Foreign Investors – An Important Link In Our Development Chain

The Government of Serbia continuously implements a series of measures that impact on improving the business environment and preparing new legal solutions and innovations that should make the work of the public administration more efficient and transparent and should ease operations for enterprises.

“Thus, for instance, we will introduce an innovation thanks to which all inspectorates in the country will be able to be networked in order to conduct controls and plan their work better and more efficiently,” says Serbian Prime Minister Ana Brnabić.

According to the PM, by the end of the year the national assembly should be discussing a draft labour law on work via temporary employment agencies, which the business community is eagerly awaiting, and the draft of a new law on strikes, which should replace the existing outdated statute.

“In addition to the expected increase in employment, working conditions will also improve for agency workers, along with their safety and health at work, and standard of living,” says Brnabić. “Simultaneously, we expect the new draft law on strikes to be harmonised with international standards.”

Moreover, the government will continue implementing measures for the control of the grey economy, which – judging by the work to date – yields good results.

The inflow of foreign investment into Serbia is still the biggest in the Western Balkan region, and the government expects this year’s result to exceed last year’s by 10%.

To what extent has the fight against the grey economy been fundamentally systematised?

– Combating business in the grey zone was fundamentally systematised in 2014 when the Serbian government – in cooperation with NALED and businesses gathered together in the Fair Competition Alliance – formed an Expert Group to direct activities aimed at combating the grey economy. Moreover, also established was the Inter-ministerial Coordination Body of the Government of Serbia for combating the grey economy, as it is essential to harmonise the activities of institutions that have the authority to uncover and sanction unregulated work.

The Expert Group and Coordination Body jointly prepared the National Programme for Combating the Grey Economy, which the Government of Serbia adopted at the end of 2015 and which has more than 100 measures and activities that are necessary for us to reduce the volume of business conducted in the grey zone over the next few years to the level it was at in the countries of Central and Eastern Europe at the time that they joined the European Union.

I’m very satisfied that the last NALED study on the volume of activities in the grey economy showed that this systemic battle has yielded results. The scope of the grey economy among registered companies has fallen in the last five years from 21.2% to 15.4% of GDP. What remains as a challenge is combating unregistered firms, i.e. the so-called ‘black economy’, and the emphasis will be placed on them.

An important innovation is the pilot phase of the e-inspector system that will be launched by the end of the year and which aims to network all inspections in the country by the middle of next year, enabling exchanges of information and the better planning and implementation of controls.

We are also working on encouraging legal operations and as of October, we will launch tax exemption measures for business start-ups that will last for a year. By year’s end we also expect the adoption of the law on public procurement, while we’ve also established a dialogue on the reform of the flat-rate taxation system, so we’re sure that conditions for doing business and complying with regulations will be improved significantly in the next year, which will further impact positively on curbing the grey economy.

The new draft Law on Work Via Temporary Employment Agencies and the Law on Strikes should contribute to creating better conditions in the field of labour and better understanding of the world of work and the world of capital

How could the announced package of amendments to labour legislation impact on improved results when it comes to higher employment and productivity?

– The current employment rate, measured using the existing methodology, reached a record percentage and totals 48.6%, while the unemployment rate stands at 11.9%. This is a result of the creation of a large number of new jobs throughout Serbia and valuable foreign investments realised in the previous period. In the first half of this year alone we’ve had 1.29 billion euros of direct foreign investment, and last year, which was a record year, we had inflows of as much as 2.6 billion euros. It was for that reason that the Financial Times declared us the per capita leader in attracting foreign investment.

We expect the Draft Law on Work Via Temporary Employment Agencies and the Draft Law on Strikes to find themselves in the procedure of the National Assembly by year’s end, and they will contribute to the creation of better working conditions. The law that will regulate work via agencies, so-called labour leasing, will provide security to citizens so that a worker leased to an employer cannot have fewer rights than someone employed directly by that employer. The conditions for the operation of these agencies will finally be regulated and harmonised with the international standards of the International Labour Organisation and the EU. In addition to the expected increase in employment, conditions will be improved for the work of temporary agency workers, their safety and health at work, and their standard of living.

The draft law on strikes will be harmonised with international standards. It regulates bans and restrictions on the right to strike, as well as determining the minimum work process in activities of general interest. These laws will contribute to better and more successful operations of entrepreneurs because the enhancing of social dialogue will enable the more effective resolving of discrepancies between the world of work and the world of capital.

What are your expectations for this year and next when it comes to FDI inflow? What would you like to see the change in the structure of FDI flows?

– Serbia will this year remain the country that attracts the most foreign direct investment in the Western Balkan region. 

I expect the inflow of FDI to continue to increase this year and for it to be about 10% higher than last year, which is a big and important result. In the first half of this year alone, FDI inflow was 8.6% higher than in the same period last year, and that is certainly an encouraging statistic.

In the first quarter of 2018, around 40% of FDI was directed towards export-orientated activities and I would like this trend to continue and increase. I’d also like to see FDI growth in the process of manufacturing products with a higher level of processing, especially in the food industry. As the Government of Serbia, in cooperation with local self-government, we are striving to provide foreign investors with all the necessary infrastructure and other forms of assistance to launch operations in our country and to do so in all of its regions. We want FDI to help and accelerate balanced regional development, which proved to be an excellent solution with the examples of Prokuplje and Leoni or Smederevo and the Steelworks.

I’m very satisfied that the systemic battle against the grey economy has yielded results… What remains as a challenge is combating unregistered firms and the emphasis will be placed on them specifically

What quality of dialogue do you have with the business community? How useful to the government are suggestions for changing the business environment that come from the business community and do you sometimes have to draw a line?

– The dialogue between the economy and state institutions are improved from year to year. This Government, and I as Prime Minister are always ready to talk, open to dialogue and constructive criticism regarding any topic. I consider that the best way to resolve certain misunderstandings or make further improvements in specific fields in society.

Data from NALED and USAID show that as many as 80 percents of business associations were involved in public-private dialogue and cooperated with institutions. Testifying to how satisfied the two sides are with the quality of the dialogue is the fact that three-quarters of institutions give this communication a positive rating, while 37% of business associations think the dialogue is good. I come from the economy and know what is important to the business. Now I have the opportunity to further advance that dialogue and I will advocate for an open dialogue and promote that with my own behaviour. In order to enhance dialogue, it is necessary to increase the capacity for communication with the economy within institutions, which is certainly in our plan. We want to encourage the involvement of as many citizens and businesspeople as possible in proposing and implementing reforms, as that is their right and the greater involvement of all stakeholders contributes to the quality of solutions that will ultimately relate to them.