There are many US companies operating in Serbia, and they are all assembled around AmCham. We are talking to the President of AmCham, Jelena Pavlović about how these companies view the business environment in Serbia, how to expedite our country’s economic growth and the objections contained in their 2018 annual report.
How can Serbia expedite its economic growth?
– AmCham member companies seek a level playing field and a business-friendly environment, with limited involvement of the Government. The state should act as the main facilitator and regulator of the business environment, rather than being an active player in the market. The role of businesses is to create jobs and generate value; the state should be there to help companies by establishing independent and capable institutions fit for a market economy. In addition to FDIs, domestic private investments also hold huge potential: last year they amounted to as little as 9 per cent of Serbian GDP. The Government should encourage businesses that already operate in Serbia to invest more by creating certainty and predictability. Legislation should be the reasonable outcome of an open discussion, while court cases should be resolved quickly and fairly. The risk of doing business should be minimal, while safeguards for private property and enforcement of contracts should be as effective as possible.
Is a “stable C”, the grade that your members gave to Serbia, something that should make us happy or worried?
– The moderate optimism of our members reflects Serbia’s macroeconomic stability and the Government’s success in cutting public debt and growing the economy during the fiscal consolidation. Several other reforms are either completed or in progress – construction permitting, labour legislation, and inspections legislation; e-Government is also starting to be implemented. AmCham’s members feel the greatest obstacles to both domestic and foreign investment are corruption, lack of the rule of law, inconsistent implementation of regulations, the shadow economy, inefficient judiciary, and underdeveloped education and healthcare. That is why large-scale, systemic reforms are needed. AmCham believes that public-private dialogue is crucial for sustainable and successful reforms. We will continue constructively contributing to public consultations and will promote capacity-building of public institutions to allow them to implement regulations efficiently, consistently, and impartially.
How do your member companies assess their own growth and what do they consider as the best features of the business environment in Serbia?
– AmCham’s member companies are optimistic in their growth predictions. Based on our annual research, almost 73% of our members expect their business to grow, while 58% plan new hiring in 2019. Over the past two years, our members have recorded higher than expected growth (by 10 pp on average for both business expansion and new jobs), which is certainly very encouraging.
Last year, among other things, you were focusing on reforming the tax system and boosting the efficiency of the Serbian Tax Administration. Have you noticed any changes in the last year or so?
– Crucial priorities for AmCham members considering new investments include the predictability of tax regulations and their consistent implementation. The Tax Administration has significantly simplified the procedure for filing tax returns and invested considerable efforts in combating the informal economy. The business community supports further improvements to the Tax Administration, especially in its use of risk assessment and consistent application of regulations.
At the end of last year, you estimated that the new Law on Charges for Use of Public Goods violated the principles of predictability of the business environment. Do you expect the Government to correct these solutions, considering that the businesses have been petitioning for years for the para-fiscal charges to be better regulated?
– The Law on Charges for Use of Public Goods was initiated by the private sector in 2013 to abolish para-fiscal charges and make new fees more predictable and existing ones more transparent. The newly adopted Law has succeeded in inventorying all charges in one piece of legislation, improved assessment rules for a number of levies, and abolished some of the minor dues. But the Law does not clearly define how the environmental protection fee is assessed and is not unambiguous in stipulating which companies are subject to this levy. However, the bylaw under preparation by the Government should shed more light on these issues.
Which reform-related topics are you going to focus this year on?
– Year after year, pending institutional reforms, have been growing in significance for AmCham members. Promoting the rule of law and capacity of public administration to enforce regulations, enhancing the efficiency of the judiciary, and mainstreaming active public-private dialogue are fast becoming indispensable preconditions for any effective sectoral reforms. Other key priorities are predictability of the taxation system and greater efficiency of the Tax Administration, additional anti-corruption initiatives, and continued efforts to tackle the shadow economy.
Do you believe the Western Balkans is willing to reduce trade barriers?
– Following the establishment of the National Coordination Body for Trade Facilitation, just over a year and a half ago, the authorities have developed Action Plans set to be implemented by the end of 2019. The abolition of non-tariff barriers is a foreign trade priority for the American Chamber of Commerce and an important precondition for the growth of economic activity.
How, in this context, do you view Kosovo imposing tax on Serbian goods? How many of your members have been affected by this measure?
– A number of AmCham member companies are affected by those measures and we have called for them to be withdrawn urgently.