White Book 2016 shows progress; lots of work still ahead for Serbia – Investors expect further reforms, Government open for negotiations

The Foreign Investors Council (FIC), which gathers more than 130 foreign companies, presented the White Book 2016 on Monday, November 28, in which it made suggestions and concrete proposals for improving business conditions and priorities in the economic policy.

The foreign companies which have invested in Serbia are satisfied with the results of the two-year reforms carried out by the Government of Serbia, which have had a positive impact on their operations as well. The FIC members have invested nearly EUR 29 billion in Serbia, participating with 21.7% in the 2015 GDP, and they employ 94,000 workers.

In its report, the FIC especially praises the recovery of macroeconomic stability, partly a result of fiscal consolidation, but also regulatory improvements through amendments to three laws – on labor, bankruptcy and privatization, reforms in the areas of real estate and construction – especially electronic issuing of permits and improvement of inspection services' operations.

Among other things, it has been suggested to the Government to complete the restructuring or closing down of ruined companies as soon as possible and to create a new industry by drawing foreign investors who are considering relocating their capacities. The Government has also been advised to reduce the bureaucracy and reform the public administration.

According to the latest issue of the White Book, published by the FIC since 2003, the biggest progress has been made in the areas of real estate and construction and in four areas of the general legal framework, such as protection of competition and consumers, state aid and public notarization, as well as in sectors such as telecommunications, oil and gas and private insurance.

Regarding construction, the FIC says that progress has been made in initiating the procedures of conversion of the right of use of building land into the right of ownership, electronic issuing of permits, as well as enforcement of the new Law on Legalization of Facilities.

The progress in the areas of competition and consumer protection is reflected in improved operations of the Commission for Protection of Competition and the new Regulation on Submittal of Request for Approval of Proposed Concentration, whereas by-laws envisioned by the Law on Consumer Protection have also been adopted.

The expansion of the authority of public notaries to include probate proceedings has also been positively assessed, as has been the fact that no new parafiscal charges have been implemented in the telecommunications sector. Another positive change relates to intensified activities in developing electronic administration.

Regarding the oil and gas sector, intensive marking and control of petroleum products has contributed to increasing their quality and reducing illegal trade.

The least amount of progress, according to this document, has been made in the areas of taxation and labor regulations, as well as in the area of laws regarding foreign exchange operations, bankruptcy and protection of whistle-blowers, but also in the sectors of food and agriculture, insurance and house cleaning products and cosmetics.

It has been estimated that there are problems in implementing tax regulations, that renting work force has not been regulated and that administrative obstacles to employing foreigners haven't been removed.

Another problem is a large number of companies insolvent in the long term, which continue to operate due to the lack of automatic bankruptcy proceedings. Furthermore, it has been established that there are problems in enforcing food safety regulations, as well as the lack of quality control and inconsistent implementation of rules by inspectors.

Mikhailova: Basis for high expectation in the future established

(Yana Mikhailova) Yana Mikhailova, President of the FIC, said that Serbia was going through a period of political and economic stability, which provided a good foundation for a stable economic growth, and that the reforms needed to continue in order for the country to be even more attractive to investors.

Mikhailova also said that the Council believed that it was crucial for the new government to seize the moment and step up structural reforms even further, reduce the bureaucracy and improve law enforcement.

She said that, between the two issues of the White Book, the Government of Serbia had managed to carry out fiscal consolidation and secure good economic parameters providing a basis for high expectations in the future.

– Economic stability is what's important for the investors who are already here and who are thinking long-term. Also important is the reform of public enterprises, enforcing tax laws and bringing the European and the Serbian legislatures in line, as this will enable increased export of Serbian products – Mikhailova emphasized.

According to her, the Council would like for the Serbian economy to be more competitive, meaning more jobs and more money for the citizens. She also estimated that qualified work force was an important element making Serbia competitive and added that the FIC members invested in innovations and the development of people.

She said that the Council valued dialogue and noted that things didn't happen quickly.

– We all need to make a joint effort to make Serbia even stronger – Mikhailova concluded.

Vucic: Government of Serbia open to investors

(Aleksandar Vucic) At the same time, Prime Minister Aleksandar Vucic said that the Government of Serbia was open for negotiations with investors and announced that a national council for competitiveness would be formed in cooperation with the FIC in order to make the state more attractive for investments.

– There's room for improving Serbia's competitiveness, even though it is “the regional champion” this year regarding the amount of foreign investments – Vucic said and added that, in the nine months of 2016, foreign investments had amounted to EUR 1.25 billion and that they were expected to reach EUR 1.8-1.9 billion by the end of the year.

Nevertheless, the prime minister said, the state is still facing the problem of abolishing parafiscal charges, because, as he says, “we still need to find a mode acceptable to all local self-governments, and we also need to bring the operations of inspection services in line”.

– There's more work to be done in order to make the laws apply to everyone equally, to make inspection services implement the regulations consistently, to make tax authorities treat each municipality equally – he said.

Vucic emphasized that the law on leasing work force would be adopted by the end of February.

According to the prime minister, this year's GDP growth in Serbia will be 2.7-2.8%, driven mostly by the manufacturing industry, energy, construction and mining. He added that the foreign trade deficit was lower by 23%, whereas the deficit of the current account and the balance of payments was lower by 20.5% and fully covered by foreign direct investments.

M.V.

FIC-Savet stranih investitora

Komisija za zaštitu konkurencije Srbije

Poreska uprava Srbije

Foreign Investors Council

FIC

White Book

White Book 2016

foreign investors in Serbia

foreign investments in Serbia

Labor Law

Bankruptcy Law

Law on Privatization

electronic issuing of building permits

restructuring enterprises

reform of public administration

protection of competition

consumer protection

public notarization

Law on Legalization of Facilities

Regulation on Submittal of Request for Approval of Proposed Concentration

Law on Consumer Protection

marking and quality control of petroleum products

automatic bankruptcy proceedings

Yana Mikhailova

Aleksandar Vucic

parafiscal charges

law on leasing work force