USAID helped the Government of Serbia to produce the E-commerce Development Program and Action Plan, which was adopted several months before the pandemic hit Serbia. This capacity for eCommerce
Some people suggest that, under these new circumstances, Serbia needs to change its growth strategy by focusing on domestic companies. How well are the companies that were supported by USAID handling the challenges of the pandemic?
– I believe that when you create a strong business enabling environment, you make investing in Serbia more attractive for both domestic and international investors. For a country like Serbia, you need foreign investments to create jobs, but, of course, you want to make sure these investments are beneficial for local communities and the country without hampering the growth of viable businesses that already exist.
Regarding our partner SMEs, we were working with them even before the pandemic to introduce digital solutions and diversify their markets. This has definitely helped them to mitigate the impact. Online sales are here to stay, and domestic online payments in Serbia have skyrocketed over the last two years. We saw that once the pandemic hit, many SMEs quickly transitioned to selling more online, accelerating digital transformation and essentially mainstreaming it. Our partner, the Shopen.com platform, facilitated this transition free of charge in order to help SMEs switch to online sales. SMEs all over the country took advantage and now more than 500 are actively using the platform. Another great example is the startup Gajbica.rs.
They pivoted from corporate to home food deliveries and experienced a 500% increase in orders and even hired more staff. Even in the post-COVID-19 period, we expect that many of these dramatic shifts in how businesses do their work will in fact continue, and we’ll work with our partner SMEs to transition into this brave new world.
EU accession is by far the most important goal for Serbia. How do you plan to assist this process in the coming period?
– We obviously support Serbia’s decision to pursue EU membership – it’s our top priority as well. So, all our programming is aligned with Serbia’s efforts to move in that direction. Regardless of when Serbia enters the EU, the actual process of adopting and executing the required reforms to legislation to meet this goal ultimately benefits Serbia, and the country’s people. As such, we coordinate closely with our EU colleagues, especially in the areas of rule of law, media reform, and anti-corruption, while our private sector assistance focuses on creating a functioning market economy to help Serbia become increasingly more competitive.