 TRADE & INDUSTRY |
 Slow but steady recovery |
After ten years of isolation from the world market, insufficient domestic sources for financing, unstable macroeconomic policy, and strong inflation there is no wonder that industrial outputs in Serbia in 2001 were almost halved in comparison with 1990, the last golden year for domestic economy. Nevertheless, the democratic changes that took place at the end of 2000 and new agreements with the IMF and the World Bank, followed by renewed contacts with all other major international financial institutions, made a positive base for a new macroeconomic policy. These preconditions gave a fresh, market oriented and stable framework for industry and trade. However, it was not enough to preserve a growth of industrial output in 2001, which ran flat in comparison with previous year.
In spite of that, the Serbian Government led by Mr. Djindjic has a right to express satisfaction. So far, there was no country in Eastern and Central Europe, which didn't show a serious decline in industrial output during the first years of transition. Serbia is the only exemption from that rule. The director of the Belgrade office of the European Bank for Reconstruction and Development (EBRD), Henry Russell, stressed to the local press in December 2001 that Serbia had achieved a major progress in the transition process.
.
Although results in 2001 for industrial output were not encouraging at first sight, lots of Serbian analysts believe that pure statistical data are misleading. Leading Serbian companies such as carpet producer Sintelon, chemical industry Merima and Nevena, rubber producer Tigar and a very strong pharmaceutical industry, Hemofarm, recorded high profits. In 2002, Serbian reformers and independent experts expects that Serbia will have a strong recovery mainly in construction and services, and industries such as the recently privatized cement plants.
The Serbian government decided not to finance the so-called "socialists' giants" from its budget, and instead of that to launch a process for their restructuring. As a consequence, these industries showed a serious decline and distorted the real picture of economic trends. The example of Smederevo-based metals producer Sartid shows how the Serbian Government wants to deal with companies that used to record loses. In March, Sartid and US Steel Kosice Co. signed a letter of intent on strategic partnership giving Sartid a chance to recover. This letter of intent sent a clear signal to foreign investors: Serbia is safe for foreign capital investment.
Sartid has 10,500 employees of whom many will become a surplus. This is a common fact for several Serbian companies, and it shows that redundant labor remains a very sensitive issue. The Serbian government decided to take three major steps to solve that problem. On the legal side, a new Labor law gives much more freedom to employers to manage their companies on the most efficient way and with the exact number of workers. The law envisages that an employee may be dismissed in such cases when a worker becomes superfluous as a result of technological, economic or organizational changes. The law also regulates that an employer with more than 50 workers who intends to terminate the employment contracts of more than 10 percent of employees is required to draw up a program for resolving the labor surplus problem.
Along with the legal conditions to create flexible labor market, the Serbian Government took firm measures to relieve state companies from redundant working force and make them more attractive for foreign investors. The government crafted strong social support for sufficient workers and offered them favorable terms to start new business in small and medium companies and free retraining programs. All these measures are followed with favorable conditions for investors that are ready to start with green field investments. It is believed that these investments will both create new jobs and accelerate industrial recovery. Serbian authorities believe that the inflow of foreign capital would be of great importance in the creation of new jobs, and especially in improving business knowledge.
The number of foreign visitors in Belgrade Trade Fair speaks for itself when talking about the increased business interest in Serbia.
Mr. Slobodan Petrovic, General Manager of Belgrade Trade Fair, says he finds very encouraging that the percentage of foreign exhibitors increased significantly up to 70-80% in 2001, and believes that "the future is in the small and medium-sized companies that stick to traditional production."
More foreign investors are also expected in trade. Serbian trade used to be fragmental, without real capital and mostly based on small shops. Foreign investors see that as an opportunity for their fast penetration in the Serbian market. Slovenian chain Mercator, which has 16 hypermarkets in all former Yugoslav republics, will open its first hypermarket in Belgrade in November this year, and has ambitious plans for the future. Belgrade's Mercator hypermarket would be the largest among Mercator stores. Although the purchasing power of Serbian citizens is low at the moment, Mercator management believes that this is the biggest and the most promising market in the Balkan region. Mercator showed interest in the privatization of the two biggest retail chains, C-market and Pekabeta. And French chain Cora signed a contract with the leading private domestic conglomerate, Delta Company, with the aim to open 5 trade centers in Yugoslavia. More international trade chains are to come to Serbia.
| Even though the country lived isolated for many years, Serbian citizens are well informed, and are buyers of many world-known brands. This is the reason why foreign companies believe that along with the strengthening of the purchasing power, their business would soon flourish. Foreign companies, producers of consumer goods, clothes, shoes, furniture and others are aware that Serbian consumers already know and prize them. "In spite of the low purchasing power, people here have an increasing need for well arranged and designed products, and they are interested in shopping in big markets which can be interesting for foreign investors" says Mr. Slobodan Milosavljevic, Minister of Trade, Tourism and Services.
International chains of hypermarkets showed interest in, not only introducing Serbian goods in their local business, but also in including them in their offer worldwide. In 2001 Serbian export was worth US 1.9 billion dollars and rose in comparison with 2000 by 10.5 %. Import was worth US 4.8 billion dollars and rose for 30.3%; this shows that the economy of Serbia is highly dependent on the import of raw materials. Even though it produced a high deficit, these trends stress that companies developed "production" and this altogether promises a slow but steady revival in industry. "At the moment we are in the process of reforming our economy from an administrative economy to a market economy. Due to the last 10 years of sanctions and isolation this country cannot offer at the moment either the best quality or competitive products and prices," says Mr. Milosavljevic.
Milosavljevic's ministry and Ministry for International Economic Relations are working on the programs known as "Made in Serbia" and "Quality from Serbia" which have to discover and promote Serbian products, which could find their place on the international market and boost Serbian exports. "Unfortunately so far we did not have many products recognized worldwide for their quality, but now we are working on a very important project called "Quality from Serbia" with its two production lines- Ecofood and Etnofood. Ecofood, for instance, involves producing fruit, vegetables or any other kind of food without chemical substance. In the last 10 years we could not afford fertilizers in agricultural production and as a result we had maybe smaller productivity but also much better and healthier products", says Mr. Milosavljevic.
A good example of products "Made in Serbia" which yet need to be fully evaluated are roof-covering materials made from clay, produced in Potisje Kanjiza, a Serbian leading industry in this branch. Mr. Istvan Jenei, General Manager of Potisje Kanjiza expects even better results in 2002. "We have a good product and what is more important: the market".
The major goal that the company management marked in the following period is to strengthen the competitive advantage and to enlarge its market in an area of 600 km around Kanjiza, which means across the country borders.
To achieve these ambitious plans, the company is looking for a strong partnership. Mr. Jenei sees the future of Potisje and Serbia in an optimistic way. "The conditions for running the business are much better now and we can make more profit. What is important is that the good spirit is already here and people are ready for new challenges. Both our politicians and businessmen need to be trusted," concludes Mr. Jenei.
The leading Serbian pharmaceutical producer Hemofarm Group is an example of how a Serbian company can be successful on domestic and international markets as long as it has strong management and clear vision of the future. Hemofarm Group produces and distributes a large and very diverse range of products. Apart for drugs, the company is famous for its dialysis and infusion therapies. "The democratic changes that happened in October 2000 gave us the stimulus to enhance our production and through that to supply the market with our drugs. That is why in 2001 we broke our production record", says
Mr. Miodrag Babic, President of Hemofarm.
Reforms in Serbia represent a substantial investment opportunity for all those who have participated in the transition processes of surrounding countries and who already had that kind of experience. It is also a big opportunity for those who didn't have enough courage to invest at that time. "This country is definitely the last chance for investing in Southeastern Europe", says Mr. Goran Pitic, Serbian Minister for International Economic Relations. "Foreign investors should not wait too long," warns Mr. Pitic. |
