National authorities have plenty of room to influence the economic and business environment even under the conditions of a global pandemic. We expect the new Government, as has been the case to date, to work together with us to build a good business environment, but for us to work together more intensively, faster and more efficiently
This year certainly isn’t a regular year for businesses worldwide, and that also goes for AmCham member companies in Serbia.
“People’s health is endangered, and we are witnessing that public health systems are extremely sensitive to such shocks, and that they are very quickly overburdened,” says Zoran Petrović, President of the AmCham Board of Governors.
“That certainly doesn’t change the fact that, even in these challenging times, businesses must continue to operate under the new conditions.”
It is up to governments around the world to show sensitivity and understanding for the given juncture to businesses that must be higher than ever, says Petrović. According to our interlocutor, the Government of Serbia responded fairly quickly, comprehensively and efficiently, helping companies, especially small and medium-sized enterprises, to overcome the first blow of the crisis, primarily in order to maintain relatively stable employment levels.
“The rating for the business climate is moderately satisfactory, and that also goes for expectations for 2021, where we see crucial obstacles to an improved business climate in the continuation of the COVID-19 virus epidemic, inefficient public administration (especially in the areas of taxes, customs, forex operations, property rights, labor and the predictability of legislative changes) and the availability of labor,” says the President of the AmCham Board of Governors.
Has COVID-19 caused changes to the business environment and, if so, how? Can we blame the pandemic for all the changes that have taken place?
– The viral pandemic has impacted greatly on the way almost all companies do business. Digitization processes that had already started were further accelerated, and we were compelled to reorganize almost all business processes to the extent and in a way that we continue to provide services and deliver our products to our customers. Some coped better, some handled it worse, but they all worked very hard and fast to transform their business models. The majority of AmCham member companies still have more than half of their employees working from home, and this model is so far yielding good results. The question of what the post-epidemic period will look like remains, as well as what long-term effects it will have on the way business is done. The last decade can be dubbed the decade of accelerating and transforming business models, and the epidemic only further accelerated and forced a shift in those ill-suited changes. It is no less important that none of the changes implemented are – and mustn’t be – to the detriment of the health of employees.
What are the business sector’s expectations of the new Serbian government? If we take the Fiat factory in Kragujevac as an example, which repeatedly postponed and halted production due to the global situation, and not due to the situation with the pandemic in Serbia, can we see that as proof that national governments have very little room to influence the economic environment?
– National authorities have plenty of room to influence the economic and business environment. Governments are the drivers of changes in the business environment, and without political will, and cooperation with the business sector, these changes come very slowly, and often include cardinal errors. In other words, without public-private dialogue between the state and businesses there is no progress, and that is what AmCham has been principally committed to for many years. We must have a broad, thorough and timely public discourse, because we must no longer allow ourselves to pass laws and regulations concerning the economy without first consulting the economy, or without enough time being set aside to provide quality inputs on the contents of regulations. We need, together with the Government, to create an environment with clear rules of the game, and an environment in which the rules of the game are the same for everyone. When we reach that level, we are left with real market competition and real competition for the benefit of citizens, the state, and undoubtedly business. We expect the new Government, as has been the case to date, to work together with us to build just such a business environment, but for us to work together more intensively, faster and more efficiently.
The opening of the Belgrade office of DFC, i.e. the American Development Bank, will be a positive signal to future investors planning investments in Serbia and the region, but will also provide support to existing investors who plan to expand their business activities in this region
In which areas is it possible to progress, and what kind of progress can be made? Is that progress in the legislative domain or in the practical application of regulations?
– In the annual “Investor Satisfaction and Confidence” survey, AmCham member companies consistently point out the problems that torment them in doing business. Institutional reforms are increasingly in the focus of our members, from year to year. Improving the rule of law, the efficiency of the judiciary and the fight against corruption are increasingly mentioned as indispensable preconditions for realizing the effects of any sector-specific reforms. The predictability of amendments to legislation is no less important, while their consistent implementation has been high on AmCham’s reform agenda for years. Combined progress in all of these areas will provide a positive incentive for existing domestic and foreign investors, but also act as a magnet for attracting new investors.
What kinds of expectations do your members have: What results will they end this year with; and will they manage to retain all the workplaces that they provided prior to the pandemic?
– According to research on the negative effects of the pandemic that AmCham conducted on two occasions, our members expect a 25% drop in profitability and a 30% drop in investment, but most of them don’t expect to face liquidity problems. The biggest cause of the decline in business activity, for as many as 68% of respondents, is falling demand for products and services, which is particularly evident in the sectors of tourism and hospitality, transport and real estate.
Apart from the majority of companies that intend to maintain the same number of employees until the end of the year (71%), the number of those that plan to hire new workers (14%) and those expecting to make layoffs (15%) is relatively similar.
Many companies accelerated their digital transformation processes and organized work from home during the previous period. How well ordered is the area of work from home?
– The mass directing of employees to work from home happened because of the epidemic. This was nothing new for many of our member companies, as employees had that opportunity before. What was new was that we were forced to reorganize our businesses so that we could direct most employees to work from home. At this moment, large sections of employees are still working from home, while we are trying – depending on the epidemiological situation – to return employees to offices bit by bit, following the instructions of the Governmental crisis task force. Our colleagues from the AmCham HR Forum discussed both the positive and negative effects of working from home in great detail. They are considering whether permanent work from home could be a lasting option for some jobs and some industries, and it is to be expected – due to the new circumstances – that working from home will become more frequent than has been the case to date. On the other hand, there are challenges in the individual motivation of employees and monitoring their performance, but also in preserving and building a team spirit, nurturing the corporate culture and hiring and introducing new colleagues. There are also sectors in which frequent social interaction among employees is crucial, so in that sense the significance of the team, communication and leadership is very important.
According to research on the negative effects of the pandemic that AmCham conducted on two occasions, our members expect a 25% drop in profitability and a 30% drop in investment, while expectations vary regarding employment levels
What could the arrival of America’s Development Finance Corporation (DFC) mean for Serbia? How can we take advantage of the opportunities provided?
– The opening of the Belgrade office of DFC, i.e. the American Development Bank, will be a positive signal to future investors planning investments in Serbia and the region, but will also provide support to existing investors who plan to expand their business activities in this region. The arrival in Belgrade of such an important financial institution from the U.S. places our country on the list of desirable investment destinations and creates the possibility for us to strengthen both the inflow of foreign direct investment, which has contributed to a high share of GDP for several years already, and domestic private investment, the level of which should be higher. This bank cooperates directly with the private sector, primarily in developing countries.
The sectors that are financed by this bank are usually relate to the infrastructure, agriculture, health and energy sectors, but also new, advanced technologies. No less importantly, DFC pays special attention to the SME sector and the development of women’s entrepreneurship. And these are programs that work in cooperation with commercial banks. All of this is important for us, because our economy also has great potential in the sector of micro and small companies, and we mustn’t forget that it is just such companies that represent the backbone of the success of every economy. It should be noted that European institutions, such as the European Investment Bank and the European Bank for Reconstruction and Development, have also been present with their offices in Belgrade for a long time and that they have helped, and continue to help, in the development of the private and public sector, with significant funds.
Could the DFC’s arrival influence the decisions of private investors from America to invest more in Serbia?
– The opening of the DFC office in Belgrade only serves to further confirm that Belgrade is becoming the financial center of the region and that some projects will soon find themselves on the radar of support thanks to the physical presence of the DFC. Alongside the implementation of the mini-Schengen initiative, this will provide a positive impetus to the economic development of the region, encouraging a faster flow of people, goods, services, and capital. Additionally, it is expected that in the future U.S. companies planning investments in Serbia or the region will turn to the DFC for information on the potential for investment on the ground, which will help them in making decisions. Of course, there are still a lot of tasks that we need to resolve, and AmCham member companies highlight the rule of law, corruption and predictability in the adopting of regulations that impact on doing business.