Despite the pandemic, Belgium continued to see interest in Serbia, even with prospection and negotiation visits during the most difficult periods for travelling. Interest lay mainly in production cooperation or production in a Free Trade Zone with the shortest transport distance to Belgium
In the interview for Magazine Diplomacy and Commerce, Hugo van Veghel, Chairman of the Belgian-Serbian Business Association said that even in the most difficult period of a pandemic, interest for starting a business in Serbia is not declining. He explained that The COVID-19 pandemic hited Serbian SMEs hard, but every disruption can open new opportunities.
Towards his opinion, the cost-effectiveness of Serbia as an investment destination is still a basic motive for starting a business in Serbia, and the post-pandemic period will for certain show more expressed interest.
The Belgian-Serbian Business Association (BSBA) was established more than a decade ago. How much has the business climate in Serbia changed during that time?
Serbia’s investment climate has modestly improved in recent years, driven by macroeconomic reforms, greater financial stability, fiscal discipline and, not at least, an EU accession process that encourages legal changes that improve the business climate.
However, as always, challenges remain. Then we think of bureaucratic delays and corruption, loss-making state-owned enterprises, the informal economy and an efficiency lacking judiciary.
Under the business opportunities that are likely to continue to grow in the next years include mainly agriculture and relevant processing, waste management (solid and water), environmental protection, ICT, renewable energies as well as health care.
Economic relations are progressing every year. Did Belgian investors increase their interest in Serbia?
Despite the pandemic, we continued to see interest in Serbia, even with prospection and negotiation visits during the most difficult periods for travelling. Interest lay mainly in production cooperation or production in a Free Trade Zone with the shortest transport distance to Belgium. The post-pandemic period (whenever that will be) will for certain show more expressed interest.
What would you pointed out as a major advantage to invest here in Serbia, and what should be improved?
The cost-effectiveness of Serbia as an investment destination is still among the top appeals for expanding businesses. With a 15% flat rate of corporate tax and the lowest rate of salary tax and VAT among its East European counterparts, the cost of operating in Serbia is among the lowest in Europe. The prices of electricity, gas, postal services, landline telephony, fax service and maintenance of motor vehicles are the lowest among 37 European countries.
According to the World Bank and International Finance Corporation’s (IFC) Doing Business survey, Serbia has improved its ranking significantly on many key indicators, such as starting a business and resolving insolvency. Despite these improvements, the two organisations still rank it in 86th position in the world for ease of doing business (publication for 2020). Let’s see what the FIC White Book will tell us in its November 2021 publication.
Where do you see potentials for improving our cooperation, is it maybe in the SMEs sector?
We cannot underline enough the importance of the SME sector. It can play a leading role in driving economic growth while fostering social inclusion and cohesion, as well as sustaining the natural environment.
How developed is this sector in Serbia and can you compare it with the SME scene in Belgium?
Surveys by the Economic Risk Management Group (ERMG) show that in Belgium revenue losses compared to a situation without the corona crisis will continue in 2021 and 2022. However, the outlook for 2021 looks more positive in the latest monthly survey in June 2021 (down 6%), after projected losses of 12% for the panel of companies surveyed in November 2020. More than 99% of the Belgian companies are SMEs of which more than 83% are micro-enterprises (<10 employees). Despite all difficulties, especially in financial reserves, the fluctuation in total numbers of enterprises is -0,01% for the total of all enterprises, +0,4% for SMEs in which + 0,01% for micros. (Comparing 2019 IV /2020 IV). Although the Belgian SME sector is “only” good for 2/3 of the total employment it is a significant contributor to economic resilience and stability.
“With a 15% flat rate of corporate tax and the lowest rate of salary tax and VAT among its East European counterparts, the cost of operating in Serbia is among the lowest in Europe”
The growth and resilience of SMEs in Serbia have been challenged by a range of disruptions of different magnitudes and impacts in recent years. Some of those are earthquake-like, such as the COVID-19 pandemic, and some are more like a slow, but persistent erosion, such as depopulation. But, as the old proverb says, “when life gives you lemons, make a lemonade” — we are witnessing that those disruptions present both challenges and opportunities.
The COVID-19 pandemic hit Serbian SMEs hard. According to the COVID-19 Socio-Economic Impact Assessment more than two thirds of SMEs were interrupted, 20% of SMEs had to restrict almost their entire operations and as many as an additional 49% of these SMEs worked with significantly reduced capacity and lacked resources. While the pandemic exacerbated other existing challenges they face, such as access to finance and markets, it also opened opportunities with the rise of nearshoring as a policy priority for many European states.
What are the BSBA plans for the period ahead and what will be the main challenges after the Covid-19 crisis?
The negative economic consequences of the pandemic are still to be counted and some sectors are more jeopardized than others, one should have in mind that from adversity often comes opportunities. Inevitably, business models will change, hopefully, toward more resilient and more sustainable, a lot of processes will be redesigned driven by technological and social innovations, while digitalization is happening in a rate that could not be ever imagined before. A fact is for instance that 52.7% of Serbs are online shoppers and this percentage is expected to reach 61.4% in 2025 (Statistica).
“The negative economic consequences of the pandemic are still to be counted and some sectors are more jeopardized than others, one should have in mind that from adversity often comes opportunities”
The BSBA will continue its endeavours, supporting the development of SME and bi-lateral cooperation. As we could not celebrate our 10 years in 2020, we are investigating if we will support the the “Balkan Trafik de Culture” festival in Brussels in 2022, which is an opportunity to present Serbia, its artists and some of its products to raise interest in the country, not only as visitors but also as cooperators or investors. Everything in this world is said to be related to money, but we believe that it is most related to people. In this way, we could support the improvement of the image of Serbia in Belgium and thus the bilateral understanding and cooperation in business.
BSBA is connecting
The Belgian Serbian Business Association is the heart of a growing network with access to a variety of companies and institutions directly involved with prospects and business in Serbia and in Belgium.
The BSBA wants to create a forum for the Belgian-Serbian economic community in the country. That is why they are inviting relevant people according to two criteria. On the one hand, all Belgian business people who live and work in Serbia, whether as expatriates or as residents and on the other hand those business people who represent or express Belgian business interests in this country, whether they are Serbian or have another nationality. The Belgian Serbian Business Association is a business club which meets on a regular basis. The common language among us is English, so we conduct our meetings in English.