Our trump card in the race for investors are the people which is something that German companies especially appreciate as seen in previous surveys, that is a competitive, trained, skilled workforce and top experts and engineers recognized globally.
Five years ago, Marko Čadež, the President of the Chamber of Commerce and Industry of Serbia, gave his predictions regarding the development of German-Serbian relations in the first edition of INFocus Germany and forcasted only growth. Five years later, we talked with him about further development of relations between the two countries, the growth of German investments, implementation of initiatives for the Western Balkan common market, successfully implemented dual education project, nearshoring and what was in store for Serbia this year in terms of EU accession.
Germany is still Serbia’s most important trade partner, with the trading between the two countries amounting to over 5.2 billion euro. To what extent will GDP growth in 2020 affect the continuation of cooperation and recovery after the crisis and pandemic?
It is extremely important for Serbia that our economic, trade and investment ties with Germany, as our main economic partner, continue to grow stronger during the pandemic. Over 11,000 Serbian companies did business with German partners last year – both imported from Serbia and Germany alike. Trading in goods and services has continued. The total external trade in goods and services last year exceeded 6.5 billion euro. We were especially pleased to see that the coronavirus did not stop foreign investments in Serbia, that German companies here invested in expanding their capacities and announcing further investments in the past year, and that negotiations with potential investors, for whom we are competing with the neighbouring EU countries, have continued.
The fact that, despite the pandemic, we have managed to save workers and companies, production and export capacities, macroeconomic stability and economic base for the planned growth of 5-6% this year, has additionally solidified our position and made the Serbian economy a more reliable partner for potential German investors. Our recovery and further growth will depend on domestic and international developments, and how quickly the EU, i.e. the economies of our largest external trade partners, especially Germany, will recover.
Serbia is becoming increasingly interesting for investors from Germany and the opportunities are growing, for instance, in the IT and environmental protection sectors. What economic segments have good potential?
Industries with the greatest development and export potential are the food industry (food for future), the production of technologically advanced machines and devices, the automotive industry, ICT technologies and creative industries, such as the film industry. We are talking about investments in high-tech sectors which, in addition to creating new jobs, will bring the latest technologies to Serbia, contribute to raising the technological level of our economy, create more added value products, enable our companies to join their supply chains and employ highly educated people. We are increasingly directing our investment incentive policy towards them, which is also part of our New Industrial Policy and Smart Specialization Strategy.
Over 11,000 Serbian companies did business with German partners last year – both imported from Serbia and Germany alike
To attract high-tech companies, which are nowadays frequently deciding to open their research and development facilities in addition to factories in Serbia, as did Germany’s Continental, Draexlmaier or ZF Friedrichshafen, in addition to ease of starting a business, having a good regulatory framework and fostering strategic commitment to development and application of artificial intelligence, we have two other trump cards – people and a set of tax incentives for companies willing to invest in research, development and innovation.
Many German companies are considering investing in Serbia as part of their strategies to shorten the supply chain (so-called nearshoring). What can Serbia offer them?
First of all, security and stability, which have been sustained even in the most difficult circumstances during that pandemic and is something that very few investment destinations in the world can boast of, and better medium- and long-term prospects than most comparable economies. Also, our borders are open for business people from all over the world, who could enter Serbia during the pandemic with fewer formalities than other passengers. For us, this means greater chances and greater attractiveness for the international business community, which, in the coming period, will search for safe, stimulating and investment destinations closer to home more than ever before, which guarantee safer supply, better conditions for doing business, greater predictability and profit.
Investors that decide to relocate their production plants from very remote destinations to Serbia and spend their capital here, can count on simpler procedures for setting up a company, obtaining building permits faster and doing business easier and cheaper than anywhere else in the region. They will also have lower operating costs here than in competing locations and will be entitled to a whole set of financial incentives – tax and customs reliefs, state subsidies, incentives from local governments, functional infrastructure, and the shortest routes for transporting goods through European corridors. Thanks to free trade agreements, producers in Serbia can export to the market of almost 1.4 billion consumers worldwide duty-free.
In Serbia, investors can also rely on the local economy, i.e. reliable domestic companies which can join supply chains of multinational companies and meet the standards of the most complex markets and the most demanding customers. We have further boosted the quality and availability of workforce by incorporating dual education in our school system – both in high schools and colleges. Ultimately, there is no better recommendation to future investors than the experience of almost a thousand German companies already operating here.
How important for Serbia is forming a single market in the Western Balkans and would that bring a larger influx of FDI?
I believe that there is nothing that could contribute to the improvement of the business climate, the recovery and growth of our economies and the greater influx of foreign investments in both Serbia and the Western Balkans like economic integrations in this region. Establishing a common, regional market without barriers and the Western Balkans as a single investment destination will reduce costs and make business more efficient, only one paper will be needed to accompany goods moving through all six economies, waiting time for trucks at borders will be drastcially reduced, exchange of workers and experts without having to produce work permits will be facilitated and tourists will be able to travel around the region freely. Other benefits include the WB countries harmonizing regulations and practice in all areas important for business with each other and with EU standards and working according to the same rules.
Establishing a common, regional market without barriers and the Western Balkans as a single investment destination will reduce costs and make business more efficient
This will allow the companies operating here to cut their costs, be more productive and competitive, produce, export and invest more, and make the WB even more attractive to the international business community. This is why it is important that the new action plan for the common regional market, which was adopted in Sofia this autumn, at the WB Summit under the auspices of the Berlin Process, and which officially started to be implemented on January 1, is implemented more consistently.
In 2018, the Government of Serbia restructured vocational education, which is now based on a dual model. How far have you come with that?
Business people are actively participating in devising the enrollment policy and curricula for dual educational profiles. They have also joined the National Council for Higher Education and the councils of educational institutions.
About 4,000 students have so far graduated from their high schools in line with the dual model, 70 percent of them work jobs they studied for, and in addition to working in about 900 companies, 6,900 students are currently studying for 47 educational profiles. Almost half or 3,289 students in 415 companies are preparing for dual occupations, i.e. profiles that have been developed with the support of German partners.
We are grateful to the German government and partner organizations, such as GIZ and the German-Serbian Chamber of Commerce (AHK), for their support so far in the development of dual education. It is especially important for us to continue the current cooperation on improving regulation and to continue stimulating German companies to participate in dual education in Serbia. Also, financial and expert support is important for the development of dual education in Serbia and the region, which can be realized through the Regional Challenge Fund, which the German Development Bank (KfW) has founded in cooperation with the Western Balkan Six Chamber Investment Forum (WB6 CIF).
What awaits Serbia this year?
It is important to bring the virus under control as soon as possible, not to prolong the crisis, to continue and accelerate the pace of vaccination and create conditions for normal business, planned growth and reforms on our way to the EU accession. At the same time, we need to fight for people’s lives and health, which is the most important thing for the economy, and we do not want to prevent people from working and earning, while adhering to epidemiological measures.
It is important that, as part of the European economy, we monitor the situation at the international level and, if necessary, respond with appropriate support to businesses. We also need to turn to new tools to support companies and to new business models that will create new value so we can operate better in the post-COVID period.