If Serbia wants economic development and EU integration, it should ramp up privatisation, business leaders say.
By Ivana Jovanovic for Southeast European Times in Belgrade -- 09/02/12
An IMF official said falling food prices globally are helping to lower inflation in Serbia. [Reuters]
Just a day after the Davos meeting ended in Switzerland late last month, members of the business and political community gathered in Belgrade to discuss the effect of the global economic crisis on Serbia, ways to boost financial growth and linking it to EU integration.
Deputy Prime Minister Verica Kalanovic stressed that Serbia's current economic situation is the result of its own shortcomings combined with the global recession, which impacts every citizen. In response, the government has a package of anti-crises measures including intensive support for foreign investors, among them some big brand names.
"Serbia attracted more than 1.5 billion euros of NET [cash] FDI, higher than almost all our immediate competitors. Some of our success projects are: United Colors of Benetton -- Italy, 43m euros, 2,700 employees; Bosch -- Germany, 71m euros, 620 employees; and Yura -- South Korea, 15m euros, 1,500 employees," said Minister of Economy and Regional Development Nebojsa Ciric.
"Even during a recession," Kalanovic told SETimes, "we managed to take to Serbia brands that guarantee we'll have better exports and new jobs."
Despite this, unemployment remains above 23% and inflation, at the end of 2011, topped the target of 6%, settling at 7% year-on-year, according to data presented by National Bank of Serbia (NBS) Governor Dejan Soskic.
This year, the goal is more ambitious. "Our target inflation for this year is 4%, +/- 1.5%, that is something that we, formally, believe is achievable. Obviously, there are risks. The risks are, basically, potentially coming from international surroundings, from international financial markets, and from the fiscal side -- if it stays in line with the legal prescription device by the budgetary system law."
Bogdan Lissovlik, from the IMF resident representative office in Serbia, told the conference that inflation is falling, helped by global food prices. He says that the NBS target is within reach.
"The most frequent problem is temptation for short-term 'fixes' -- usually it's about justifying the need for government action and often it's about requesting financial support … The only solution is to leave the government to do what it can do well and give the private sector a chance. A vibrant private sector is a proven cornerstone of economic success," Lissovlik said.
One of Serbia's most successful businessmen, sugar tycoon Miodrag Kostic who owns MK Group, agrees.
"I heard that in Davos, somebody said that capitalism doesn't have an alternative but this is not the case in Serbia. Here, capitalism has an alternative but I am not sure we have consensus about what that alternative is. Here, everybody is talking about privatisation in a negative way, although the productivity increase is four or five times in privatised companies and, mainly, they are our main exporters. But in non-privatised companies, the value of them is decreasing by 20%."
Kostic adds "Serbia doesn't have a problem with financing; Serbia has a problem with mentality."
In addition, Serbia must change some economic habits, to move towards EU accession. Adriano Martins, deputy head of the EU delegation in Serbia, told conference participants that these include establishing a free market economy and the capacity to exert competitive pressure in the EU internal market.
He opted to sound a bright note. "Times of crises are also times of opportunities. This is the moment for Serbia to address some structural problems and deficiencies it has been struggling with for years."