Small businesses on the verge of collapse – Is Serbia entering the zone of economic survival?

What happens when business becomes synonymous with uncertainty? How can small and medium-sized businesses plan for growth when the rules of the game are constantly changing, costs are rising, and debt collection is becoming a lottery? Can we talk about a healthy economy in such conditions, or have we already entered the survival zone?

While decision-makers boast of a stable economic environment, the reality on the ground looks different - entrepreneurs in Serbia are struggling with growing taxes, bureaucratic obstacles and unequal conditions on the labor market, and it is the hardest for the smallest ones. The economic situation for small and medium-sized enterprises in Serbia is currently alarming, Jovana Mihajlovic, a representative of the association Protector of Entrepreneurs and Business People of Serbia (Zastitnik preduzetnika i privrednika Srbije), points out in an interview for eKapija.

– The growing costs of doing business in Serbia are the result of a combination of economic instability, inflation, rising input prices and an unpredictable tax policy. Through a series of measures, the state has increased the direct and indirect costs of doing business, while business people face difficult conditions for the collection of claims and a lack of system support. I assess the economic situation for small and medium-sized entrepreneurs as alarming - it is increasingly difficult to maintain liquidity, plan growth and ensure business stability. In such circumstances, entrepreneurs are forced to survive instead of developing their businesses, which threatens the entire economy in the long run – warns our interviewee.

One of the problems faced by domestic employers is the unequal treatment of domestic and foreign workers in terms of tax and fiscal obligations. The current regulation creates a situation in which domestic employers have to choose between higher costs of doing business or hiring labor from abroad under more favorable conditions. This not only makes it difficult for small and medium-sized enterprises to do business, but it can also demotivate entrepreneurs to invest in the development of the domestic workforce.

– While high taxes and contributions are applied to domestic employees, foreign workers in Serbia enjoy more favorable conditions, which amounts to unfair competition on the labor market. This system discourages domestic employers from hiring workers from Serbia and directly contributes to the outflow of domestic labor force abroad. In order to reduce this difference, it is necessary to equalize tax rates and provide local companies with tax breaks that would encourage them to employ workers from Serbia under fair conditions – explains Mihajlovic.

No room for innovation

The current situation, according to her, means that entrepreneurs cannot invest in development, which leads to long-term consequences for the economy.

– When entrepreneurs cannot invest in development, it means that the economy cannot progress either. The long-term effects of this situation are catastrophic - market stagnation, reduction of competitiveness of domestic companies, loss of qualified labor and increased dependence on imports. Instead of innovating and developing domestic products and services, we remain a market for foreign companies that have better working conditions and more capital. As a result, the number of quality jobs decreases, which forces young and educated people to leave the country in search of better conditions.

This type of business necessarily leads to long-term consequences - many skilled workers, faced with a lack of competitive wages and safe working conditions, decide to leave the country and look for better opportunities abroad. This further depletes domestic resources and slows down economic growth.

Proposals for concrete changes

The association Protector of Entrepreneurs and Business People of Serbia advocates a series of measures that would improve business conditions:

• Reduction of the tax burden for small and medium-sized enterprises, in order to increase their liquidity and opportunities for reinvestment in business
• Introducing incentives for the employment of domestic labor, so that employers are motivated to employ people from Serbia under the same conditions as foreign workers
• Faster and more efficient collection of receivables, as many companies are on the verge of survival due to late payments by large systems and the state
• Removal of bureaucratic obstacles, in order to reduce administrative burdens and enable easier business operations
• Abolition of unnecessary parafiscal charges
• Abolishing the closing of existing companies due to administrative and technical failures, which we have been actively working on until now as part of the “Don’t close” initiative
• Stable economic and legal policy, to enable entrepreneurs to plan and invest in the long term without fear of sudden changes that threaten business activities.

– Without these changes, entrepreneurs will continue to operate in the “survival” mode, which means that Serbia will lose jobs, income and economic potential in the long term – eKapija’s interviewee concludes.

Ivana Zikic

Udruženje Zaštitnik preduzetnika i privrednika Srbije Beograd

udruženje Zaštitnik preduzetnika i privrednika Srbije

association Protector of Entrepreneurs and Business People of Serbia

Jovana Mihajlović

business operations

small businesses

entrepreneurs