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Marko Čadež, President of the Serbian Chamber of Commerce

We Rightfully Expect a Continuation of Good Results

A strengthened macroeconomic situation, along with political stability and an improved regulatory framework, is one of the most important items on the list of Serbia’s reform progress. All of this provided the impetus for the domestic economy, but that progress was also recognised by the international business community

“We have a good presupposition for the further acceleration of economic growth, for the increased inflow of investments and better export performance of the economy,” says Marko Čadež, President of the Serbian Chamber of Commerce & Industry.

In this interview, our interlocutor summarises the achieved results and expectations in 2016.

How much do today’s macroeconomic situation suit foreign and domestic investors?

In Serbia, the question of macroeconomic stability is decreasingly asked and increasingly implied. Inflation is low and stable, while medium-term inflation expectations are within the boundaries of the inflation target. Fiscal adjustment measures in 2015 resulted in the lowest deficit since 2008. The current account deficit was reduced significantly and was fully covered by foreign direct investments, which created space for the significant relaxation of monetary policy. Despite external uncertainties, exchange rate stability has been preserved.

Strengthened macroeconomic and political stability, as well as an improved regulatory framework, is one of the most important items on the list of Serbia’s reform progress. This has secured the basic prerequisites for growth – of production and exports and investment, both domestic and foreign. This has improved Serbia’s position in the reports of the World Bank, the IMF, the European Commission, the assessments of rating agencies, while the first chapters in the EU accession process have been opened, the climate for doing business and investing has been improved, while risks have reduced… All of this provided the impetus for the domestic economy, but progress was also recognised by the international business community. Serbia’s economy emerged from recession last year, and that was in a year of austerity and the consolidation of public finances when GDP growth was driven by higher investments and exports. The industry was the engine of growth and foreign direct investment was 46 per cent higher than in the previous year.

Given the current tempo of investment in 2016, do you expect the FDI level of 2015 to be outdone this year?

It is realistic to expect further growth in both domestic and foreign investment. When it comes to the domestic economy, the growth of newly approved investment loans was one of the most important sources of financing for private investment. Monetary policy is relaxed and a further decline in interest rates is expected. Regulatory and structural reforms have been conducted, which have provided an additional incentive for investment activity, including – amongst others – in the construction sector. In parallel with private investments, a new wave of public investment was has been launched in infrastructure.

I believe that last year’s net inflow of foreign direct investments in Serbia, of 1.8 billion euros, will be exceeded this year. Apart from the “Belgrade Waterfront” and “New Niš” projects, some 15 to 20 major industrial and manufacturing projects launched by foreign investors in the previous period are now in the course of being implemented. We will also see the start of the announced investments of Tönnies, Lidl, Royal De Heus Group, Zumtobel and He Steel at the Smederevo Steelworks etc.

Which of the legislative initiatives that are in the process of being implemented or that have been announced do you see as being the most important for improving the business environment?

Although the regulatory framework has been significantly completed and improved in the past year or two, in 2016 the adoption or amendment of a set of 40 – 50 laws is planned, the adoption of which would further improve the business environment.

Marko CadezThis year, in addition to the Law on Services and the announced improvement of labour legislation, changes to the law on companies and bankruptcy will follow, as well as the adoption of the Law on Regional Development. Establishing a legal framework is also expected for electronic communications (among other very important regulations on e-business and e-government), innovation and intellectual property, as well as changes to legal solutions in all aspects of education, including the creation of a legal basis for the introduction of dual education. A new framework, or changes to existing frameworks, is also awaited for customs, regulations governing market capital, free trade zones, public utilities, housing, land registration and food safety. Social entrepreneurship and microfinance should also be packaged within legal provisions.

As the economy, especially small and medium-sized enterprises, is burdened by a large number of fees and charges set down in a number of laws, the Serbian Chamber of Commerce is committed to codifying existing para-fiscal charges in the coming period, as well as defining the criteria which will form the basis for local governments to determine their fees.

From the perspective of business leaders, what are the most important steps that are expected from the new government and what do foreign and domestic businessmen most commonly suggest to you when it comes to further improve the business climate?

Last year saw a strong turnaround made and a good basis created for the continuation of resolving problems that haven’t been solved anywhere or by anyone in a year, for the development of the private sector, the further acceleration of economic growth and, most importantly, for the greater influx of investments and better export performance of the economy. Space has been created for us to deal with the healthy part of the economy, which has the potential for sustainable growth and development.

The “Year of Entrepreneurship” has elicited great interest among the general public, partly because it opens up employment opportunities for young people through entrepreneurship

Alongside the continuation of responsible fiscal policies, business leaders expect the government to carry out structural reforms more intensively, as a precondition for strengthening competitiveness and furthering economic growth, finalising privatisation and restructuring, reform of the public sector – public utilities and public administration, raising the efficiency of public administration (including inspections) and the judiciary, implementing strategies for addressing problematic loans and a national programme for reducing the grey economy, reforming the education system and introducing dual education to cater for the needs of the economy…

To what extent can the SCC use its initiatives to channel and represent the business in dialogue with the government?

Last year alone the Serbian Chamber of Commerce participated in the activities of 30 working groups of relevant ministries, organised 24 public debates, launched nearly 50 initiatives to amend laws and bylaws, many of which were accepted. It provided a significant contribution to the creation of the Law on Investment, the agreement on financial restructuring, on inspection oversight, but also on advancing legislation in the area of public procurement, the tax system, labour legislation, construction, transport, the environment etc. In cooperation with the largest audit firms (KPMG, Ernst & Young, PwC, Deloitte, Crowe Horwath, BDO) we educated the Council for the Business Environment and since August the SCC has employed a team tasked with analysing legislation of importance to the business.

Marko CadezThis year we will secure even more significant participation of businesses in the legislative process in order to create a more stimulating regulatory framework and environment for doing business and investing. The solutions for the new Law on Chambers, adopted in December, also contribute to strengthening the role and influence of the chamber in the representation of the economy. Their essence includes the principle of representativeness, comprehensive membership that ensures that the Serbian Chamber of Commerce brings together and represents all companies and entrepreneurs and that Serbian companies receive a strong, efficient, professional and cohesive representation of the interests of the entire economy in front of state bodies and international institutions.

Thus the Serbian Chamber of Commerce is becoming a central institution in which a consistent stance is formed regarding economic policy measures and all matters of importance to business operations, linking and harmonising, even resolving conflicting interests of individual parts of the economy. With the new law, the SCC also gains the right to voice a reasoned stance on any draft regulations that are adopted by the state, and which relate to the economy and have an effect on the same. That is envisaged as an explicit obligation for the Government and ministries in the preparation of any such regulations.

What kind of role does the chamber have when it comes to stimulating export- orientated domestic companies?

In the process of modernisation of the chamber system, we are strengthening all pillars of chamber activities, including the internationalisation of the economy – with a focus on supporting the export economy. We are working on building a new model for the representation of the economy in the world, under the auspices of the Chamber of Commerce of Serbia and modelled on the Austrian network of trade centres. Thanks to the building of a global network of trade centres of the Austrian Federal Chambers of Commerce, the Austrian economy has changed from being dominated by import, as it was 15-20 years ago, to become a pronounced export-focused economy. Of every ten euros earned by the Austrian economy today, seven come from abroad.

Apart from the information, legal and financial advisory services and market analysis (sector-based analysis of the potential of the domestic economy and the analysis of foreign markets) that we provide to exporters, the SCC also works on improving existing services and tools and creating new ones to support the export economy.

A special segment of our activity is directed towards opening doors to foreign markets for our companies, which is especially important for small and medium-sized companies that cannot themselves make breakthroughs beyond the local market. In the last year we have organised, both at home and abroad, nearly a hundred forums, sector-specific B2B meetings, appearances at trade fairs etc.

Of great importance are forging links with potential partners – investors and buyers abroad – and the inclusion of our firms in the production and supply chains of major companies, both domestic and foreign. In previous months we have organised days dedicated to suppliers of major international companies, such as General Electric, IKEA, BOEING, SUKHOI and Siemens, as well as meetings with Russian supply chains. Likewise, we have established cooperation with the BME – the German Association for logistics and procurement, which brings together about 9,000 companies for which our firms can be reliable suppliers.

The Serbian export performance on the German market exceeded 1.5 billion euros last year, which is partly a result of the Serbian Chamber of Commerce’s activities aimed at better connecting the Serbian and German economies

Where has the SCC been most successful to date when it comes to opening markets or finding new modalities for the placement of goods of domestic exporters?

We had the largest increase in exports last year in Germany, which is one of our most important foreign trade partners. This is, among other things, the result of intensive activity by the Serbian Chamber of Commerce on connecting with German and Serbian economies and the investments of export-orientated companies from that country in Serbia.

The Serbian export performance on the German market exceeded 1.5 billion euros last year. Exports to Germany in the period between 2002 and year’s end of 2015 increased nearly sixfold, imports increased by 250 per cent and the coverage of imports by exports almost doubled – to around 74 per cent. We also increased sales of Serbian products on traditional markets in the region – in Bosnia-Herzegovina, which is our largest export destination after Italy and Germany, as well as Croatia and Montenegro.

In addition to the region of the former Yugoslavia, we also exported more than in 2014 to the UK, France and Austria, but also Bulgaria, Hungary, Turkey, Slovakia etc. We had business forums with all of these countries last year, holding B2B discussions with entrepreneurs or participating in their fairs.

The establishing of direct flights between Belgrade and New York, with the possibility of cargo transportation, also brings Serbian exporters closer to the American market, where we have GSP (generalised system of preference) status

Although a problem with the rouble caused exports to Russia to fall last year, the large Russian market remains particularly important for the Serbian economy in the long run, as testified by the annual average growth in total exports of 22 per cent in the past five years. Besides the advantages of duty-free exports, the prospects of our exporters on the Russian market, especially from the agribusiness sector, are also proven by the great interest among Russia’s largest retail chains and performances at the biggest trade fairs in Russia, organised by the SCC. During the last food sector fair, Prodexpo, new export operations worth as much as 28 million dollars were agreed.

The establishing of direct flights between Belgrade and New York, with the possibility of cargo transportation, also brings Serbian exporters closer to the American market, where we have GSP (generalised system of preference) status.

What kind of response has so far been met by the Serbian Government’s Year of Entrepreneurship initiative among those considering launching their own businesses and where do you see the role of the SCC in encouraging young people to venture into entrepreneurial waters?

No single project in recent years has provoked as much interest in the general public as “The Year of Entrepreneurship” project. That’s why, despite the problems (from a lack of funding to a lack of entrepreneurial initiatives and an under-developed entrepreneurial spirit), a solution has been established: a package of 33 different programmes of financial and non-financial support – from grant funding and loans to education. They are intended for beginners, but also those who have entered into entrepreneurial waters and need a strong boost in order to continue and develop their businesses.

In parallel with this, a significant segment of this national project is to improve the business environment – from the removal of administrative barriers, construction of infrastructure and the involvement of the business sector in the creation of policies and programs. This national project is all the more significant because it addresses the issue of unemployment, as the biggest problem of young people, while simultaneously directing them towards entrepreneurship, as one of the ways of resolving this limitation.

The Serbian Chamber of Commerce plays an important role in the realisation of all activities relevant to the development of entrepreneurship: from improving the business environment, through improving access to sources of financing and new markets, raising the competitiveness of SMEs and the continuous development of human resources, to the promotion of the entrepreneurial spirit and encouraging social entrepreneurship and the entrepreneurship of women and young people.

I would single out the activities that are currently in our focus: work on the introduction of dual education; digitisation of existing services and the creation of new ones, especially online services; the development of start-up support; networking of small systems with large ones; support in the use of national and EU funds; and the promotion of good practices.

Interview for the 11th edition of Guide to International Business Sector in Serbia 2016