FOREIGN INVESTORS COUNCIL IN SERBIA

Guide to

Foreign Investors Council in Serbia 2013/14

contents Guide to

Foreign Investors Council

6 Light at the end of the tunnel Dr MIHAILO CRNOBRNJA Professor at the Faculty of Economics, Finance and Administration 8

We’re Ready to Change the Economic Environment

in Serbia

ZORANA MIHAJLOVIĆ, Serbian Minister of Energy, Development and Environmental Protection

2013/14

EDITOR Saša Marić, s.maric@aim.rs assistant EDITOR Miša Brkić ART DIREcTOR Ilija Petrović, i.petrovic@aim.rs

IVICA DAČIĆ, Serbian Prime Minister 14 Implementation Crucial

EDITORIAL MANAGER Tanja Banković, t.bankovic@aim.rs PROJECT MANAGERS Vanja Đorđević, v.djordjevic@aim.rs Svetlana Okanović, s.okanovic@aim.rs Marija Vujković, m.vujkovic@aim.rs SPECIAL THANKS TO: Ana Firtel, FIC Executive Director Milica Ðorđević, FIC Communication Officer Koviljka Miladinović, Office Assistant

FREDERIC COIN, FIC President, President of the Executive Board of Societe Generale Banka Srbija 20 Fostering Efficiency

PHOTOS Zoran Petrović

EXECUTIVE DIRECTOR Ruža Ristanović, r.ristanovic@aim.rs

FINANCIAL DIRECTOR Ana Besedić, a.besedic@aim.rs PRINTING Rotografika d.o.o.

Segedinski put 72, Subotica FIC – “Foreign Investors Council 2012/13” publisher alliance international media in association with the Foreign Investors Council Serbia.

Makenzijeva 67, 11000 Belgrade, Serbia Tel: +(381 11) 2450 508 Fax: +(381 11) 2450 122 E-mail: office@aim.rs www.allianceinternationalmedia.com ISSN no: 1451-7833 All rights reserved alliance international media 2013

36 On the Right Path TONY VERHEIJEN, World Bank Country Manager for Serbia 38 A Full 45 Years of Success in Serbia DIMITAR ANDONOV, Operational Manager of the Coca-Cola Company for Serbia, Macedonia and Montenegro

Gabor Bekefi, FIC Vice President, Patron of the FIC Legal Committee, CEO of Carlsberg Serbia Group 24 Macroeconomic Stability is the Priority SRĐAN LAZOVIĆ, Vice President of the Foreign Investors Council, patron of the FIC Tax Committee and British American Tobacco SEE Director for Corporate and Regulatory Affairs in the CEFTA region and Bulgaria 28 Everything Valuable has Not Been Sold SAŠA RADULOVIĆ, Serbian Minister of Economy

53 Wholesale Leader ROBERTO MANCUSO, General Manager of Metro Cash & Carry Belgrade 54 F ive Years of Innovation & Investment MICHALIS ORFANOUDAKIS, Commercial Director of PepsiCo Western Balkans

42 Administrative Barriers – the Greatest Constraint for Business DEJAN JEREMIĆ, Executive Vice President of Delta Holding for Operational Activities

50 R ulebook Good for Both Producers and Consumers

MILICA STEFANOVIĆ, President of the FIC Food & Agriculture Committee (The Coca-Cola Company-Barlan S&M d.o.o.)

52 We Will Hold the Growth Trend ALEXANDROS DANIILIDIS, General Manager of Heineken Serbia

65 The Largest Conference Centre STELIOS KOUTSIVITIS, Executive Director of the Metropol Palace Hotel, Belgrade 66 Construction and Development Need Support

56 Market Consolidation and Further Expansion ANSGAR BORNEMANN, Regional Director of Nestlé Adriatic 57 For More Frequent Government and Business Dialogue ANA GOVEDARICA, General Manager of Roche Serbia 58 Deep Reform of the Education System Needed

40 W e are Continuing Steady Growth CLAUDIO CESARIO, CEO of UniCredit Bank Serbia

44 C hallenging Times Spiros Dallas, Vojvodjanska Banka CFO

TRANSLATOR Mark Pullen

GENERAL MANAGER Ivan Novčić, i.novcic@cma.rs

32 Radical Reform Necessary

DEJAN JEČMENICA, President of the FIC Human Resources Committee (Wiener Staedtische osiguranje a.d.o. Beograd) 60 Progress Needed CHRISTOPH LEITNER, FIC Leasing and Insurance Committee President (VB Leasing d.o.o. Beograd) 62 Excessive Gap Between Laws and Bylaw Solutions MILICA SUBOTIĆ, President of the FIC Legal Committee (Jankovic, Popovic & Mitic o.d.)

63 We Follow Germany’s Classical Banking Model SVETLANA TOLMAČEVA DINGARAC, Chairperson of the Executive Board of ProCredit Bank 64 G ood Results Despite the Crisis NATAŠA MARJANOVIĆ, Director of the Delta Generali Voluntary Pension Fund and director of Delta Generali Insurance’s asset management and financial operations directorate

ANDREW PEIRSON, FIC Real-Estate Committee President (Jones Lang LaSalle d.o.o. Beograd) 67 Pragmatic Approach – Basis for Future Growth RONAN CONROY, Director, BPI d.o.o.

68 We Seek Only Consistency and Predictability IVAN RAKIĆ, President of the FIC Tax Committee (Ernst & Young Beograd d.o.o.)

69 Dynamic Development

OVE FREIDHEIM, CEO of Telenor Serbia 70 E-governance – Key to Reforming State Administration

ZDRAVKO DRČELIĆ, President of the FIC Telecommunications and IT Committee (Hewlett Packard d.o.o.)

72 We Highlight Problems and Offer Solutions ANA FIRTEL, Executive Director of the Foreign Investors Council

comment Dr Mihailo Crnobrnja Professor at the Faculty of Economics, Finance and Administration

Light at the End of the Tunnel The decisiveness of the government to tackle the major problems that burden the business environment is reassuring, while the latest measures announced by the government suggest that the long-awaited turnaround should soon happen

I

t seems that light is finally appearing at the end of the tunnel the Serbian economy has been going through for a long time. It is true that the light is still far away, but it is encouraging that the pace of change is increasing, which should reduce the time needed to exit the tunnel.

There still hasn’t been a decisive turnaround in the actual economic conditions in Serbia. On numerous lists of ratings published around the world, Serbia is still ranked far below its potential. But the latest measures announced by the government suggest that the much-desired and long-awaited turnaround will soon occur. The government’s first package of measures, initiated by the Ministry of Finance, is aimed at fiscal consolidation towards dramatically reducing the high budget deficit and putting a stop to the growth of external debt. Fiscal stability significantly influences the predictability of operations and positively impacts on the decisions of investors and business people.

The second package of measures, initiated by the Economy Ministry, aims to change labour-market conditions, simplify the procedure of moving capital, or bankruptcy of enterprises, improve conditions in the real-estate sector and simplify a series of procedures. What is encouraging, above all, is the decisiveness of the government to tackle the major problems burdening the economic environment.

Also praiseworthy is the determination with which the fight against corruption is being approached.

The adoption of a strategy to combat corruption is positive. However, this is just the start. It is necessary to shift the focus from individual cases and investigations to systemic changes that will prevent cases of corruption and enable monitoring, detecting and dealing with issues of corruption at all levels.

The inflow of foreign investment in the last year was far below expectations, partly due to the still insufficiently attractive business environment and partly because of the continued recession in Europe. On the other hand, there has been a diversification of foreign investment and new investors have emerged from China, UAE and Azerbaijan. Much of this investment is directed towards infrastructure, transport and energy.

On the macroeconomic front it is positive that inflation has calmed in the past year, the dinar exchange rate is surprisingly stable and export is growing despite the continued recession in Europe. However, significant challenges remain in the employment domain and the very slow and limited recovery of production and GDP growth. The unemployment rate of over 25% is among the highest in Europe. The even higher unemployment rate among young people under 30 is of particular concern. The rate of GDP growth, which was just under 1% last year, is not enough to ensure a positive reversal in the labour-market trend or provide a basis for the growth of the standard of living.

Progress in relations with the European Union should also be noted.

Serbia is about to receive a definitive date for the start of accession negotiations. This is expected to be at the start of next year and in the meantime work has been accelerated on both sides to ensure it is successful. The start of negotiations is a strong signal to the business world that Serbia will continue making changes to the economic environment and will quickly harmonise with the prevailing conditions of the European Union’s common market. The process of further approaching the EU will have a vital impact on paying attention to adopting new laws that are in line with those in Europe and to expanding the implementation of legislation already adopted. ■

On the macroeconomic front it is positive that inflation has calmed in the past year, the dinar exchange rate is surprisingly stable and export is growing

6 Guide to Foreign Investors Council in serbia 2013/14

www.erstegroup.com

www.erstebank.rs

Member of Erste Group

Da li je vaša banka pravi partner u ostvarenju vaših investicija?

Investicioni krediti Erste Banke osmišljeni su u skladu sa najnovijim trendovima na finansijskom tržištu, a prema specifičnim potrebama i zahtevima naših klijenata u različitim industrijama. Brzo, efikasno i pod veoma povoljnim uslovima, možete obezbediti sredstva kojima ćete u kratkom roku sa uspehom realizovati svoje poslovne planove i postići željene rezultate – uz snažnu podršku, veliko iskustvo i znanje visoko profesionalnog tima eksperata iz oblasti finansijskog poslovanja.

Interview Ivica Dačić Serbian Prime Minister

We’re Ready to Change the Economic Environment The Serbian government is ready to accept and implement the suggestions of the FIC related to strengthening capacities for implementing laws, with Serbian Prime Minister Ivica Dačić stressing he also expects the expansion of investments that are already in progress and the arrival of new investors. “The transparency of work and procedures is extremely important for the activities performed by the public sector, but in addition we also want the administration to take a more active role in citizens’ daily work and business,” he says

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he FIC’s key suggestions this year focus on strengthening the capacity of public administration to implement laws. The government, in cooperation with relevant stakeholders, will prepare specific plans to increase the efficiency of state institutions and simplify bureaucratic procedures, but not at the expense of quality, says Serbian PM Dačić: “We also expect a lot from the introduction of e-governance in all places where that’s possible. The focus of the Serbian government’s work will be on carrying out reforms in the economic environment, from which we expect the expansion of investments that are in progress or that will be in the implementation phase in the near future, as well as bringing in new investors.”

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M

Y

CM

MY

CY

CMY

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Investments

Dialogue

Corruption

The Serbian government is open to all proposals that will lead to Serbia becoming the first destination for the arrival of investment in Eastern Europe, while the reforms will demonstrate our commitment to improving the business climate.

Dialogue is the most effective tool to achieve results in every system of work.

In addition to dialogue with private businesses, we will also talk at the operational level, at the level of local governance.

Additional education, more intensive training for civil servants, increased transparency, the simplification of procedures and e-work, most effectively lead to a reduction of systemic corruption in the long term.

Is it possible to strengthen the civil service in a relatively short period of time using transparent mechanisms and procedures to reinforce institutional capacities?

- The transparency of work and procedures is extremely important for the activities performed by the public sector, but we additionally want the administration take a more active role in the daily work and business of citizens. However, until state employees take on the role of an efficient and equitable service for citizens we can expect the strengthening of the institutional capacity to be done through strengthening of the legal framework.

â–ş

â–ş How do you intend to raise the importance of ac-

countability among civil servants in the conducting of public affairs?

- Upon completion of the analysis of the work of state agencies and state employees, we believe it will be possible to bring appropriate legislative changes, considering that the responsibility of civil servants is clearly defined by the Law on Civil Servants. Respecting the principle that the state will first start with itself when it comes to the implementation of reforms - such as savings in the state budget, I believe it is also necessary for legal solutions related to civil servants to be amended in the context of comprehensive reforms of the state administration.

The job of taking over three insolvent banks was completed without major tremors on Serbia’s financial market and in the near future we will consider a model for the growth of economic activity through monetary policy relaxation

2013/14 Guide to Foreign Investors Council in serbia 9

► What will the government do to create a legal

framework and the capacity to monitor, detect and fight corruption?

- The most effective cure for corruption is increasing economic activity and job creation. I believe that additional education, more intensive training for civil servants, together with increased transparency, the simplification of procedures and e-work, most effectively leads to a reduction of systemic corruption in the long term. In the short term, the government and its institutions will work to shed light on individual cases of corruption, while it will only be with final judgments that the tremendous work done in the past will become visible.

► Can Serbia change laws to improve the business climate by the end of this year?

- I don’t think reform of any system can be completed quickly and suddenly and still yield the desired results in the long term. The main aim of reforms is their viability. In the previous period it occurred that legislation was adopted and new patterns of behaviour set that later proved not to be applicable at this time. For this reason we want all proposed legal amendments to go through a full public debate, in order for us to get as many ideas and comments as possible.

In the middle of this year, at the proposal of the Ministry of Economy and Finance, the government adopted action plans regarding the completion of the restructuring of enterprises in the portfolio of the Privatisation Agency

One gets the impression that abolishing redundant procedures and unnecessary bureaucracy has halted. Why has this stopped?

- I agree that the impression is that the reform of bureaucratic procedures stopped. However, the desire is to amend the entire business model, which would entail amendment of the legal framework as well as changing the work of individual state institutions.

Given that those are comprehensive amendments, upon the establishment of a new legal model we will continue to work on the reform of the work of those who will implement these legal solutions.

What will be important for us are the comments and suggestions of colleagues from the European Commission, based on the solutions used in practice in the European Union. ►

► Serbia has mostly passed laws that are in line with EU legislation, but can their consistent application be improved?

- Changing the legal framework is not the only obstacle to reforming a system. The key is to change the way service users think, but also authorities that apply those legal provisions.

The legal framework has been altered in the past, but without specific reform of their method of implementation. The reforms that this government intends to implement include changes that will be used by the end user. ► Does your government intend, through regulatory and structural reforms, to redefine the role of the state as a public sector that should contribute to faster economic development?

- The public sector has its own irreplaceable role in the functioning of the state and should be in the service of citizens and businesses, whose efficiency is measured by the success of the economy.

In the coming period, the Serbian government will bring structural reform directions, depending on the vision of the business model and environment that we would like to be applicable in the next 10 or more years.

► How does the government intend to solve the problems of the fiscal deficit and public debt?

- The government recently adopted guidelines prepared by the Ministry of Finance about reducing budget expenditures (through reduction in salaries) and increasing government revenue (through increasing the lower rate of VAT). It is possible that the application of these measures will lead to a reduction in economic activity, so we will monitor their implementation regularly and the effects achieved.

Additionally, through the proposed law on the budget for 2014, concrete solutions were presented to increase efficiency of work, reduce expenditures at the state level and the direction of the government in the implementation of individual strategic projects.

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We believe that the combination of austerity at state level and incentives for business growth will raise economic activity and ensure smooth servicing of obligations on the public debt.

Given that we are awaited by a number of radical reforms, the implementation of which requires the full mandate of this government, I expect a gradual fall in public debt from 2016 onwards.

Does the government have a strategy for finalising the privatisation of large state-owned and public enterprises?

- In the middle of this year, at the proposal of the Ministry of Economy and Finance, the government adopted action plans regarding the completion of the restructuring of enterprises that are in the portfolio of the Privatisation Agency and an action plan on structural reforms in public enterprises.

Considering that restructuring of the government has been finalised, I expect the ministers responsible for implementing these plans will continue their implementation and the delivery of appropriate changes in the near future.

►

► Does the government still intend to take over troubled companies?

- If you mean companies that are in the process of restructuring, they are already under state or majority social ownership. If you mean private companies that the government has taken over, in the coming period the Serbian government does not plan to take over companies that are in trouble if that does not threaten the functioning of the entire system.

We must mention that the biggest economic strain in 2013 was the takeover of three insolvent banks (Agrobanka, Metals-banka and Privredna Banka), which would have caused problems for countries with much greater economic strength than Serbia.

However, these works were completed without major tremors in Serbia’s financial market and in the near future we will consider a model for the growth of economic activity through monetary policy relaxation.

- The Law on Public Enterprises, which was adopted in December 2012, opened the way for strategic orientation in the method of reforming the work of public enterprises, and that is towards their corporatisation. The legal solution that is currently in force did not achieve even one year of effective implementation, thus I believe that only through its consistent application can we evaluate its effectiveness and the need for possible amendment.

I must note that the draft legislation was prepared jointly with the World Bank and that a model was chosen that is considered able to achieve maximum efficiency within the deadline set.

► How do you Prime Minister view the suggestions and proposals of the FIC? - Any kind of suggestions and comments are always welcome and I am always very happy to answer the call to listen to the opinions of people who have invested in Serbia. However, you must understand that the Serbian government is obliged to take care of the smooth functioning of the system as a whole.

It is very important that representatives of the FIC convey to their colleagues in their home countries the willingness of the Serbian government to change the economic environment and I think this is the right time for investors to come to Serbia and work together with the government to raise domestic production.

The latest data on exports provides great encouragement to the government to continue on its current course.

The Law on Public Enterprises that is currently in force did not achieve even a year of effective implementation, thus I believe that only through its consistent application can we evaluate its effectiveness and the need for possible amendment

► How will the government limit the political influence of public enterprises?

Does dialogue need to continue between private business and public administration in order for Serbia to become a good place for business?

- Dialogue is the most effective tool to achieve results in every system of work. In addition to dialogue between private businesses and the Serbian government, we will also talk at the operational level, at the level of local governance.

The Serbian government is open to all proposals that will lead to Serbia becoming the first destination for the arrival of investment in Eastern Europe, while the reforms we plan to implement in the coming period will demonstrate tangibly our commitment to improving the business climate. ■

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►

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Interview Frederic Coin FIC President, President of the Executive Board of Societe Generale Banka Srbija

Implementation Crucial The FIC President welcomes the Serbian government’s commitment to conducting much-needed reforms and is hopeful that institutions will be able to ensure the proper implementation of new legislation and practices

reforms aimed at increasing the predictability of the environment and the sustainability and competitiveness of business in this country.

Among these reforms are five priorities for us.

The first is to maintain macroeconomic stability and focus mainly on two points: consolidation of the public deficit and the link with the public debt. The reason I would focus on this is not only because of the level of public deficit and public debt, which is relatively high but not so dramatic compared with other countries. For me the main issue is the trend, because we have seen in other countries recently that they have had a trend of huge public deficits and vast increases in debt, and this is a situation that is not sustainable because it leaves no solution other than very tough measures. So this is a particular issue that the governith Serbia ment has to address. planning We also need to see reform of the judicial system in Of course, inflation to start is also an issue and if official EU order to make sure that the laws are applied and that these things are adaccession negotiations, the interpretation of the laws by the courts is consistent dressed properly they which will help imwill lead to the realisaprove the legal frametion of the main target of reducing unemploywork by adding useful pressure and provide a ment and improving consumer spending. This frame and support, the FIC President is conficovers the first priority of maintaining macrodent this will improve the country’s competieconomic stability. The second is for the countiveness in the long term.

INTEGRATe try to launch a series of systemic reforms. The Our members are coming FIC has advocated this for a long time, but it’s ► Considering the current economic trends from almost all EU good to repeat it. The first such reform relates in Serbia, what priorities in this year’s White countries and have valuable to the health and pension systems, because Book would you like to single out? they are not sustainable today. The second one - The FIC has long been advocating structural experience of this process.

W

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FAIRNESS

IMPLEMENT

RED TAPE

When public companies are receiving subsidies, this is killing the market and private companies suffer.

There is no point in introducing a new law if it then has no tangible effect because it was not implemented.

Cutting bureaucracy is something that all investors are expecting, because it complicates everybody’s lives.

is definitely to have an education system that is Last but not least is a very important priorworking well and giving all kids a chance. When ity from the FIC’s perspective, of how to impleI came to this country I discovered that Serbia ment these reforms and the willingness and had had a very good public school system, but capability of the administration to implement everybody says that it is going down and so this them properly and in a timely manner. This is is an issue. The third priority is to reform the because we can have a lot of reforms announced administration to boost efficiency and transparand a lot of laws passed, but at the end of the day ency, which is very important for if we do not have the bylaws and all our members. And of course administration working to make we also need to see reform of the it happen then nothing moves. judicial system in order to make And we have seen that in the past sure that the laws are applied and also. So this part is extremely imthat interpretation of the laws portant. Among everything that by the courts is consistent. The the government has so far ancourt process is also extremely nounced this is the part we have long and it’s an issue when we heard about the least. cannot have a decision from the courts, and investors often don’t ► The overall impression is understand why it takes so long. that the Council has been a This is not unique to Serbia, but lot more to the point this year, that doesn’t mean it shouldn’t be steering clear of generalisaaddressed. The next main priortions and focusing more on the ity is reform of the state owndetails in its proposals. Is this ership policy, which basically approach due to the severe means dealing with public comeconomic crisis? panies that, unfortunately, - I don’t think we have been are very often not performmore detailed than in the The influence of the crisis continues… last ing well and are pulling a previous years, but perhaps lot of resources from the that way. What is year was very tough. This year we have seen an itforappears state that supports them. sure is that the influence So the reason we are pushof the crisis continues. I canimprovement, but still we cannot say that the ing for reform in this area is not say that it has deepened situation is good effectively due to the fact this year, but last year was that the restricted resources very tough. This year we of the state are funding operations that are inefhave seen an improvement, but still we cannot ficient and this is a waste of money, and in order say that the situation is good. It gives a sense to ensure that all the companies operating in of urgency and detailing more what has to be this country are competing in a fair way. done is perhaps a response to the urgency that When you have public companies receiving we feel. The reforms have to be done and it’s imsubsidies, this, of course, is killing the market, portant for us to effectively reinforce our mesand private companies in the same field suffer sage that this will be very tough by relaying our and that’s not fair. The next priority is to address sense of urgency. the legal framework. We are hopefully going to enter into official negotiations with the EU, ► It seems that certain expectations are rewhich will definitely help to improve the legal peated year after year. Has there been any framework because there will be added presprogress made? In which fields has the least sure, which is useful to the state and will also progress been made? provide a frame and support to help improve - The FIC is actually relatively precise in assessthe legal framework, and in doing so will lead ing which recommendations have been impleto an improvement of Serbia’s competitiveness. mented year after year and which ones have 2013/14 Guide to Foreign Investors Council in serbia 15

not been implemented. What we see this year is that a little below 50% of our recommendations submitted last year achieved progress. That’s not bad, but we could say that if a lot of reforms have been touched upon, they have not been carried out deeply enough, and this goes for the implementation as well. So a lot of areas have been touched by the reforms, in terms of announcements and even laws, but the subsequent implementation is not deep enough from our point of view. This is where we would like to focus attention regarding what has already been done. It’s good to see that there is willingness to reform and that the government is showing its intention to work with us and others from the private sector to discuss the reforms, open the subjects and conduct some reforms, but now it is a question of implementation, how good it is and how fast it is.

stability is crucial in that. The crisis has unfortunately shown with some countries that the economy can hit a wall. And when a country hits a wall, the companies that are operating there suffer a lot. As such, macroeconomic stability is a key for the predictability and sustainability of business. It is important for us, but I think it’s also important for the country as a whole.

► The government has announced a new set of systemic reforms that will also redefine the state’s role. In your opinion, what systemic reforms have to be implemented and how do foreign investors view the state’s role?

- We already mentioned some of them, in the form of education, pension and health systems and the reform of the administration.

At the FIC we believe that government has a big role to play in helping to ensure the business environment is competitive, ► Could you draw a parallel bepredictable and sustainable. But tween the measures publicly we don’t see its role in managannounced by the government ing companies – where we see, and the recommendations not only in Serbia, that the state from the White Book? How is not always the best at doing much do they coincide? that. So, let’s see the government - As I said, we see a really strong focus on the macro encorrelation and this is vironment and stop, or normal because we are When a country hits a wall, the companies that are reduce, its focus on the really focusing on strucenvironment. If it tural reforms, as our goal operating there suffer a lot. As such, macroeconomic micro does so it will be much is to really improve the more efficient. overall business environstability is a key for the predictability and ment. So it’s normal and sustainability of business we are happy that the ► Very little has been government is addresssaid publicly about ing these questions and we definitely support building the state administration’s capacity the direction the government is taking. Again, for implementing laws. How important is there is the question of how this is implemented this to investors? and we have to wait and see how the govern- I believe that this is part of the package of rement will reform the administration to impleforms announced by the government, but it has ment it. not been communicated much in public, despite its importance. It is definitely key, because there is no point in introducing a new law if it then ► Why is maintaining macroeconomic stabilhas no tangible effect because it was not propity so important to foreign investors? erly implemented. In some ways this is more im- Macroeconomic stability is key for any invesportant than introducing a new law, because if tor, because when you are investing, or continuthere is an announcement and investors expect ing to invest, in a country, you want to make sure a new law and nothing happens, then it is worse that the situation will not worsen in future years than doing nothing at all. and, ideally, will improve. And macroeconomic

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► Since the first White Book the FIC has been

viewed as an important factor in the Serbian economic environment. The Council has constantly advocated and advised the Serbian government to adhere to the rule of law.

How present is the rule of law in Serbia and which segments are lacking in that respect?

- This relates to one of the systemic reforms I already mentioned, in terms of making the judicial system work more efficiently and ensuring predictability for investors. This is still a weakness in this country, and the FIC and others have long advocated progress in this area. It is also seen as a key area by the EU and therefore should definitely be a priority. Working on this area would also prove the government’s willingness to improve the business environment in this country globally.

administration into change because I don’t see any reasons why the administration, like any other institution, would change by itself. Why would it seek to reduce its own power and influence? So it’s an issue of politicians applying pressure to force a change. ► In this year’s White Book the Council suggests holding mandatory and timely consultations. Why is this format of communication necessary and does this imply there have been no consultations of this kind so far?

- It does not imply that at all and, in fact, on the contrary, we are pretty happy with this and in the last period we saw a real willingness from the government to discuss and work together with the FIC and other stakeholders to improve the situation. But, of course, if we could take this a step further and make such consultations mandatory we would be very happy to be in the loop.

On top of this we also insist on timely consultations, because in order to have a good dialogue with the government, we need to mobilise our members and it takes time for them to formulate concrete and adapted proposals.

Bureaucratic hurdles are a perennial topic in the White Book. For years, Serbia has been ranked very low in terms of conditions for starting businesses. Which obstacles are the most visible and why do you think the state administration is reluctant to remove them?

- Cutting bureaucracy is something that all inves► Do you think that Serbia I think all institutions are reluctant to let go of obtaining a date for the tors are expecting, because it complicates everybody’s any power they have and that’s why you need start of its EU accession lives – not only companies negotiations is a good opstrong politicians who are ready to push the but individuals as well. So I portunity for the country think there is no need to infinally complete the readministration into change because I don’t see to sist on that because its imforms and transition proportance is clear. As for the cess that have been delayed any reasons why the administration, like any main obstacles, we could for years? other institution, would change by itself mention the general real es- Definitely. The EU will protate and construction area vide a framework, which Serand the laws governing it. The government has bia will have to work through in order to imannounced that this will be a priority and that prove the business environment and increase there will be a law to reform it by the end of transparency and predictability. This is a huge the year. We welcome the given opportunity job, but as well as pressure there will also be to analyse draft law on spatial planning and assistance from the EU, both in terms of guidconstruction and are curious to see result of ance and funding. By the way, Serbia has to go this important advocacy. Generally speaking, I through this transformation with or without Euthink all institutions are reluctant to let go of rope. With Europe it will be easier and is a very any power they have and that’s why you need good opportunity for the country, but it has to strong politicians who are ready to push the make these changes regardless. ■

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Interview Gabor Bekefi FIC Vice President, Patron of the FIC Legal Committee, CEO of Carlsberg Serbia Group

Fostering Efficiency The FIC is keen to continue helping the Serbian government in its efforts to streamline and strengthen the country’s system, introducing EU-compliant rules and regulations and fostering an improved business climate for the benefit of all. According to FIC Vice President and CEO of Carlsberg Serbia Group Gabor Bekefi, the FIC believes that its longstanding partnership with the Serbian government is crucial during this time of transformation

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he FIC thinks that as a part of fiscal policy, there is a need to reform the public sector and there should be consistent implementation of the new public procurement policies and a better allocation and better utilisation of the budgetary resources, which should be coupled with concerted efforts to keep inflation under control.

The Council also advises that the Serbian government undertake serious and zealous reforms, since it believes that now is the right time for such reforms. Is it really the right time for them or the last moment?

- I think it’s very obvious in Serbian society today that the government has recognised that the time has come to really launch reforms. The FIC has always been a good partner in driving those reforms over the course of the last 10 years, so we therefore do think that now is the right time to continue the dialogue and we advocate a number of changes.

As the foreign investor community, we are proposing four areas where the Serbian government should focus its activity. One is in maintaining macroeconomic stability, and here we spoke about continuing coordination of monetary and fiscal policies to address the key problems of fiscal deficit and raising public debt, price instability and inflation, and their correlation with economic growth and employment. Then we also recommend launching systemic reforms and reforming state ownership policy.

We would also like to see, as we have been advocating for a long time, the state becoming stronger in the implementation of laws and gaining more consistency in that implementation, and that there is an upgrade in the business climate through the cutting of red tape. So, we do think and we have seen that the government now has an interest in moving forward and we think that it’s the right time to strengthen our dialogue with the government on all of these topics.

►

The FIC believes that following legislation and rules that are similar to those of the EU will create more predictability and more transparency and that will foster a better business climate

► In its suggestions for maintaining macroeconomic stability, the FIC notes unstable prices and the inflation rate. How much of an impact do these factors have on economic development and employment?

- The FIC advocates that the government should re-assess the country’s current fiscal policies. Moreover, in order to ensure macro-economic stability, coordinated monetary and fiscal policies is of key significance. As part of the fiscal policies we do think that there is an obvious need for reforming the public sector and we also think that there should be consistent implementation of the new public procurement policies and a better allocation and better utilisation of the budgetary resources. All these things should be coupled with concerted efforts to control prices in the sense that inflation should be under control, because a lower level of inflation would create more predictability for business and from an investment perspective this is also important. And the more predictability there is, the more perspective for future investments will be obtained.

roles The FIC believes that roles among economic stakeholders must be separated.

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Predictability

Systems

Laws

Lower inflation would lead to greater predictability for operations, which is important from the perspective of investors.

The nature of each system, company and organisation is always to create new things and there is a tendency to forget to remove old phenomena.

We would like the state to become more assertive and consistent in applying laws.

Why did the Council suggest legislative reforms in this year’s White Book? What problems have investors been facing?

- This is a topic that the FIC has had on its agenda for a long time and it has two angles. One is that we have been advocating that there should be a legislative system with clear laws and clear guidelines governing how those laws should be implemented. And then any disputes that arise about the implementation would be dealt with through the creation of a judiciary system that is transparent, fast and professional. We think that these two things should go hand in hand.

â–ş

productive consultations so far?

- The FIC believes that a dialogue fosters better laws and enriches the thinking, and when there is a continuous dialogue then potential conflicts can be cleared up in advance.

In the last 10 years the FIC has been a good partner to all of the governments in this respect. Nowadays we see that this current government is also interested in continuing that dialogue and therefore there is good collaboration. This collaboration is proven by a few successes.

Since 2010 there has been a committee within the FIC that is dealing with regulations tackling the fields of food and agriculture, and it has been working with the Ministry of Agriculture for the last three years in order to help in the creation of more laws that conform to the European Union in the area of labelling and marking packaged food stuffs. This year

Today the management of state-owned companies is sometimes influenced by non-economic interests, while the best interest of the country itself is to see the best and most efficient use of capital

â–ş The Council also recommends holding regular consultations with interested parties in drafting major laws. Why is this important and have there been any

potpuno bezbedna Mobilnost, tokoM svake ziMe.

www.michelin.rs 2013/14 Guide to Foreign Investors Council in serbia 21

we passed an important milestone when the committee and the Ministry agreed about, for example, displaying pictures of fruits on labels and now this new legislation has been brought in with EU standards, so thereby Serbia became compliant with a broader setting in Europe. Similarly, there was another example where we do believe the FIC’s advocacy work has been listened to, and that is in the area of the Law on Real Estate Brokerage. Here we were able to achieve the acceptance of our proposals by the government. So these are two good examples of where the everyday hard groundwork is achieving tangible results.

What we see with the White Book is just a summary of the work that goes on behind the scenes throughout the year.

► What is going to change in the business environment with the adoption of EU-compliant laws and their consistent implementation?

- The FIC believes that following legislation and rules that are similar to those of the EU will create more predictability and more transparency, and that will foster a better business climate, which is important for all investors in this country.

Why is concluding the privatisation process important for the economic environment?

- The FIC believes that there should be a separation of roles between the participants in the economy. The state’s role is to create an operating framework through legislation, the judicial system etc, while the investors are here to operate the economic enterprises. When the state is participating in the free market through state ownership there is a double role, and therefore completing the privatisation process and handing over enterprises to private owners would create much clearer roles and thereby contribute to the creation of a level playing field and more transparency in the country.

►

side, enabling employers to adapt to the changing needs of the market. Currently this is not possible because the legislation is quite rigid and, therefore, in order to make itself more competitive, Serbia should change the Labour Law to make it easier to both hire and release people. We believe that doing this would create more opportunities for the economy itself.

► Why do foreign investors consider abolishing obsolete procedures and unnecessary red tape so important, and how detrimental is red tape to the Serbian economy?

- The nature of every system, company and organisation is that you are always creating new things and there is a tendency to forget to cut and remove the old things that are no longer valid. Then you have a combination of new rules and old rules getting in the way. That applies to both companies and states. In order to create clarity, logical systems and transparency, one should cut out old and obsolete laws and procedures, because only then do you have a cohesive, logical and streamlined system, with elements that logically support each other. When that is not there, transparency is hindered and automatically problems start to occur because laws and legislation can be cherry-picked based on the need of interpretation. This can obviously lead to a suboptimal situation in the economy.

In order to become more competitive, Serbia should change the Labour Law to ease both hiring and firing. If this is done, we believe that more opportunities will be created for the economy itself

► Considering that the FIC’s member companies employ more than 95,000 people in Serbia, which of your proposals pertaining to labour legislation do you expect to be taken on board?

- It has to be said that the Serbian Labour Law is quite complicated and puts a lot of administrative and financial burdens on the employer. This might have been right at different times, but today the world is changing quite fast, as are the conditions, and the nature of capital investment means that it needs flexibility on the labour

► Why do foreign investors advocate the modernisation and professionalisation of public and utility companies?

- As I mentioned earlier, economic interests should be managed the same way because the logic is the same, regardless of whether it’s a public company, a government-owned company or a private company. Today the management of state-owned companies is sometimes influenced by non-economic interests, while the best interest of the country itself is to see the best and most efficient use of capital. That is why the FIC is proposing that these companies get professional leadership and, therefore, the same principles would apply when it comes to running a public company as is the case with a private enterprise. That would create the benefit for the government of ensuring the better use of capital and greater efficiency, which, at the end of the day, is also good for the taxpayers. ■

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2013/14 Guide to Foreign Investors Council in serbia 23

Interview

Srđan Vice President of the Foreign Investors Council, patron of the FIC Tax Committee and British American Lazović Tobacco SEE Director for Corporate and Regulatory Affairs in the CEFTA region and Bulgaria

Macroeconomic Stability is the Priority We expect continuation of the coordination of monetary and fiscal policy in order to address the key issues of fiscal deficit and public debt, price instability and inflation and their link to economic growth and employment the economy and launched a number of important initiatives to amend laws. But if the process does not lead to a successful culmination within a reasonable time frame, and in a way that actually solves the problems identified in practice, there will not be many reasons for satisfaction. We specifically emphasise the importance of implementation of laws, because what are good and consistent laws worth to us if they lack bylaws and if the laws are not implemented?”

T

he FIC is committed to the transparency of its work and for 11 years has given recommendations for improving business through publication of the White Book. In the 2011 edition it went a step further. Namely, in the last three editions it has included a tabular overview of the implementation of recommendations from previous editions of the White Book, which provides information on the state’s response to specific proposals by foreign investors. In this way, the tangible effects of efforts to improve general business conditions can be seen. Thus the performance indicators are extremely precise. For example, of the 267 recommendations given last year, progress was made on about 47% of them, while no progress was made on the other 53%. More specifically, 98 recommendations made a degree of progress, while 27 recommendations made significant progress.

“According to the latest edition of the White Book, which was published recently, last year brought a wide range of reforms that should be deepened and implemented more efficiently,” says FIC Vice President Srđan Lazović. “So it is very important that the government recognised the priorities of the FIC and

► How do you interpret the fact that the least progress, among other things, was made in the laws governing the food and agriculture industry?

- It is correct that the least progress was made in the area of food and agriculture. Paradoxically, we all speak about the food and agricultural industries being strategically important areas, or areas where Serbia has a chance to make much needed economic progress in a positive direction. In addition to these industries, relatively small steps forward compared with last year were also made in the areas of labour legislation and human capital, real estate and construction, customs and insurance, and leasing. Considering the importance of these areas to strengthening competitiveness and the inflow of new investments, it can be assumed that the FIC with great attention expects significant improvements in the period ahead.

With regard specifically to the food and agriculture sector, I would like to convey a positive example from a few weeks ago. Namely, the adoption of the

We actively monitor all events related to announced changes to the Labour Law

Education Most universities are aware that they are in a competitive market.

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Market The state should gradually withdraw from the management of public companies in order to significantly liberalise the market.

Taxes

Reforms

Two important laws have also been improved: the Law on Corporate Income Tax and the Law on Value Added Tax.

Last year brought a wide range of reforms that should be deepened and implemented more efficiently.

Rulebook on Labelling, Marking and Advertising of Food at the end of September this year is a positive development. The rulebook concerning each food and beverage producer and each consumer has hitherto created an obstacle to the import and export of products, but unfortunately also unfair competition, because the old rulebook provided an opportunity for a section of manufacturers who do not respect the rules to take advantage of the situation and achieve an advantage in the market, which did not fall under fair competition. Another important issue that has still not been satisfactorily resolved is the issue of procedures for sanitary and phytosanitary inspections during the import of raw materials or finished products. Inconsistency in the interpretation of measuring samples and its implementation, despite the new guidelines on sampling that came into force in January 2012, is still noticeable.

Finally, there remains the issue of subsidies, i.e. the lack of a longterm policy on subsidies that would enable producers in this sector to make long-term business plans.

These are all important issues and we will continue to closely monitor all the news regarding not only this area, but all the others on our list of priorities.

deficit and public debt, price instability and inflation and their link to economic growth and employment.

What are the obstacles to the development of the free market and how can the state help in that regard?

- There the role of the state is very important. The state needs to deal with macroeconomic issues and to gradually withdraw from the management of public companies in order to significantly liberalise and create a fair and competitive market.

Now the government is both the regulator and a market participant and there are often abuses of power that are not good for anyone – not for the state, nor for its citizens. And ultimately it has a negative impact on the image of the country, and that bad word is then heard far away and with that we as a state also lose credibility. That’s why we believe the state needs to carry out reform of state-ownership policies in order to create conditions for the creation of a sustainable public sector. This specifically entails: defining the strategy of the government in relation to the privatisation of large stateowned companies, completing the process of privatising public companies according to a defined plan, reviewing the state’s participation as a market player, as well as the required modernisation and professionalisation of public enterprises and utilities.

►

The state needs to reform state ownership policies in order to create conditions for the creation of a sustainable public sector

► What is the essence of the FIC’s recommendations to economic policy makers in terms of continuing the coordination of monetary and fiscal policy?

- One of the top priorities on our list is maintaining macroeconomic stability, which is of crucial importance to all investors for devising their long-term business plans. We always emphasise that, in addition to political stability, macroeconomic stability is a key prerequisite for the survival of existing investors and their further investing. No less significant, it is also important for all those investors who carefully consider Serbia as a potential market and who make plans to enter this market or invest in another country on the basis of the macroeconomic indicators of the country at a given juncture. As such, we expect continuation of the coordination of monetary and fiscal policy in order to address the key issues of fiscal

► According to the White Book, a lot has been done in the tax system. What does this relate to specifically?

- Yes, analysis emerging from the latest edition of the White Book showed that the area of taxation was among those where the most progress was made.

Specifically, the results look like this: of 25 recommendations, there have been positive developments on 10 – on six there were significant changes, and some progress was achieved on four. In this we are primarily referring to the following: since 30 May this year, with the aim of achieving unique implementation of tax laws, the opinions issued by the Minister of Finance, or the official he authorised, are binding for the treatment of the Tax Administration. That

2013/14 Guide to Foreign Investors Council in serbia 25

should contribute to the predictability of the tax system and consistency in the application of tax regulations, but a key prerequisite for that is to ensure that the aforementioned opinions are applied in practice.

Two important laws have also been improved: the Law on Corporate Income Tax and the Law on Value Added Tax, both of which have introduced more precise rules. Along with the first mentioned law, related to transfer pricing, tax depreciation, recognition of the cost of advertising for tax purposes and so on, and the second mentioned law, regarding the tax treatment of services without additional charges, also introduced is the possibility of trade in buildings – which is generally exempt from VAT – being taxable by VAT, with which the Law on Value Added Tax removed barriers to enlivening the financial leasing of real estate in practice.

► What can be done to improve the labour market and harmonise it with the needs of the economy?

- Much could be done to make labour markets more flexible and the FIC has for years advocated for the improvement of labour regulations. We actively monitor all events related to announced changes to the Labour Law, and we recently held a special meeting for the members of our Human Resources Committee with State Secretary of the Ministry of Labour and Social Policy, Zoran Martinović, regarding the planned changes to this important law.

We plan to continue to be active in this field and to zealously advocate for the improvement of the labour market, which should first start with the creation of a more modern Labour Law that will respond to all, or at least most, of the requirements of the economy in the coming years in order to significantly improve the situation on this market.

In a few lines, I will note our key recommendations: abolition of existing restrictions on the signing of contracts for a specified period of one year, introduction of the concept of workforce leasing, removal of significant financial constraints (the employer now has to pay severance for all years of working life) and other administrative barriers (the complex payroll system, e.g. a signed paper trail for every salary paid).

For example, the provision of the current law according to which the employer must pay severance of someone’s total years of employment, and not for the years working for a particular employer, blocks the hiring of experienced people, because no one wants to get into a situation, due to a drop in business for any reason, where they must also pay the incremental

cost of retirement benefits.

We have to accept the fact that the world is changing dynamically, that the time of having a secure job until retirement is in the past and that every day is a new challenge for both employers and their employees. Consequently, the regulatory framework, in particular the Labour Law, has to respond to that.

► For several years the FIC White Book has suggested modernising the education system. Has this suggestion been accepted and what else should be done?

- The fact is that there is a mismatch between the education system and labour market needs. And that’s not something that emerged yesterday.

This is a problem we have had for the last 15-20 years. On the other hand, we have noted certain changes to the education system, especially at the university level, where it is noticeable that most universities are aware they are in a competitive market. They began the process of reforming on their own, in order to position themselves on the market better than the competition.

Regarding the issue of modernising education, implementation of the Bologna process has started in Serbia, which will lead to improvements in the education system. However, there still aren’t many universities that are able to provide students with practical knowledge, which is why companies are forced to invest heavily in educating and training young graduate employees. To conclude, the education system must be improved and be better connected to the business community in order to reduce the gap between education and the needs of employers. This would undoubtedly improve the image of Serbia as a desirable investment location with a high-quality workforce.

There still aren’t many universities that are able to provide students with practical knowledge

► How can the FIC assist the government in implementing reforms?

- The FIC continues to strengthen, thanks to continued growth and the influx of new members, currently bringing together 130 companies that have invested more than €20 billion, accounted for 17.5% of GDP in 2012 and that directly employ over 95,000 people in Serbia. We believe that with the experience of our members we can significantly help the government, not only with advice on which reforms should be given priority, but also where problems exist in implementing reforms and improving the administration of laws, which is of crucial importance to investors. ■

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Interview Saša Radulović Serbian Minister of Economy

Everything Valuable has Not Been Sold Seriously and responsibly in reform. Gradual but fundamental action required. There will be no uncontrolled throwing of money down the drain. The entire system will be completely public and transparent, while conditions will be the same for all. The most efficient and transparent ‘subsidy’ is certainly reducing taxes on labour

“T

he main goal of the measures we are preparing and implementing is reduction of the deficit in the state budget, relieving the local economy and creating a good business climate for economic growth. Considering that predictable, clear conditions for doing business are a critical factor in investors opting for new investments in Serbia, both foreign and domestic, we intend to strengthen the business environment in Serbia by improving regulation and ensuring more transparent work of state institutions, says Economy Minister Saša Radulović, clarifying: “By year’s end improved laws on privatisation, bankruptcy, labour and planning and construction will be adopted. These four laws are essential to the reform process started by the government. For systemic deficit reduction it is necessary to resolve the issue of restructuring enterprises and the system of the work of public enterprises, as well as improving conditions for doing business. For the recovery of the domestic economy it is critical to reduce taxes on labour. We intend to address the grey market and illegal operations and to work publicly with responsible institutions to prevent corruption. There will no longer be uncontrolled throwing of money down the drain from the state funds and agencies through various subventions and loans. That’s now ended. We are entering into reform seriously and responsibly, but as a result of the erroneous economic policy led in Serbia in the last decade the economy cannot recover all at once, but rather will require gradual but fundamental action.” ► Will

those measures attract new investors?

- We expect so. The most important signal for attracting new investment is the opportunity to generate profit, which requires an economy that stands on solid foundations and a favourable

business climate. That is precisely what the new measures should ensure. The entire system will be completely open and transparent and conditions will be the same for all. That is not only in the interest of the citizens of Serbia, but also all investors, because I believe that all of us together want investment unburdened by controversies.

By the middle of next year we must complete the restructuring of 179 companies that cost us $750 million annually, according to the assessment of the World Bank. The healthy companies cleared of debt that emerge from this process will be attractive to investors. ► Investors

Investment

To attract investment we should have an economy that has a sound base and a favourable business climate.

will be invited to participate in the completion of the privatisation of public enterprises under restructuring. What do you offer them?

- First they should know that not everything valuable in Serbia has been sold. That should be shown by the ID cards of companies in restructuring and all those in the portfolio of the Privatisation Agency. The great action of making ID cards of these companies was launched by the Economy Ministry in September and they are all now posted on the official website of the ministry. There potential investors can see all the relevant information about the companies being privatised, financial statements, inventories and appraisals of property value, lists of obligations, existing customers, suppliers, mortgages, legal disputes. Domestic and foreign investors can analyse the data of companies that interest them and show business plans and ideas for the company to the Economy Ministry, so that together we can find the best model of cooperation.

We are setting a new framework for privatisation. The key words in the amendments to the law on privatisation are com-

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Transparent The entire system will be completely public and transparent, with rules that are the same for everybody.

ID cards The Ministry of Economy launched an ID card scheme for all companies being privatised, so investors can see all the relevant information.

plete transparency and accountability of state authorities. An element of capital increase and the possibility of joint ventures will be introduced, as well as options to purchase capital, entrusting the management etc. Investors have already been invited to propose improvements to the operations of companies whose current business are presented through transparent ID cards and at the beginning of 2014 we will make a decision on the best method of privatisation for each of the enterprises.

What follows is a sharp guillotine to eliminate unnecessary regulations that burden businesses.

investors. In this I’m not referring solely to citizens of Serbia, but also partners who have come from abroad and launched operations in Serbia. The domestic economy equally comprises all companies doing business in Serbia, employing and paying taxes in Serbia, regardless of whether they are owned by citizens of Serbia or other countries. ► Will

a guarantee fund be formed?

- We are working intensively with the EBRD on models for a guarantee fund, which will carry part of the risk with the banks and reduce interest rates for all investors, not just certain ones. The money invested by the state through the guarantee fund should be multiplied at least five times by the funds that banks can place even today, but they do not have anywhere to place them.

Subsidies provided to date, on which a lot of money was spent without control or evaluating the effects, are not a model of sustainable economic growth

You said at the Restart conference that there will be no more discrimination between domestic and foreign investors. What does that mean?

- Foreign direct investments are necessary, desirable and welcome in Serbia. Foreign investors, however, have for years been our excuse to do nothing and not to change, because we expected that foreigners would come to develop our economy. No one will help us if we do not help ourselves and that’s why the main focus of economic policy must be local entrepreneurs and local ►

Guillotine

► Is

there a need to complete regulatory reform?

- In addition to preparing and adopting the four key laws we discussed and the relevant bylaws, what follows is a sharp

2013/14 Guide to Foreign Investors Council in serbia 29

guillotine to eliminate unnecessary regulations that burden businesses. There should not be many taxes and they should be simple to administer. Some laws, although good, are not implemented. The Law on Budget System, for example, stipulates that the amount of tax cannot be determined arbitrarily, but must reflect the actual costs of providing services. So far this has not been implemented and we will ask everyone to adjust taxes to costs. In short, our priority is to finish the key laws and then we have a whole series of new things to do in order to relieve the economy.

What new things do amendments to the Law on Bankruptcy bring?

- The bankruptcy law should primarily accelerate bankruptcy proceedings, where today there are many deviations. Bankruptcy will be more transparent in the future and creditors will have a stronger role. The responsibility of trustees will be increased, as will the rights of workers to link years of service. We will introduce mandatory analysis of the causes of bankruptcy. People need to understand the essence of that process; that bankruptcy is an opportunity for the company to look into healthy sections and see how to return to the market. ►

What are the key changes to the Law on Planning and Construction?

- Innovations to the Law on Planning and Construction, which we prepared together with the Ministry of Construction and Urbanism, will shorten the time and number of procedures needed for issuing construction permits. To date this has been a major problem that has raised complaint among all investors coming to Serbia and domestic investors planning to expand their operations. Another important issue it resolves is the right to use construction land. The vagueness of that right is largely to blame for the failure of privatisation and the standstill of many bankruptcy cases. It is a prerequisite for the further development of the building industry and the greater availability of construction land. ►

good model it would have yielded some result by now and the economy would not be in the condition that it is. The most efficient and most transparent ‘subsidy’ is certainly reducing taxes on labour. ► When do you expect the burden on labour to be reduced?

- There is agreement in the Serbian government that it is necessary to reduce taxes and contributions on labour, it is just a question of when and to what extent. That measure has not yet passed the government, due to the assessment that reducing current taxes on labour would increase the budget deficit. My assessment of risk was different, but as part of the government I respect the decisions made. Reducing taxes and contributions remains a key reform measure proposed by the Economy Ministry and therefore we will continue to work on creating the conditions for implementing these measures.

How and when will the monopolies of public enterprises be abolished?

- Public enterprises are generally monopolies through which Serbia has led its social policy for years. That costs a lot. Instead of being sources of profit, we spend hundreds of millions of euros per year on those companies.

That must stop. In addition to direct damage caused by throwing money away and increasing the government deficit, the damage caused by the way of working to date has also rendered senseless the sound business practices based on competition, profit and the positive selection that they carry. We need to introduce corporate governance to public companies, with managers who will know how to play the market game. We are preparing amendments to the Law on Public Enterprises that will introduce mandatory licensing of all directors and members of the supervisory and executive boards. We will also introduce complete transparency to public enterprises, as well as the obligation to report to the state and citizens. And from now on public enterprises will have to behave as hosts. ►

The state’s task is to create a framework that will enable interest rates to fall, while banks are the ones who need to provide loans and work with the economy

What will be the main model for supporting the economy?

- The state’s task is to create a framework that will enable interest rates to fall, while banks are the ones who need to provide loans and work with the economy. We are considering ways of supporting the economy through the reduction of risk and thereby interest rates and greater availability of credit. We are also talking with investment funds, which would raise the issue of capital investments.

Subsidies provided to date, on which a lot of money was spent without control or evaluating the effects of investments, are not a model of sustainable economic growth. If that was a ►

► Can Serbia increase employment figures in the near future?

- We will get new jobs when the economy starts to grow. That is why we insist on reducing taxes on labour and the new model of financing the economy through commercial banks, because in that way we will facilitate business. One of the key laws that should encourage employment is the Labour Law. Amendments that were proposed by the Economy Ministry will resolve the issue of redundancy benefits, so that they will pay for years of service with the last employer and its related entities and not for all years of service. It will also enable easier releasing of workers and with that much easier hiring, because the weight of layoffs will directly influence the ease of decisions to hire. ■

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Interview Zorana Mihajlović Serbian Minister of Energy, Development and Environmental Protection

Radical Reform Necessary A prerequisite for establishing a good business climate is the dismantling of this system we work in. Tax reform must be such that it attracts foreign investment, encourages entrepreneurship and creates jobs

“W

e must establish a diagnosis as clearly and accurately as possible,” says Zorana Mihajlović, Serbian Minister of Energy, Development and Environmental Protection, at the beginning of her interview. “This government inherited a very expensive and inefficient state that functioned without a strategy or capable leadership, which established within the system personnel on the basis of establishing a certain oligarchy, too many social rights that are highly unsystematic and which prevent the establishment of the business climate, but at the same time are also not effective at sustaining social protection. We inherited indebtedness, much less production than consumption, the propensity for corruption and despotism in which the president was also the prime minister. We also inherited a bureaucratic state and a reluctance to dismantle the same.”

As the minister also responsible for development, could you assess what needs to be done to improve the business climate as an important element of economic development?

- A prerequisite for establishing a good business climate is the dismantling of this system we work on. Tax reform must be such that it attracts foreign investment, encourages entrepreneurship and creates jobs. At the same time, it must also be a source of state revenue, thus tax collection must be fair and strictly controlled. Fiscal reform should be accompanied by structural reforms of the economy, public administration, pension and healthcare systems, which is the only way to provide the basis for long-term growth and development. I support labour market flexibility alongside security for employees. That simply means hiring and firing without bureaucratic obstacles and the state must provide high social security for those who lose their jobs, which is an important counterweight to flexible firing.

► You are known to be a critic of the work and results

►

of public enterprises. How do you see the government’s strategy of the corporatisation-privatisation of large state-owned enterprises?

- Radical changes are necessary to replace the eligible with the competent. It seems to me that in the previous period there was no coherent strategy and I’m advocating for competence and transparency as basic criteria, bringing the best managers in the way that the best are engaged in the private sector, rewarding in the same way, as that’s a precondition of competitiveness. I believe that with the new changes in the government we will standardise the way of placing the leading people in the public sector, but that we will also endeavour to reduce the number of public enterprises. Where the state is not required, why wouldn’t we talk about public-private partnerships?

This would significantly contribute to corporatisation and the creation of an effective form of responsible and sustainable management. As there are defined deadlines for resolving the issues of restructuring companies until June next year, I do not see any reason not to define a deadline for the reform of public enterprises, as that

If we want to have a system with zero tolerance for corruption, in addition to the effective work of prosecutors and the courts, we must also act preventatively

Environment Nearly a third of the EU acquis relates to the environment and all these regulations should be transferred into national legislation.

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Reform

Payment

Culture

Tax reform must be such that it attracts foreign investment, encourages entrepreneurship and creates jobs.

There is no basis for companies that generate substantial income to use the status of restructuring to avoid payment obligations for electricity or gas.

It is very important to develop in the society a culture of offering support to each individual to achieve success, to prosper and develop all their talents and abilities.

is in the interest of citizens and the economic stability of the country. Corporatisation is completed for Elektromreža Srbije (electricity) and Transnafta (oil), but two major energy companies remain in EPS and Srbijagas. Reform of the public enterprise Srbijagas will happen, because there is no other way for this enterprise, which last year made a loss of over €300 million and has debt in excess of €1 billion, to become sustainable and capable of meeting commitments it has taken on by participating in international projects such as the construction of the South Stream gas pipeline.

We insist on reforms, because the interest of the state is that these companies be as ready as possible for the arrival of competition. Unfortunately, in public companies many thought that for them nothing would change, thus they didn’t take the restructuring seriously enough.

EPS formed public supplier EPS Snabdevanje (EPS Supply) with a delay of a few months and thereby caused a problem for tens of thousands of consumers in Serbia because of inadequate care, crowds at the counters, an inability to make non-cash payments etc. Such an attitude towards customers is unacceptable, especially for a company that from 1 January 2014 will compete for thousands of customers in the medium- and low-voltage sections. If that’s how they also behave towards entrepreneurs entering the market, there will be no surprise if they move to suppliers who offer them a better price and better service, which would mean reduced income for EPS.

panies in similar situations and facing bankruptcy. Nobody should ever again be allowed to behave by publicly praising themselves as the greatest state tycoon, when at the same time we are fighting a war against corruption and business crime that comes from the ranks of certain tycoons. If it is known that of the €1.2 billion debt of Srbijagas some €800 million has nothing to do with the inadequate price of gas, but rather with inadequate management, then that management must be changed by a clear decision of the state.

In the same way, there is no basis for companies that generate substantial income to use the status of restructuring to avoid payment obligations for electricity or gas because it creates a problem for EPS and Srbijagas, and distorts competition on the market. ► Should the state still intervene in the

market?

- The very fact that there are companies that can do business on the market yet they belong among companies undergoing reconstruction, which are exempt from the payments of any kind of obligations, is indeed a form of state intervention in the market, which is creating unfair competition.

Public companies were carrying much of the burden of the social functions of the state in recent years, which had a negative impact on their business performance. In the energy sector we have already taken concrete steps to break free of these functions. Among other things, today we have established parity between domestic and imported gas that prevents Srbijagas from making a loss on substance, which is one of the reasons for the losses of this company. From 1 April, social cards that guarantee vulnerable consumers a certain amount of electricity and gas at the expense of the state are valid, and for instance, EPS does not have to give so-called social discounts but only discounts that reward regular payers. The goal, then, is to create conditions for public companies to be profitable and competitive, and for the state, through budgetary allocations, to take care of vulnerable individuals and families.

The goal is to create the conditions for public companies to be profitable and competitive, and for the state, through budgetary allocations, to take care of vulnerable individuals and families

► Do

you think the role of the government as a market player in the takeover of troubled companies should be reconsidered?

- I think that is necessary in some cases, among other things in order to accelerate the privatisation process and to carry out an additional assessment of whether there are the opportunities and room for the sustainable functioning of the company. After that a decision will be brought regarding some of the solutions, whether that is to be privatisation, public-private partnerships, bankruptcy or liquidation. Never again should it occur that a company that has a problem with losses or debt and is lacking successful corporate management be tasked with saving other com-

Despite announcements to the contrary, large investors have not emerged in the electrical energy sector.

What is the cause of that in your opinion? ►

2013/14 Guide to Foreign Investors Council in serbia 33

- That is primarily the responsibility of those who announced it, because we heard in previous years about energy investments of €9 billion that never materialised.

I personally avoid talking about billions of euros, although we are leading serious negotiations on the construction of new facilities. Priorities are the conclusion of a preliminary contract for the Štavalj mine and thermo-electric power plant, and TE TO Novi Sad, as well as two large hydropower dams: HPP Đerdap 3 and the reversible HPP Bistrica. With these capabilities we will ensure not only the security of supply to the domestic market, but also a certain amount of power for exporting to neighbouring countries.

Regulations on the conditions and procedure for acquiring the status of privileged power producers have been adopted. What tangible activity now follows in this regard?

- In total, between December 2012 and July this year, four regulations were adopted in the area of renewable energy: the Energy Law was amended and the National Action Plan for Renewable Energy was adopted, a guide for investors in renewable energy was defined, as was the model of contracts for the purchase of energy from privileged producers.

Our goal is to have a total of 1,092 megawatts of new capacities for the production of electricity from renewable sources by 2020, which would bring Serbia about €2 billion of investments over the next seven years.

That is also an obligation of Serbia towards the Energy Community. Although only a little time has passed since completion of the legal framework, we already have encouraging signals from investors. NIS recently started building a wind farm in Plandište with power of 102 megawatts, which should be completed next year, and based on signed memorandums we expect to see the building of more than 200 small hydropower plants in the next two-to-two-and-a-half years. We are currently preparing a new public call with new locations for the construction of mini-hydropower plants, which should soon be published. ►

We need to make legal regulations stricter, in order for drastic penalties to prevent the possibility of pollution, and on the other hand encourage the introduction of environmental standards in enterprises and practices at all levels.

Five laws in this area will come before the parliament very soon. For next year we plan to have established a budgetary fund for environmental protection. This will not be a new agency, but rather a separate item in the budget. But it will allow us to have dedicated separate funds from which we will finance environmental projects.

With the adoption of these laws, we are simultaneously preparing for the start of negotiations with the European Union, and negotiating chapter 27, which relates to the environment, is one of the most difficult. It is enough to note the fact that nearly a third of the EU acquis relates to the environment and all of these regulations should be transferred into national legislation, with their implementation ensured.

Does this mean the creation of a legal framework and the capacity to monitor, detect and fight corruption at all levels?

- In addition to all of this, I think it is very important to develop in society a culture of offering support to each individual, to achieve success, to prosper and develop all their talents and abilities. Supporting tolerance and encouraging respect for diversity, promoting fairness in all areas of life and work, consistently and fairly applying law and justice in all institutions of the state and society. All community service work should be encouraged, as well as optimism, positive relations towards one’s self, opportunities for success and the future in all spheres of public and business life. We need to create an enabling environment and reward success. Instead of negativism, value creation should be affirmed.

Of course, we must also deal with problems, because Serbia has been a state trapped by corruption for years.

Although we were often attacked for forming an anti-corruption team, I think its recent results have shown that we were right when we established it. In addition to the large number of cases submitted to the Prosecutor’s Office, this team helps with the internal control of public companies that truly do their job without fear that they will have a problem with the management.

If we want to have a system with zero tolerance for corruption, in addition to the effective work of prosecutors and the courts, we must also act preventatively, which implies a different relationship among officers and officials towards state property, which is also tempting for appropriation and misuse in countries that are better organised than ours. ■ ►

We also want to launch public works or specific actions that would allow us to create a ‘green’ Serbia. It is very important to create an ecological culture and an awareness of responsibility towards nature

Almost all laws in the field of environmental protection have been adopted and an institutional framework has been created. What’s next in this domain?

- We will try to animate the community to take an active part in protecting the environment, preserving and cleaning Serbia and alerting us about incidents. We also want to launch public works or specific actions that would allow us to create a ‘green’ Serbia. It is very important to create an ecological culture and an awareness of responsibility towards nature.

►

34 Guide to Foreign Investors Council in serbia 2013/14

2013/14 Guide to Foreign Investors Council in serbia 35

Interview Tony Verheijen World Bank Country Manager for Serbia

On the Right Path The fact of the matter is that reforms are politically and socially never easy. They often require a lot of political courage and, particularly, a vision which spans beyond a political cycle

W

orld Bank Country Manager for Serbia, Tony Verheijen, is confident that the country is on the right path when it comes to carrying out necessary reforms and fiscal consolidation. Here he discusses some of the options available to the Serbian government as it seeks to safeguard the country’s economic stability and create a more favourable climate for doing business.

tion is often inconsistent. This is because rules and procedures are too complex and leave too much room for discretion, causing unpredictability in making decisions and room for corruption. Companies have an incentive to stay small and informal – when they grow they start attracting the attention of various inspections, which have quite a bit of discretion in enforcing complicated rules.

In contrast, although tax rates are sometimes high in northern Europe, procedures are straightforward and implementation is uniform, with very limited room for discretionary interpretation. One practical step in this process is to adopt one bylaw that will regulate implementation of a certain law (e.g. a bylaw on implementation of VAT linked to the VAT law). This bylaw/regulation should contain unambiguous implementation rules of various provisions of the law. This approach is used in most European countries. ► In the last few years the World Bank has written

several studies about reWhile the government is in the process of fineforming certain segments What is your definition Serbian society, the state of a favourable business tuning some elements of the reform agenda, at of and the economy, includclimate?

- Laws and regulations have this point we have no reason to believe that the ing studies on reforms in education, healthcare and to be simple, unambiguous government will not deliver and we will continue transforming public enand transparent, leaving as terprise Serbian Railways. little room as possible for deto support the process Why do you think succescisions based on someone’s sive Serbian governments have failed to take on discretion. In implementation, everybody should board and implement the suggested reforms? be equal before the law.

- The fact of the matter is that reforms are politiAs one of the World Bank reports (‘Golden cally and socially never easy. They often require a Growth’) points out, the main difference in the SUPPORT lot of political courage and, particularly, a vision business environment between northern and that spans beyond a political cycle. There are also a southern Europe is not so much the level of, for I am encouraged with lot of strong vested interests to maintain the status example, taxation, but rather the consistency and the signs that the quo, even when this is not in the interest of citiuniformity in rules and their implementation. It is new finance minister zens. So whenever there is an attempt to change, well known that Scandinavian countries have high has the government’s various groups put public pressure, of one or antax rates and yet most of them are considered as support to continue other kind, on a government to retract. being business friendly markets. In many southern even more vigorously Nevertheless, there are examples – even in European countries, including Serbia, rules and recent Serbian history – that staying on a reform legislation are convoluted and their implementain the right direction. ►

36 Guide to Foreign Investors Council in serbia 2013/14

Rules and procedures

vision

consolidation

Rules and procedures are too complex and leave too much room for discretion, causing unpredictability in making decisions.

Reforms are politically and socially never easy. They often require a lot of political courage and, particularly, a vision that spans beyond a political cycle.

This government has already taken a big step in right direction in consolidating its fiscal position with consolidation revenues.

course pays off, politically and socially. If only one example, we can recall how everybody was taken aback when the Serbian leadership decided to close down the biggest banks in the country at the beginning of the last decade. Yet this decision paid dividends in the development of the banking sector in the long run.

issue, which is one of the critical remaining ‘transition’ issues left to be addressed. ► The

Serbian government has announced that it will ask the United Arab Emirates government to lend Serbia US$2 billion. Do you think this is a good move?

- It is obvious that Serbia needs external financing for the budget deficit. In principle, the more concessional the source of funding it can get, the better for the country, though of course one needs to examine if there are strings attached and if so what these are.

Several years ago the World Bank calculated that Serbia spends between €500 million and €800 million more than it earns. Serbia has been advised to cut back public spending, but local politicians are against austerity measures.

What is your message to them? ► Following the reshuffle of the - This government has already Serbian government, do you taken a big step in right directhink the World Bank will grant tion in consolidating its fiscal poSerbia a loan of US$200 million? sition. It consolidated revenues - Most of the reforms this loan and closed some extra budgetary will support are already agreed funds. In addition, it improved upon between the government control of expenditure commitand the World Bank. And while ments and started introducing a the government is in the process centralised payroll system. of fine-tuning some elements of Having said that, I have to rethe reform agenda, at this point iterate that a big task still remains we have no reason to believe that ahead in order to significantly the government will not deAlthough tax rates are sometimes high reform public finances and put liver and we will continue to them on a sustainable path. support the process. We are in Northern Europe, procedures are This is something Serbia has particularly encouraged after to do whether one likes it or Deputy Prime Minister Vučić straightforward and implementation not. The problem in Serbia is adamantly backed these reis uniform, with very limited room for the high level of so-called manforms in the meeting with datory expenditures, which our Country Director Ellen discretionary interpretation makes fiscal consolidation Goldstein, and that this was challenging. However, we feel that there is room further confirmed in meetings with the ministers to manoeuver, in particular in the area of discreof Finance and Economy. tionary subsidies (e.g. in agriculture). In addition, according to our calculations, Serbia loses about ► Is Serbia in a position to continue putting off 2.5% of GDP in direct and indirect costs of SOEs pension-system reform? (state-owned enterprises) that in many instances - Pensions are among the biggest burdens on the do not contribute to employment or growth.

Serbian budget. In order to address fiscal consoliI am encouraged with the signs that the new dation, Serbia will thus have to do something about Finance Minister has the government’s support to this particular expenditure. One of the ways to do continue even more vigorously in the right directhat is to introduce penalties for early retirement tion. In addition, the new Economy Minister is putand implement stricter rules for disability retireting resolving the issue around SOEs at the top of ment. After that the government might want to his agenda. It appears that for the first time in a consider further adjustment of the retirement age decade there is a real opportunity to address this for both men and women. ■

►

2013/14 Guide to Foreign Investors Council in serbia 37

Interview Dimitar Andonov Operational Manager of the Coca-Cola Company for Serbia, Macedonia and Montenegro

A Full 45 Years of Success in Serbia We pay €3 million in taxes annually, while €1 of our tax is equaled by the €35 in tax paid by all those who work with us. It is not productive to expect those who operate positively to help those who are less resilient to the crisis. The key to our operations is clear and precise laws that leave no room for ambiguity. Each of our jobs creates an additional 13 in the Serbian economy

A

fter 45 years of operation in Serbia, CocaCola has become a significant market player and its operations generate 1.18% of Serbia’s GDP. From the perspective of a large business system such as Coca-Cola, it can be said that the Serbian economy certainly needs to strengthen and radical reforms are needed for that. For this it is necessary to deepen the dialogue between the public and private sectors aimed at improving the business environment, considers Dimitar Andonov, operational manager of the Coca-Cola Company for Serbia, Macedonia and Montenegro.

What needs to be done to improve that environment?

- It is necessary to deepen the dialogue between the public and private sectors in order to improve the business environment. It is certainly necessary to stimulate production. Much has been done in that area in recent years and that route should continue.

On the other hand, reducing the budget deficit is a constantly burning issue, but we believe that the solution should not be sought in a sector that generates income, i.e. in additional tax burdens and obligations for producers. They certainly carry the heavy burden of the economic crisis, thus to expect those who operate positively to help those who are less resilient to the crisis is certainly not productive. ►

Clear and precise procedures, as well as less complicated administration, are urgent priorities when it comes to the business environment

Coca-Cola has operated in Serbia for 45 years and is among the foreign investors operating on this market the longest. How does the business environment in Serbia look to you?

- Coca-Cola has been present on the Serbian market for four and a half decades, which is the best indicator of our successful operations. During this time the CocaCola system has gone through a fantastic journey from the moment when the first Coca-Cola was produced here to the present position, when we are employing 1,300 people in three factories. We are proud that we have become a significant market player, which was confirmed by renowned economic analysts who conducted a study of our socio-economic impact. Its results show that with our business operations we achieve 1.18% of Serbia’s GDP. We pay €3 million in taxes annually, while €1 of our tax is equaled by €35 in tax paid by all those who work with us.

In that sense, from the perspective of a large business system such as ours we can say that the Serbian ►

economy certainly needs to strengthen and for that radical reforms are needed. However, we believe that it is easy to be critical of the economic reality, which is certainly difficult. It is necessary for us to approach constructively and work together on solving problems and finding opportunities for improvement, which is the task of the state, but also the corporate and civil sectors.

dialogue It is necessary to deepen the dialogue between the public and private sectors in order to improve the business environment.

► How much is the legal framework a barrier to better and easier business?

- It is necessary for the economy to be a partner of the state, by proposing constructive solutions and proposals for the challenges that we face every day - specifically through consultation in the preparation of new

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legislative proposals, which are directly or indirectly related to the economy. When it comes to the legal framework, for our operations the key is clear and precise laws that leave no room for ambiguity. Work should also be done on improving complicated and unclear procedures, but also on full implementation and respect for the law. ► Are

you bothered by corruption?

- We believe that the implementation of and respect for the law, as well as equal conditions for all participants competing on the market, are necessary conditions and the foundation for a healthy business environment, and thus the improvement of the business environment and economic growth and development. ► What should be done for to administration become

more efficient in facilitating business company?

- It is certain that clear and precise procedures, as well as less complicated administration, are urgent priorities when it comes to the business environment. We can also see that with the example of the Labour Law, which should bring flexibility to labour relations in general, as well as resolving problems with building permits and difficulties over land ownership. For many years we have a situation where the process of obtaining building permits is extremely long and unnecessarily complicated, which represents an additional strain on all companies doing business in Serbia, but also future investors. As a concrete example, it is an interesting fact that we have a problem with the transfer of land ownership that has lasted 10 years. It is necessary for us to prevent such situations.

Is Coca-Cola able to secure the right staff and workforce in Serbia? Can the labour market meet the needs of your company?

- Certainly the most worthy of credit for our success are our employees, who function as a large and harmonious team. We are very proud that talented managers who emerged in our company now work within our system in many countries in the region and Europe, even in Atlanta. It is often said on the market that you can recognise staff who come from the “Coca-Cola school” according to their quality, knowledge and desire to succeed.

Within our system in Serbia 1,300 employees endeavour on a daily basis to refresh people around the country and the region with our drinks and each one of our jobs creates an additional 13 in the Serbian economy. This means that with our operations we provide another 18,500 jobs, which is 0.62% of the country’s total workforce. Given the unemployment rate, as a key problem in Serbia today, these figures show what kind of stimulus our system provides to stakeholders in the value chain in Serbia, including the state and households.

►

Does Coca-Cola has new investment plans in Serbia?

- Despite all the challenges, the Serbian market is very dynamic and has great potential. In a year in which we are celebrating an important anniversary, we feel that we made the right decision by investing in Serbia, which is confirmed by the results that we are very proud of - in all categories where we are present in Serbia we are recording an increase in market share. We are aware of the effort that lies behind these successes, but also the responsibilities that bind us to the consumers and the local community in which we operate. We will remain equally committed to both the development of our business and further investment in the local community, because that is the only way we can contribute to the sustainability of both. We are confident that we are awaited by many more successful anniversaries here that we will celebrate together. ■ ►

We believe that the implementation of and respect for the law, as well as equal conditions for all participants competing on the market, are necessary conditions and the foundation for a healthy business environment

How should the laws on quality control and food labelling look? Are these laws in Serbia harmonised with EU laws?

- The domain where the most insufficient compliance with European regulations is felt is in the category of fruit juices and nectars. This is extremely competitive and important for the fruit growing industry, but unfortunately business conditions have not been the same for all for a long time. Let’s take for example the Rulebook on Marking, Labelling and Advertising of Foods that was only recently finally changed, following the long-term insistence of responsible producers.

Here we recall the NOPS’ research showing that certain manufacturers misled consumers. This segment

►

certainly has great potential and we believe that it is necessary to set the same conditions for all and regularly monitor the quality of all products in the consumer goods sector, but also continually work to educate consumers. Only in this way can customers be assured of the quality of a product on the market.

2013/14 Guide to Foreign Investors Council in serbia 39

interview Claudio Cesario CEO of UniCredit Bank Serbia

We are Continuing Steady Growth We are one of the few companies to invest in all customer segments in the past five years in order to further extend our offer. The lack of an adequate rate of economic growth is certainly the first and most important problem confronting banks in Serbia focused on the real needs of clients and our goal is to provide concrete answers and realistic benefits to the challenges and opportunities they face. International and local know-how contributes greatly to our position and our competitive advantage is reflected in the quality and service we provide. Numerous awards from leading financial magazines, such as Euromoney, Global Finance and Banker, testify to our expertise. UniCredit at the global, regional and local level has, among others, won the award for best bank in financial trade, money management, private banking, project financing etc.

U

niCredit has been present on the Serbian market since 2001. If the investment of this bank was measured according to total assets, it could be concluded that at the end of the second quarter of 2013 it amounts to more than €2 billion. This positions UniCredit Bank as the third biggest bank in Serbia. For the past 12 years, which were characterised by the continuous reinvestment of profit into operations and several injections of additional capital, the total capital of the bank has continuously grown and now exceeds €400 million. A significant increase in balancesheet assets and equity, as well as an increase in the customer base to the current total of 200,000, further confirm its long-term commitment to Serbia. “All these years we have actively offered financial support to our clients, directly influencing the development of the Serbian economy. Support did not even stop during the crisis, as evidenced by the aforementioned figures,” says Claudio Cesario, CEO of UniCredit Bank Serbia.

► What are your experiences when it comes to large corporate clients?

- We are one of the few companies that invested in all customer segments in the past five years with the aim of further extending our offer. When it comes to the economy we’ve always been one of the leading banks.

Thanks to our expertise, professional skills and understanding of clients’ needs, we have managed to overcome the difficulties brought by the global financial crisis and we continue to grow steadily. Over the past year we have further strengthened our team focused on serving small businesses.

Thanks to a combination of international experience and local expertise, we continually provide new funding schemes for our corporate clients consistent with their needs and we create new business models.

Our goal is to follow up their growth and contribute to the development of their business. We complete our service with the products of UniCredit Leasing.

Thanks to a combination of international experience and local expertise, we continually provide new funding schemes for our corporate clients

How much does the competitive advantage of UniCredit Bank come from the fact that it is a member of an international banking group?

- The fact that UniCredit Bank is a member of one of Europe’s leading banking groups, the undisputed leader in central and eastern Europe, with a long and rich history, certainly contributes to our position on the local market when it comes to strengthening the trust of our clients, our image and reputation. As a group we are

►

GROWTH A significant increase in balance-sheet assets and equity, as well as an increase in the customer base to the current total of 200,000, confirm UniCredit's longterm commitment to Serbia.

► Which market problems slow down banks?

- A lack of adequate rates of economic growth certainly represents the first and most important problem confronting banks in Serbia. This affects the development

40 Guide to Foreign Investors Council in serbia 2013/14

of business in the country, but also the possibilities of attracting new investment. On the other hand, as a critical issue we can also highlight the high unemployment rate, which has risen steadily during the crisis period.

The crisis very carefully ‘chooses’ banks. Those that are unable to adapt to the new business model and the environment in the crisis period will feel negative effects when it comes to operational efficiency, risk and the possibility for new investments. ► What challenges will Serbia face in the near future?

- Where there are challenges there are opportunities. In the last 12-month period much has been done in Serbia. It has been shown that there is a willingness for change and hard work. The European Union has recognised that.

However, before the process of joining the EU begins, it is necessary to implement reforms and meet a number of requirements, considering that the construction of an administrative infrastructure is of great importance in order for EU accession countries to more effectively manage pre-accession funds and prepare for the EU structural funds.

On the other hand, it is necessary for Serbia to continue work on improving the business environment through the implementation of structural reforms, in order to increase the level of investment and thus influence the development of domestic and foreign companies.

Unemployment is extremely high and every investment, regardless of its amount, may lead to its reduction. This is also the only way to improve living standards. I believe you will agree with me that it is important for the citizens of Serbia not only to see the changes implemented, but also to feel the effect of those changes in their everyday lives.

already. This project, which is implemented in cooperation with the Ana and Vlade Divac Foundation, aims to promote the economic and social integration of refugees and internally displaced persons. Grants of €2,000 each have been received by 140 families so far. In that way they are given the opportunity to generate revenue and become economically independent. The importance of this project has been recognised, which is also evidenced by the two major awards given to our bank: Planet Business and My Serbia.

I would also like to mention another project: Idea For a Better Tomorrow, which we are also implementing with this foundation. It is focused on people and enterprises that, by proposing the idea of uniquely Serbian products and services, have the opportunity to participate in a contest for financial grants in the amount of €56,000. This project has a wider dimension, because in addition to economic viability it is placing a focus on products and services that can contribute to the promotion of Serbia abroad and increase the competitiveness of export.

Last but not least, I would like to mention the cooperation agreement that our foundation recently signed with the Dragica Nikolić Foundation. We have identified healthcare, which represents one of the most pressing problems in Serbia, as the first area of joint action that requires urgent solutions and a quick response.

It is necessary for Serbia to continue work on improving the business environment through the implementation of structural reforms, in order to increase the level of investment and thus influence the development of domestic and foreign companies

► Which of the socially responsible activities of UniCredit Foundation would you single out?

- We are working on two fronts when it comes to our social responsibility programme. As a bank, through our micro marketing programme, we support projects which are of great importance for the local communities in which we operate in Serbia. On the other side, we carry out most of our activities with the support of UniCredit Foundation, which has invested over €1.5 million in Serbia since 2008. Of numerous initiatives, I would certainly single out the RAISE Project, which has focused on the problem of migration for five years

► UniCredit Bank is a highly desirable employer among young, educated people. What kinds of opportunities do you provide to employees of your bank?

- For employees we provide many opportunities for professional development through various activities, master programmes, experience abroad etc. Our employees grow along with the bank. They represent a basic investment, regardless of age, gender, origin or any other factor. Internal advancement, both within the bank and within the group, represents our primary competitive advantage.

I would like to point out just some of the projects we undertake. There is CIE Without Borders, which enables employees to change jobs for a certain amount of time, work in an international environment, meet colleagues and learn more about new processes. In addition to that, employees with the best results not only have the opportunity to work abroad, but also to actively participate in the development of strategically important projects for the Group. ■

2013/14 Guide to Foreign Investors Council in serbia 41

Interview Dejan Jeremić Executive Vice President of Delta Holding for Operational Activities

Administrative Barriers – the Greatest Constraint for Business Predictability is the first condition of normal operations. We strive for predictability in all areas, but we believe that we must also talk about the relief of the economy. Development of the real estate business requires simple procedures and clear titles over land Property rights relations are unresolved, the process of restitution is not implemented and cadastral data is erratic. Because of that, many projects are on hold, because the documentation needed to begin construction cannot be obtained.

D

elta Holding will soon complete its investment in the Crowne Plaza Hotel in Belgrade worth €40 million, which has been realised through its own funds and will employ 200 people. Plans are also underway to double the capacity of cold storage at the Podunavlje farm from 6,000 to 12,000 tons and the expansion of an apple orchard that already covers over 300 hectares. Plans also include the building of the largest shopping centre in the region. The first nine months of this year saw €445 million generated in sales revenues, with EBITDA of €38.1 million, while €66 million was paid into the Serbian budget.

Successful operations and valuable investment plans are just one side of the coin. The other side is the business environment, and at Delta Holding they say that the government must realise that it represents a service provider for citizens and businesses, despite often being given the impression it is the other way around.

► What would public-sector reforms mean for you?

- The public sector and the state are obviously both inefficient and expensive, but it is not up to Delta as a private company to deal with that. We accept the need for the state-public and private sector, but we do not accept that private entrepreneurs be discriminated against on the market. And that most commonly happens through different systems of financing, subsidies and generally through a completely different treatment in public of state companies over private business.

We are just finishing an investment in the Crowne Plaza Hotel in Belgrade worth €40 million ► What

parts of the state should be modernised in order to help the economy to invest faster and do business better?

- The first step of the state must be to simplify procedures. Or to put it simply: the state must realise that it is a service provider for citizens and businesses. We often have the impression that it is the other way around.

► Is Delta confronted by administrative barriers to

its operations?

- There is no company in Serbia that does not come up against administrative hurdles, and as one of the largest investors in the country we can say that the administrative problems are the greatest constraint on the development of business. How can one develop projects if many towns in Serbia do not have a general urban plan, let alone a detailed one? Niš, the third largest city in Serbia, only recently adopted an urban plan!

What needs to be fixed in the real estate business to make it easier to do business and achieve greater profits?

- Doing business in real estate is very complex and a lot of things should be changed. From the legal aspect, through complex procedures, to disordered urban planning and land cadastre books. This even goes for the charges on construction land that do not exist at all in many developed countries, while here

►

budget We have contributed €66 million to Serbia's budget.

42 Guide to Foreign Investors Council in serbia 2013/14

they are extremely expensive. Isn’t it in the interest of the whole society to construct the Delta Planet shopping centre in Belgrade, because its construction will see the hiring of 5,000 workers and another 5,000 will get permanent jobs when the complex is complete? Through project financing, some €200 million will be invested in this project. But it is expected from us to pay an additional €18 million in fees for infrastructure development, which actually already exists at this location.

How does Delta see opportunities for the prosperity of the real estate business in Serbia?

- There is a lot of room for the development of the realestate business! Primarily, Belgrade and Serbia lacks housing, offices, shopping centres and modern retail outlets… However, more simple procedures are necessary for the development of this business, as well as clarity when it comes to land ownership. Foreign investors know about that best. After all, look what happened with the attempted conversion of land usage rights on property under ownership – construction has practically stopped for years and now the authorities have announced that they will amend or revoke the law on conversion. They acknowledged an error with that, but what good is that when the effects have not been reversed. And we won’t even mention the legal uncertainty for investors.

►

Agriculture is one of the key strategic points of development.

How can the state contribute in this area?

- Agriculture is a strategic sector generally only in words, while in practice little has been done. The agriculture budget is too low, in absolute numbers and in proportion to the national budget. We emphasise that it is necessary to support small farmers and provide cheaper loans. As a company we are ready to offer them knowledge, to guarantee purchases of the entire crop, to ensure a secure buyer and export to foreign markets. However, loans for their production is something that the state has to deal with, through the opening of a development bank, the establishment of special credit lines and true incentives for commercial banks to support agricultural production under more acceptable conditions than has been the case to date. Of course, the state could also help in the development of an irrigation system, which is one of the greatest weaknesses of Serbian agriculture.

►

► Do you agree with the proposal of the FIC White Book to introduce a transparent and predictable system that will cover all types of fees, instead of many taxes and levies?

- Predictability is the first condition of normal operations. We strive for predictability in all sectors, including tax policy, but we believe that we must talk about the relieving of the economy. Due to the state being too expensive, as a result of the large budget deficit, the economy is definitely overloaded and will not be able to meet the current tax obligations for long. ► Has Delta faced problems regarding labour legislation and on the labour market to date?

- The Labour Law contains solutions whose application in practice has proved problematic. These solutions are not in the interests of employers or employees. It is necessary to change the regulations, to adapt them to the economic situation, to introduce new instruments as required in this field. I remind you that under the law there is no project work exceeding 12 months, engagements through employment agencies are not legally regulated, deadlines for changing the work schedule of employees are too long, etc.

Do you have any new investments and how many new jobs could be created through them?

- Delta sticks to a rule that the company needs to grow and invest, while standing in one place actually means decline. With such a policy we have succeeded in achieving sales of €445 million and EBITDA of €38.1 million during the first nine months of this year. We have contributed €66 million to Serbia's budget.

Despite the extremely difficult situation, we are just completing our investment in the Crowne Plaza Hotel in Belgrade, which is worth €40 million and has been fully realised with our own funds and already employed 200 people. In the field of agriculture we are planning to double the capacity of cold storage at the Podunavlje farm from 6,000 to 12,000 tons, as well as expanding the apple orchard that already covers over 300 hectares.

Of course, we are also planning to build the largest shopping centre in Belgrade and the region, but that project is largely dependent on the mentioned conditions in the state administration and the timely issuance of the necessary permits. We will work to create new jobs, but I think we need to be realistic and say that at this point the preservation of existing jobs is a real achievement. ■

The Labour Law contains several solutions whose application in practice has proved problematic. These solutions are not in the interests of employers or employees

2013/14 Guide to Foreign Investors Council in serbia 43

►

Interview Spiros Dallas Vojvodjanska Banka CFO

Challenging Times The sovereign-debt crisis and deterioration of the macroeconomic environment in the EU had a negative impact on Serbia’s economy and financial institutions had to reposition themselves to confront a number of challenges

T

he Vojvodjanska Banka Chief Financial Officer warns that financial markets will forget about risks in time, but that Serbia’s system will be safer if the country succeeds in ‘building’ financial institutions that will not ‘forget’.

How would you evaluate Vojvodjanska Banka’s business under current market conditions and the legal regulations of the Serbian banking sector?

- Financial institutions face conditions that could be described as a perfect storm, as the market and economic volatility combine with regulatory and commercial pressures to produce an exceptionally challenging operating environment. This is a combination of challenges we have not witnessed simultaneously before.

In this environment, Vojvodjanska Banka has enhanced its efforts in key areas: strong liquidity focusing on self-funded operations; cost containment through the further rationalising of operations has remained a priority, aiming not to hinder the bank’s ability to sustain the business model and service delivery; maintaining the risk profile in line with the risk strategy, along with strengthening the capital base and supporting the group’s strategic management initiatives; universal product offering on the Serbian market and expansion of the customer basis.

►

macroeconomic environment in the EU had a negative impact on Serbia’s economy. Therefore, financial institutions had to reposition themselves to confront a number of challenges, including new regulations and state interventions, higher funding costs, higher credit risk and changing customer behaviour. Banks launched numerous initiatives to improve capital efficiency, revenues and costs and regain the confidence of investors and society.

At the end, I would like to highlight that financial markets will forget about risks in time, but our system will be safer if we succeed in ‘building’ financial institutions that will not ‘forget’.

► What are Vojvodjanska Banka’s plans and projections for the Serbian market in 2014?

- Our strategy for the following years is to achieve superior performance by being unique, not competing in the same dimensions with our rivals.

The biggest challenges ahead for the bank are to continue to create value for our customers, with customers to define the future winners; to protect our strong capital base and rigorous risk adjusted capital allocation; to create value for our shareholder and deliver returns that exceed the cost of capital and; to achieve operational excellence with the optimisation of business processes.

By targeting priority segments and innovation we plan to boost our market share, efficiency and profitability. We have the capacity and the appetite to offer new and competitive products and finance new projects and also plan to continue our strategic collaboration with IFIs. Social responsibility remains our priority, aiming to balance our duty to maximise profits against the potential cost to society of losses caused by excessive risktaking and undertaking initiatives to support social programmes, such as the Generation Next CSR programme. ■

We have the capacity and the appetite to offer new and competitive products and finance new projects and also plan to continue our strategic collaboration with IFIs

► How much has the business environment changed

since 2002, when NBG Group came to Serbia?

- At the beginning of the last decade banking penetration in Serbia was below that of other emerging markets in several product categories. Along with low funding and risk costs, this gap created conditions for a substantial increase in demand for banking services.

The banking model in Serbia remained traditional without being exposed to ‘toxic’ financial instruments in an attempt to increase returns.

The sovereign-debt crisis and deterioration of the

44 Guide to Foreign Investors Council in serbia 2013/14

2013/14 Guide to Foreign Investors Council in serbia 45

The Foreign Investors Council

Strict Guardian and Reliable Partner Major foreign investors in Serbia established the Foreign Investors Council (FIC) at the Official Foundation Meeting in Belgrade on 15 July, 2002.

The FIC’s mission is: “To actively promote sustainable business environment through open dialogue with the authorities and other relevant stakeholders”

F

ounded with the support of the OECD – Investment Compact for SEE, the FIC represents an independent advocacy platform for dialogue with the authorities. The main goal of the Association is to influence improvement of the business climate in Serbia, by making concrete reform proposals.

Today, the FIC brings together 130 companies with a 17.5% direct share in Serbia’s GDP in 2012, which have invested more than €20 billion and employ over 95,000 people, and whose number is still growing. The FIC gathers companies from around the globe – from the European Union and the United States of America to the Russian Federation and National Republic of China. Most members come from the EU market, reflecting the general trend of FDI inflow.

FIC members are domestic companies established by a significant share of foreign capital. In addition, membership of the FIC is open for domestic consultancies and companies that represent foreign business interests, regardless of the form of their establishment.

The key characteristic of the FIC is that it defines its standpoints through active debate between members and promotes only reforms that are in the interest of the wider business community, rather than a specific company or business group.

The FIC advocates for a stable, predictable business environment and a level playing field, and believes that the EU integration process can assist in reaching of these goals. The FIC supports systemic reforms that would build an efficient public sector and redefine stateownership policy to secure macroeconomic stability in the long-run.

On the micro level, the FIC strongly advocates for better and more consistent implementation of regulations and the cutting of unnecessary administrative burdens.

The aims of the FIC are: • to improve Serbia’s investment and business-development climate • to represent, voice and promote the shared opinions of its members in order to advance mutual interests and stimulate FDI • to improve communication, cooperation and permanent dialogue with the Serbian administration • to cooperate with the Serbian administration on overcoming difficulties and obstacles in relations with foreign investors and in economic relations with other countries • to advance the interests of the international business community in Serbia • to, as much as possible, inform its members and other interested parties about the investment climate in Serbia • to communicate with other foreign investors’ organisations across the region in order (a) for all sides to benefit from shared common practice exchanges, and (b) to examine specific methods for the improvement of regional business.

As an active participant in the process of driving reforms and economic development, the FIC is recognised as one of the key stakeholders and a reliable partner to the Government of Serbia, international organisations (such as the IMF, World Bank), the diplomatic corps, development agencies, business associations, civil society or-

Each year FIC members work on preparing a comprehensive overview of the business climate in Serbia and formulating a list of recommendations for its improvement – the White Book

46 Guide to Foreign Investors Council in serbia 2013/14

ganisations, universities, etc.

White Book Each year, through a consultative process lasting several months, FIC members work on preparing a comprehensive overview of the business climate in Serbia and recommendations for its improvement – the White Book. The White Book relies on the experiences of FIC members in Serbia and third markets, as well as their knowledge of contemporary best practices, to formulate tangible and implementable solutions for overcoming regulatory barriers. Once the book is prepared, the FIC organises an annual public presentation and open discussion between government officials and the FIC, with distinguished representatives of the public, business and civil sectors in attendance.

The White Book offers a set of priorities in economic policy, as seen by foreign investors, but additionally reveals suggestions for the ease of doing business in specific areas. The publication covers three main segments: ‘Pillars of development’ – infrastructure, labour and real-estate – as areas where reforms would yield multiple positive effects in the business environment Legal framework – comprising all critical regulatory elements, including company law, competition and consumer protection, trade, environment, taxation, etc Sector specific – portraying regulatory framework for specific industries.

Each regulatory topic is presented in a chapter with a four-fold structure: current situation, positive developments, remaining issues and FIC recommendations. Moreover, each chapter features the balance score card, tracking progress of the execution of White Book recommendations.

The White Book serves as a vehicle to define the joint advocacy platform of the association and provides a constructive tool for dialogue with the Government and other stakeholders in the promotion of FIC views.

Although the most renowned, the White Book is just one of the projects the FIC conducts. With the aim of supporting reform processes, the FIC organises its Reality Check Conference six months after the White Book’s launch to track the execution of recommendations and help overcome current problems by offering concrete solutions.

Besides these, regular FIC activities can be divided into three segments.

The first is related to analysis of the current situation – existing legislation and its implementation. As an example, the FIC worked on the reform of labour regulations and provided more than 25 tangible proposals on how to streamline the current system and facilitate employment.

The second is linked to active participation in preparing new legislation by providing comments and proposals and participating in working groups for the drafting of laws. In the period between White Book editions 2012 and 2013, the FIC conducted analyses of 11 draft regulations and participated in five working groups for the drafting of regulations.

The third is connected to external interaction, which entails systematic and regular communication with all important stakeholders, staging roundtables and presentations, as well as participation in relevant initiatives and forums.

The Serbian government and other state institutions are the FIC’s main interlocutors. However, the FIC regularly communicates with all other players who influence the business climate: international organisations, the diplomatic corps, development agencies, business associations, civil society organisations, universities, etc.

The FIC recognises the relevance of synergy and cooperates with various organisations to promote a better business environment. During 2013, two notable examples are: the ‘Serbia Turns to Economy – Together Out of the Crisis’ conference in July 2013, which the FIC organised together with the Delegation of the European Union to the Republic of Serbia, the Privrednik business club and the American Chamber of Commerce, as well as a joint initiative on inspection reform with several business associations (the American Chamber of Commerce, Naled, the Serbian Chamber of Commerce, the Serbian Association of Managers, the Union of Employers) and USAID Business Enabling Project, initiated in June 2013.

The FIC communicates with all players who influence the business climate in Serbia: international organisations, the diplomatic corps, development agencies, business associations, etc.

Activities In its regular activities, the FIC facilitates structured communication between members in order to formulate joint views and suggestions, which are then actively presented to the stakeholder community. The FIC insists on the execution of multi‐level dialogue, both between top officials and experts, in order to make greater and more effective progress in advancing the business climate in Serbia.

2013/14 Guide to Foreign Investors Council in serbia 47

Committees In line with its mission, the FIC operates through relevant crossfunctional and sector-based committees. These committees work to identify specific obstacles to investments and investor operations, organise discussion forums and propose solutions to overcome existing barriers to doing business.

The committees gather representatives of member companies, experts in specific areas, who jointly analyse regulatory framework and reach common conclusions on how to overcome specific regulatory barriers.

FIC committees focus their attention mainly on commenting on new draft legislation and proposing changes to existing ones. It is important to note that production of specific committee proposals and materials is conducted by committee members themselves.

The FIC executive team provides ongoing administrative support to the committees and coordinates their work.

In order to promote their views, FIC committees engage in direct dialogue with representatives of Government institutions and important stakeholders (i.e. Delegation of European Union), and advocate for specific improvements in the business environment. Types of committee activities include, but are not limited to, meetings with Government officials, meetings with stakeholder expert teams, organisation of roundtables, participation in conferences, etc.

FIC committees are headed by a Committee President and Committee Vice President, who are elected to these posts by committee members with a two-year mandate.

In addition, the FIC has also formed a taskforce for payment deadlines to support formulation and enforcement of the relevant law, since illiquidity is one of the burning issues in Serbia.

Key postulates of FIC committees are: • Committees are ‘live’ forms, established based on the interest of members and in line with changes in the business environment • Active involvement in committee work is voluntary, reserved exclusively to FIC members • Establishment of sectoral committees is based on demand of the representatives of the specific industry • FIC committees initiate and develop direct dialogue with the relevant government and stakeholders, contributing to the introduction of European norms and standards into the domestic legislative framework.

Through committees, member companies have the opportunity to: • Propose solutions for overcoming existing obstacles to doing business • Raise and discuss regulatory issues relevant to the industry they represent, thus creating a common position to be advocated for • Participate in drafting the White Book • Share positive practices and experience • Have early access to draft legislation and give comments/suggestions for improvements • Gain first-hand information on recently enacted legislation • Set up direct contact with persons responsible for implementing different regulation FIC members can choose between active or observer member status, depending on the companies’ interest in a particular topic.

The operations of FIC committees are meticulously regulated to ensure transparency and the wide involvement of FIC membership in their activities. The Board of Directors supervises the committees’ work and approves all decisions and regulatory positions. ■

FIC operates through relevant cross-functional and sector-based committees, spelling out specific positions and suggestions

The FIC currently has seven active committees: • Cross-functional: Legal Committee, Human Resources Committee and Tax Committee • Sectoral: Food and Agriculture Committee, Leasing & Insurance Committee, Real-Estate Committee and Telecommunications & IT Committee.

Petrikić & Partneri AOD in cooperation with CMS Reich-Rohrwig Hainz Cincar Jankova 3 | 11000 Belgrade | Serbia T +381 11 3208900 | F +381 11 3208930 E belgrade@cms-rrh.com | www.cms-rrh.com

MiniPani se nalazi u samom vrhu pekarske industrije na tržištu Srbije. Već više od jedne decenije uspešno primenjujemo našu franšiznu strategiju koja ispunjava sve uslove Franšiznog etičkog kodeksa prema Evropskoj Franšiznoj Asocijaciji, koja nas je i rangirala na prvo mesto među prisutnim franšizama u Srbiji.

Mini Pani doo, Hipodromska bb, P.f. 2., 24107 Subotica tel.+381 24 621 521; fax. +381 24 621 522 info@minipani.com; www.minipani.com

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2013/14 Guide to Foreign Investors Council in serbia 49

comment Milica StefanoviĆ President of the FIC Food & Agriculture Committee (The Coca-Cola Company-Barlan S&M d.o.o.)

Rulebook Good for Both Producers and Consumers

B

ehind us is a difficult and turbulent year, in The biggest positive change is the adoption of the every field. Changes in the political sphere rulebook on food labelling, marking and advertising. significantly slowed down all regulatory processes, including changes to those reguOur recommendation is to define four-year strategies lations related to food and agriculture. In addition, for the medium-to-long-term policy of subsidising the difficult economic situation in the country and falling purchasing power have caused manufacturers to focus increasingly on cost optimisation. In such get some attention from the appropriate authorities, circumstances, any positive changes in the regulatory in order to remove procedural obstacles for efficient environment, in particular those concerning the simand predictable business processes. plification of procedures and harmonisation of legisAnother open issue which causes uncertainty lation with the EU legislative framework, as well as within the entire agriculture sector is that of subsicombating the grey economy, bring necessary savings dies. It is understandable and natural that with peror room to generate profit. sonnel changes at the head of the ministries, a change As the greatest positive change in 2013, when it in policy can be expected when it comes to certain comes to food and agriculture, I would definitely highmeasures, especially important ones such as subsilight the long-awaited adoption of the ordinance on the dies. However, as an economic instrument, subsidies declaring, labelling and advertising of foodstuffs (Official are aimed at achieving efficiency and sustainability Gazette no. 85, 25 September 2013). This is a rulebook of agricultural production, which should create conthat concerns every food and beverage producer and ditions for improved competitiveness in the export every consumer, and which until recently created an obsector and high quality in production. Unfortunately, stacle for the import and export of that is not possible to achieve beproducts, but also an opportunity cause of the undefined long-term The new rules on labelling will level the for some producers not to respect policy of subsidies which would the rulebook and take advantage enable producers in this sector to playing field for producers, simplifying of the fact that this issue was not make long-term plans. the preparation of products for export on the list of inspection priorities.

Our recommendation, as such, The new rules on labelling is to define four-year strategies will create a level playing field for all producers on for all larger agricultural production sectors, establishthe market, simplifying and decreasing the procedure ing a medium-to-long-term policy of subsidies, where costs in preparing products for export. such policies work towards raising the standards of Apart from this good news, there is still much room production in order to prepare this area in a timely to improve operations in the food and agriculture secmanner for competition within frameworks broader tor. In this very important area I have to single out the than those of our country. issue of procedures for sanitary and phytosanitary We hope that after recent changes in the Ministry inspections during the import of raw materials or finof Agriculture, Forestry and Water Management, and ished products. Although since January 2012 a new in the government in general, we will be able to count guideline on sampling has been in effect, there are on a solution to some of these issues, in order for us to still differences in the interpretation of these measremove obstacles to the viability of this sector, which ures and inconsistencies in their implementation. We is so important for our country, and create conditions believe that issues as broad as this should definitely for its long-term development. â– 50 Guide to Foreign Investors Council in serbia 2013/14

2013/14 Guide to Foreign Investors Council in serbia 51

Interview Alexandros Daniilidis General Manager of Heineken Serbia

We Will Hold the Growth Trend With the aim of developing the economy in Serbia, perhaps a central place dedicated to all domestic and foreign investors should be organised, at which the most progressive and most dynamic segment of the market would receive a full service

S

ince arriving in Serbia the market share of company Heineken Serbia has doubled, some brands from the portfolio have become much more strongly positioned and the Heineken Group has displayed great trust in its Serbian company – investment for this year totals €36 million. Heineken Serbia General Manager Alexandros Daniilidis came to the country a year and a half ago from his position as Commercial Manager of Heineken in Greece. He has been employed at Heineken since 1992 in senior positions within the sales sector

The main changes are related to the rationalisation of spending and to a different perception about the role of the brands.

On the one hand, value-for-money propositions and smaller outlet types, due to proximity and convenience, have an advantage, whereas on the other hand consumers still have the need to be inspired by brands that can reflect the relevant values in the current fragile environment.

What do you think Serbia needs to change in its macroeconomic policy and business environment?

- Competitive labour costs as well as the good strategic location of Serbia provides opportunities for successful investments and effective local and export business operations.

On the other hand, Serbia needs a more stable and simplified legal framework, which will facilitate the way the companies operate. A stable legal framework makes all investors feel confident about their future operations and clear rules are essential in order to attract more foreign investors.

Additionally, managing the bureaucracy phenomenon, which is also related to legal complexity, is crucial given that investors are discouraged when they have to face a labyrinth of processes and different entries.

It could be that a ‘one-stop shop’ focused on all local and foreign investors could offer a great service to the most progressive part of the market, in order to lead the development of the Serbian economy.

►

Competitive labour costs and Serbia’s good strategic position enable successful investments and efficient development of domestic operations and export

► How would you rate Heineken’s operations in Serbia considering the current market conditions?

- Despite the fact that the Serbian beer market is under big pressure due to the shrinkage of consumers’ disposable income and unfavourable weather conditions during the summer, Heineken in Serbia is expected to deliver much better results in 2013 due to its market share and volume growth.

By establishing stronger relationship with our distributers and customers, and due to the fact that consumers have recognised the quality of our beers and the effort we have invested in their satisfaction, we have started growing out of the stronghold regions. Consecutively, we have grown in volume and market share and improved financial results.

Overall, it will not be easy, but our expectations are conservative regarding the size of the total market and we hope that we will manage to continue the growing trend of our company. ► How much has the global economic downturn changed consumer habits?

- We have noticed that consumers’ habits are changing rapidly due to the global crisis and the decrease of disposable income.

► What

do you think of the FIC’s proposals in the White Book?

- In general, the proposals are in the right direction and should be a good platform for a constructive dialogue with the Government. The proposals should be translated into an actionable programme of changes given that Serbia has many competitive advantages and, most of all, very talented and skilled human capital.

►Is your company gearing up for new investments in Serbia?

- Yes, we are. In our plans, we have a list of investments that would take place in the coming three years. These are mostly investments in production within Supply Chain division. ■

52 Guide to Foreign Investors Council in serbia 2013/14

Interview Roberto Mancuso General Manager of Metro Cash & Carry Belgrade

Wholesale Leader As a leader in the wholesale sector, Metro seeks to strengthen its position through a stronger focus on revising its store concept and providing solutions through various channels Are you satisfied with your local subcontractors?

How many companies have been awarded certificates to do business with Metro and are there plans to include more producers?

- Wherever it operates, Metro seeks to improve and standardise its entire value chain, from supplier to customer, in order to ensure that customers are buying the best quality products under the most competitive conditions. It is very important that suppliers understand that they have to achieve the highest standards in production in order to compete for a place on the shelves.

Metro is also unique in that we are willing to help them do that. Suppliers are certified or in the process of certification of production facilities to IFS/GFSI standards, which are the world’s highest quality and safety standards. Metro is also a great opportunity for local producers, whose goods can access regional and global markets through our network. When it comes to our own brands, Metro currently has over 100 producers from Serbia, 83 of which have finished the certification programme. Provided they guarantee capacity and continuity, they have the possibility to export their own brand products to 29 countries on three continents. Local products are currently exported to Austria, Croatia, Hungary, Romania, Czech Republic, Slovakia, Ukraine and Moldova.

►

R

oberto Mancuso is impressed by Serbia’s dedicated and motivated young people, who are willing to fight for their chance and see it as their ticket to a better future. Here he discusses the progress and plans of Metro Cash & Carry in Serbia.

► What do you think of the conditions for doing business in Serbia? How much did the crisis impact on the retail sector in which Metro operates?

- A crisis can be seen as an opportunity. Every crisis forces you to rethink value proposition to the market and assess your strengths and weaknesses.

For us this was an opportunity to revise our current business model with the aim of having a better focus on customer selection, product ranges, services and cost structures. For us, as a leader in the wholesale sector, this means strengthening our position and approaching the expectations of our target customers. We see a big opportunity to satisfy their expectations and needs even better through a stronger focus on revising our store concept, giving business solutions through channels like delivery, the Moja Radnja project for small independent traders and the METRO HoReCa centre, a unique training centre for that sector in Serbia.

Metro is also a great opportunity for local producers, whose goods can access regional and global markets through our network

► Are you satisfied with Metro’s workforce?

- What struck me is that there are so many dedicated and motivated young people. It’s great that they want to fight to get a chance, as they see it as their ticket to a better future. We want to encourage them and help them grow and develop professionally. The advantage of METRO Serbia is that it can provide employees with needed training and the opportunity to build their capabilities and promote them abroad.

► Are you planning to expand and open new retail facilities?

- So far our focus has been on opening stores. In the future Metro will not significantly increase its store network, but will expand services like delivery to HoReCa and Traders, in order to get closer to our customers.

Further on our focus will be on customer relations, providing unique services and support specifically adapted to the needs of our customers. We will also provide intense training for our small independent trade and HoReCa partners. As we will celebrate 50 years of doing business in 2014, we will focus on taking our partnership with our customers to the next level, inspired by their commitment and passion. ■

2013/14 Guide to Foreign Investors Council in serbia 53

Interview Michalis Orfanoudakis Commercial Director of PepsiCo Western Balkans

Five Years of Innovation & Investment Those companies that invest in people and innovation, give consumers high quality products at affordable prices, have solid balance sheets and healthy cash flows have the right to succeed

F

ive years after the acquisition of Serbia’s Marbo, PepsiCo has made further investments in the country, expanded its product range and managed to prove successful across the region. Here Michalis Orfanoudakis, Commercial Director of PepsiCo Western Balkans, talks about the challenges and opportunities facing the company.

► PepsiCo came to Serbia at the height of the global economic crisis through the acquisition of local company Marbo. How did the crisis impact on the Serbian business climate back then and now?

- PepsiCo entered Serbia in August 2008 with significant investments. First it was with the acquisition of Marbo Product, but soon other important, multi-million investments followed, namely in manufacturing facilities at Maglić, then in a new high-capacity potato chips production line, as well as building a state of the art, highly modern and efficient waste water treatment facility in line with our efforts towards a sustainable environment.

However, the biggest investment was in people.

Based on strong human resources fundamentals that already existed in Marbo and through ongoing training, best-practice sharing and the recruiting of highly talented people, we created a world-class organisation that we are really proud of.

The crisis affected the business climate, no doubt, but with strong will, quality products, a good team and the synergy of Marbo’s local success and PepsiCo’s global know-how, we created value even in the most challenging of times.

► What is your view of the efforts exerted by the Serbian government in its attempts to conduct economic reforms?

- The FIC has exerted great efforts compiling recommendations to improve business conditions and has been very clear in communicating the opinions and first-hand experiences of investors. We all agree on several priorities: acceleration of the transition reforms is vital to improving the business climate and bringing Serbia closer to the EU; bureaucratic procedures at both the national and local levels need to be reduced and simplified; market competition conditions need to be created through good regulations and equal rights for all competitors; intensifying the fight against corruption is important, as is conducting a well-balanced economic policy that will be beneficial for current businesses and future investors.

However dynamic the reform efforts are, we need to keep in mind that implementation afterwards is equally important.

With strong will, quality products, a good team and the synergy of Marbo’s local success and PepsiCo’s global know-how, we created value even in the most challenging of times

recommendations

The FIC has exerted great efforts compiling recommendations to improve business conditions and has been very clear in communicating the opinions and firsthand experiences of investors.

Following the fifth anniversary of the acquisition of Marbo, what would you say was the biggest challenge and biggest achievement of PepsiCo in Serbia?

- Crisis conditions have been the most challenging, undoubtedly. Whenever and wherever consumer purchasing power is changing, companies must be flexible and sensitive enough to offer indulging and premium-quality products that consumers can afford and want to buy.

So those companies that invest in people and innovation, give consumers high-quality products at affordable prices, have solid balance sheets and healthy cash flows have the right to succeed. Al►

54 Guide to Foreign Investors Council in serbia 2013/14

though the financial crisis was our biggest challenge in these five years, it also represented a great opportunity to capitalise on our strong fundamentals and I am certain that Marbo will be even stronger when the crisis finishes its cycle.

What further innovations and plans has the company envisaged for Marbo’s production range?

- PepsiCo’s, and therefore Marbo’s, strategy is to constantly introduce innovative products to suit the local market and consumers’ tastes and habits. Excellent examples are our new potato chips segment – the incredibly popular Chipsy Domaćinski and baked snacks Pardon portfolio, which has been enriched significantly with original products also developed in line with Serbian tastes. In the same direction, Marbo will soon have further pleasant surprises for consumers.

Birthdays and anniversaries are times when we need to think of the impact of our footprint on society. So, apart from brands and products, I would like to emphasise one more aspect of PepsiCo, which is our commitment to the local community and the environment. As we value greatly cooperation and integration with the local community, we strive to implement PepsiCo’s well-known ‘performance with purpose’ on a daily basis, from the investment in production facilities and water treatment, to working conditions and supporting specific needy groups and institutions through help in equipment and donations. In the following period we envisage additional efforts and initiatives towards that priority. ►

As patron of the FIC Food & Agriculture Committee, you said last year that agriculture was one of the country’s development pillars and most of Serbia’s regulations complied with those of the EU, but the full potential was yet to be utilised due to inconsistent implementation at the administrative level. Has anything changed since then and what measures would improve the situation?

- The agriculture sector should be one of the pillars and motors of domestic GDP, as Serbia has an unprecedented basis for satisfying not only local needs, but also achieving considerable exports and providing certain agriculture products to markets around the world.

However, despite the fact that certain actions have been taken, the FIC White Book clearly shows that the least progress was actually made on laws regulating the food industry and agriculture, among other fields.

There is considerable room for improvement that would create a better, more efficient and more stable business environment. This includes subventions, with Serbia lacking long-term subvention policies that would enable investors a more stable basis for longterm planning, then also the question of sanitary and phytosanitary inspections, especially in consistent implementation. ►

I consider the adoption of the Bylaw on Labelling, Marking and Food Advertising in September this year as the highest achievement, as it marks a new era for the market

► Marbo exports to all regional countries. Do you

have expansion plans for European markets too?

- Marbo is one of Serbia’s leading snacks manufacturers and we are proud of the success after launching our products on the region’s other markets. Besides Serbia and Bosnia and Herzegovina, where we have production facilities, our products are popular in Croatia, Slovenia, Montenegro, FYROM, Albania, Bulgaria and Romania.

As part of PepsiCo, Marbo has ambitious plans and challenging targets. It is now clear that Marbo’s rich portfolio has big opportunities not only for the Balkans, but also beyond. So the next step is to take on western European markets, and we are deploying all our options towards that end.

► What would you stress as the FIC Food & Agriculture Committee’s major milestone in the past year?

- I consider the adoption of the Bylaw on Labelling, Marking and Food Advertising in September this year as the highest achievement, as it marks a new era for the market. We have invested a great deal in this process. The document is very thorough and has immense importance for all, not only food and beverages producers, but all consumers as well.

This aims to create equal conditions and opportunities for all of Serbia’s producers, as well as contributing to the export process by becoming less complex and less expensive.

Members of the FIC represent a precious base of experience and, as we have seen, can contribute greatly to the development of this important sector.

We are always open to constructive partnerships with officials, with the aim of strengthening business conditions in Serbia. ■

2013/14 Guide to Foreign Investors Council in serbia 55

Interview Ansgar Bornemann Regional Director of Nestlé Adriatic

Market Consolidation and Further Expansion

World-renowned company Nestlé has become a major player in Serbia and is aiming to consolidate its position and extend its market share Could you compare the business climate in Serbia to the region’s other countries?

- Countries in the region are deeply interconnected and thus it is hard to compare them outside the regional contest. However, each market has its specific characteristics. Serbia certainly has a lot of business opportunities and I see human and vast natural resources as Serbia’s potential. Related to our business, there is a very strong food culture in Serbia, since most family and social life revolves around food. Serbians feel very strongly about their food and it is up to us to excel in quality and conform to local tastes in order to remain part of Serbian households.

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estlé Adriatic’s regional director believes Serbia has a lot of opportunities and sees potential in human and natural resources. Noting that Serbians feel very strongly about their food, he says it is up to Nestlé to excel in quality and conform to local tastes in order to succeed.

► Is the Nestlé Group satisfied with results achieved by its new company in Serbia, which was acquired in 2011?

- Centroproizvod is Nestlé’s second acquisition in Serbia and our biggest investment in the region. We initially implemented Nestlé policies and procedures and now we can further develop the already versatile product portfolio. We are confident we can respond to consumers’ preferences and expectations. This is verified by our latest innovation in the soup category, where we have created new children’s soups Hello Kitty and Spiderman. Besides the visual component, our experts developed recipes containing less salt, as sodium consumption is high in the region.

Importantly, we are already exporting products to other markets. For example, we export Maggi Halal bullion to the Middle East from Surčin and we export to many European markets from the Stara Pazova ice cream factory. This shows that our products have recognised quality and are in demand on foreign markets.

This year’s business results are in line with expectations and projections and we have achieved great results in categories such as Cipiripi, which has undergone complete renovation and is currently our fastest growing brand.

► How important is it that laws on quality control and food labelling comply with EU legislation?

- It is always better to have unified procedures, regulations and ways of doing business. I see it as a business language and if we all speak the same language it is easier to conduct business.

As a company we have all the procedures and knowhow already implemented and uniform labelling would mean easier operations for us.

We are focusing on maintaining and growing our market position through innovation and product renovation

► Should the Serbian authorities grant

subsidies to food manufacturers?

- Serbia is recognised as an agricultural country of great potential and it is important to support food producers. Highquality local food production has added value compared to the price of raw materials, which is very important for potential export. Additionally, the food industry is a big employer and is co-dependent with other industries, which offers great potential for overall economic growth. However, in the long term it’s not good if the food industry relies heavily on subsidies and that should not be the tool ensuring industry competitiveness. ► Do you have plans for new investments and, if so, in which segments?

- Currently we do not have big investments planned. However, we are always open to new opportunities. We are focusing on maintaining and growing our market position through innovation and product renovation. We are also focused on human potential growth and I am proud to announce that we have commenced our Youth Employment programme, which will help us identify and employ talented people who will grow together with our company. ■

56 Guide to Foreign Investors Council in serbia 2013/14

Interview Ana Govedarica General Manager of Roche Serbia

For More Frequent Government and Business Dialogue The problems caused by a lack of financial resources could be overcome much more effectively by addressing the problem of imbalances in the distribution of responsibilities, the role of different levels of healthcare and the problem of communication in decision-making

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he medicines market is highly regulated in each regulated state and that’s how it should be.

The route for registering medication, through determining pricing and the so-called positive list, is determined by the state. Some measures taken by the government, such as the Law on Payment Deadlines, have resulted in improvements that have significantly reduced the liquidity problem and this should certainly be welcomed. On the other hand, selective application of the exchange rate when calculating price still remains. The ‘positive list’ of drugs is poor compared with similar countries to ours, mostly in the areas of treating serious diseases. Those are the segments where the state should respond more vigorously.” This is how Ana Govedarica, General Manager of Roche Serbia, responds to the question of what needs to be fixed to regulate the market in the sector where her company operates.

- In the preparation and adoption of all laws, it is primarily important that the relevant ministry is led by the need for longterm and systemic planning of the area it is responsible for.

This is not possible without a fundamental knowledge of the department, familiarity with modern practice and awareness of the direction in which a specific sector should develop. International companies doing business in Serbia have required knowledge, insight into problems and a vision of development.

They should be seen as generators of development, bringers of the latest knowledge and technology and in every sense their resources should be used to better regulate the environment. Of course, the circle of those it is necessary to consult is not exhausted in talks with foreign companies and investors. It is necessary to consider all those that legal solutions apply to and it is important that all of us are able to promptly, actively and equally participate in public debate about laws that govern our business and operations.

The government must ensure the predictability of the decision-making process

Are there laws in Roche’s business domain that need to be harmonised with EU legislation?

- As a company with a very long-term presence in Serbia, Roche aims to contribute to more rapid harmonisation with the rules and standards that apply to developed markets, including the EU in the first place. For this reason we are actively involved in a number of initiatives aimed at improving the health system in Serbia. The government must ensure the predictability of the decision making process, with clear deadlines and a transparent process of consultation with industry representatives. We are convinced that the problems of a lack of financial resources could be overcome more effectively by addressing the problem of imbalances in the distribution of responsibilities, the role of different levels of healthcare and the problem of communication in decision-making.

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► How important is it to companies that the government

has regular consultations with them in the preparation and adoption of all important laws?

► Why is the rule of law – and strengthening the capacity of the public administration to implement it – important for the economy?

- The rule of law is a prerequisite for the normal functioning and development of society and the state. From the point of view of the economy and investment, it provides legal certainty for the ‘alpha and omega’ of each healthy operation and development. The state administration should be professionalised and trained to effectively respond to the needs of citizens and businesses. The basic prerequisite for this is its reorganisation and the creation of staff able to perform the long-term role as a skilled service, with clear powers, strong integrity and competence.

► How important is regulatory reform or the repeal of obsolete procedures and unnecessary bureaucracy?

- In addition to the great effort of ensuring that all medicines registered in the EU become available to patients in Serbia in the shortest possible time, we believe that binding protocols and guidelines are a very important issue that should be harmonised with European practice and implemented. ■

2013/14 Guide to Foreign Investors Council in serbia 57

comment Dejan Ječmenica President of the FIC Human Resources Committee (Wiener Staedtische osiguranje a.d.o. Beograd)

Deep Reform of the Education System Needed

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very society strives to create the best possible market operation. However, in the past 20 years, we have made few changes that create the conditions which would increase employment levels and enable other unhindered conditions for the operation of the entire economy. Our progress and the attracting of foreign investors depends largely on the Labour Law. We are not familiar with the real reasons why such changes have not occurred. We consider changes to the Labour Law to be necessary and must follow the requirements of the market and the competitiveness of our economy. The FIC gave many recommendations for improving the Labour Law in the previous period, with the aim of introducing more flexible market functionality (removing current limitations on the validity of agreements for a set period of one year; introducing the concept of outsourcing workers), abolishing significant financial burdens (employers’current obligation to provide life-long severance pay) and eliminating administrative barriers (a complex payroll system, e.g. a paper trail with signatures for every salary paid). We hope that the announced amendments to this crucial law will resolve these problems in the near future and introduce a long-awaited flexible and modern labour market.

Our opinion is that the education system is crucial for every society and state. However, the actual process of furthering its development and improvement is very slow and not in line with actual market requirements. This considered, the education system should follow the needs of the economy and social development. In that respect we have not been very successful. Of course, new methods of working and the market demands require new knowledge, skills and abilities, which young people often do not possess. We repeatedly ask ourselves why? The education system requires deep reform as the basis for social and economic progress. Without that we will not be able to enter the increasingly competitive game on the domestic and for-

Constant development of the workforce is a necessary factor for the development of a country’s market competitiveness eign markets. The FIC provided plenty of recommendations for the improvement of education and human capital, which are primarily related to improving and modernising the education system in order for human resources to possess the necessary skills, and the constant development of the workforce as a key component of economic competitiveness.

One of the key successes of economic growth is the development of human resources. In today’s increasingly demanding business conditions, we are witnessing rapid changes and the problems faced by every business. In such conditions, business competitiveness has taken a central place in the “economic considerations” of both developed and developing countries. We may say that in the past, competition in some countries was based on individual comparative advantages. For example, on the qualifications and costs of the workforce, as well as on certain available resources. However, business conditions have changed greatly.

Today the foundations of economic development are factors which significantly impact or are based on knowledge and developed infrastructure, high technology, innovation and human resources. Human resources are becoming an increasingly important success factor of any business and company. The global method of operations has also impacted on the labour market. This primarily refers to the reduction of labour costs, new approaches and greater labour-market liberalisation. Such an approach enabled the rapid transfer of know-how from various markets and their fast implementation.

Globalisation has influenced the process of overcoming the complexity of some work processes, and in applying certain methods identically on all continents. Constant development of the workforce is an essential factor in the development of a country’s market competitiveness. ■

We consider changes to the Labour Law to be necessary and must follow the requirements of the market and the competitiveness of our economy

58 Guide to Foreign Investors Council in serbia 2013/14

2013/14 Guide Investors Council in serbia GUIDE to TO Foreign THE FOREIGN INVESTORS COUNCIL 57 59

comment Christoph Leitner FIC Leasing and Insurance Committee President (VB Leasing d.o.o. Beograd)

Progress Needed According to the FIC Leasing and Insurance Committee President, the value of leasing contracts in Serbia showed an upward trend during the last two years, signalling a recovery of the leasing market. However, he notes, significant changes are needed in order to ensure fair play on the third-party liability insurance market

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he insurance sector is suffering from insufficient development, suboptimal market structure and high concentration, according to the latest available data. Significant changes are needed in order to ensure fair play on the motor third-party liability insurance market.

While being the most important market segment, with a 31.5% share last year, that obligatory insurance market is marked by the unlawful practices of the technical checkpoints, which abuse their dominant position to get commission rates up to 50% of the premium in spite of the ban on taking any commission exceeding 5%. We advocate both strict law enforcement and regulatory changes that would put insurance companies in a better position. Our suggestions include: MTPL price liberalisation; allowing insurance companies to perform car registrations on their own business premises; and revising the number and timelines of mandatory technical checks for newer vehicles. While waiting for the new Insurance Law to be drafted, we have recommendations for changes that would benefit the development of the market. As the current obligation to split business into life and non-life insurance is about to be reversed, we advocate including the provisions regulating integration of those two segments for the companies that split them, despite the extension of deadlines.

In view of better predictability, the law should also regulate some important issues which are now left to be tackled by National Bank of Serbia. Our opinion is that it is not a good solution as it gives loose discretionary rights to that regulatory body, which hampers predictability.

Although in 2012 the Law on VAT was changed and taxing of real-estate leasing was made more attractive for clients, several issues remained unaddressed. As an illustration, one issue concerns the

very high founding capital of €5 million requested of leasing companies executing real-estate leasing. The other issue is regarding the tax credit, which a taxpayer investing in fixed assets in Serbia can claim for 10 years for corporate income tax purposes in the amount of 20% (40% for small legal entities) of the investment made during the year in which corporate income tax liability is assessed. However, in cases where the asset is being acquired under a finance lease contract, the lessee is only allowed to use the tax credit in the last year (i.e. the year in which the finance lease contract is expiring and the lessee becomes the legal owner of the asset) and only in the amount of the investment repaid in the last year of a leasing term. Given this fact, financing of fixed assets under finance lease has a clear disadvantage when compared with lending.

International data at the European level suggests that leasing is an economically efficient solution for funding support of SMEs. During the last two years, the value of leasing contracts in Serbia showed an upward trend, signalling a recovery of the leasing market, which in turn represents additional motivation for us to intensify advocacy and enable even better results. Besides the aforementioned need to change the Corporate Income Tax Law, changing VAT is also needed to make finance lease interest VAT free. This would make conditions for leasing the same as for the banking sector’s lending programmes. Among other regulatory changes needed, we consider regulating operative leasing to be of great importance, as it constitutes 18% of placement of leasing companies in Serbia and plays a more and more significant role in western European and US leasing markets. Finance lease companies should be able to perform insurance-agency activity. This would enable leasing companies to offer their clients a ‘one-stop shop’ solution and hence increase attractiveness of the product. ■

In view of better predictability, the law should also regulate some important issues currently left for the National Bank of Serbia to tackle

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2013/14 Guide to Foreign Investors Council in serbia 61

comment Milica Subotić President of the FIC Legal Committee (Jankovic, Popovic & Mitic o.d.)

Excessive Gap Between Laws and Bylaw Solutions

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he process of harmonising Serbian legislation with European rules and standards has led to tangible results of legislative activity in Serbia.

We can single out several areas in which the legislator has been the most active. The impression is that the most progress has been achieved in the area of public procurement, trade, taxation and the IT industry. When it comes to public procurement, we must mention that a new law on public procurement has been applied as of 1 April.

The application of this law envisages better control of the actual planning of public procurement and the advancement of anti-corruption measures. Although these decisions were long expected, it remains to be seen whether the law will be applied in practice and thereby really lead to the set goals. In the field of trade there has been progress in terms of further reducing the documentation required for the transport of goods, which will further reduce the cost of transport and we hope, influence the growth of trade.

Progress can also be seen in the fact that the official opinions of the Ministry of Finance are binding in the application and interpretation of regulations, which should lead to greater consistency in the application of these regulations by the Tax Administration.

Generally speaking, the greatest progress in legislative activity has been made in the field of competition protection and the area of e-commerce. The Commission for the Protection of Competition has raised awareness of the importance of competition through the application of all authority entrusted to it by the existing Law on the Protection of Competition. Significant progress has also been made in the further concretisation and increased objectivity of rules on the allocation of state aid.

The areas in which no progress has been achieved are: labour regulations, the education system, real-estate and customs, as well as the fields of food industry and agriculture, insurance and leasing. When it comes to labour regulations, it must be noted that the labour market should be made more flexible. The education system should also be

This gap creates uncertainty and generally slows down Serbia's economy, and could be solved by the comprehensive education of the state administration elevated to a higher level in order to increase labour productivity. In terms of legal regulations in the real-estate field, the problem arises with conversion rights for the use of land, restitution etc. Slow progress has also been noted in the area of customs regulations in a framework where there are certain legal loopholes. Difficulties also arise in the application of the existing law. In the food industry and agriculture, the problem is that the process of control and the labelling of food quality is not in line with EU regulations. Moreover, one of the main problems in this area is that milk does not meet quality standards and that the National Reference Laboratory is still not functioning. In the insurance field, a problem arises due to the unpredictability and uncertainty created by constant changes to the strategy in this area. In the field of leasing I would highlight the fact that operative leasing is not legally regulated.

The biggest problem still lies in the inadequate implementation of legislation. Although laws are introduced which we can say are advanced and in line with global trends, the Serbian state apparatus is slow to adopt changes. The key to overcoming this problem is the constant education of the Serbian administration in establishing a better system of exchange of information between different government sectors. Another problem is represented by the fact that the adoption of bylaws is nearly always late. New laws bring new solutions which bylaws then need to make more concrete. However, it seems to us that there is still too big of a gap between the adoption of new laws and an adequate bylaw solution, which creates uncertainty and generally slows down the Serbian economy. Through the comprehensive education of state administrators, disagreements over the application of certain laws and rules would disappear. â–

The key to overcoming this problem lies in the constant education of the Serbian administration and in establishing a better system of exchanging information between different government departments

62 Guide to Foreign Investors Council in serbia 2013/14

Interview Svetlana Tolmačeva Dingarac Chairperson of the Executive Board of ProCredit Bank

We Follow Germany’s Classical Banking Model Our goal is not to place loans at any cost, but rather through talks with the client to come to a solution that fits a specific investment, and therefore also borrowing. We are proud that ProCredit Bank does not finance high-risk jobs and unviable projects

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roCredit Bank is one of the leaders in supporting the development of entrepreneurship and smalland medium-sized enterprises in Serbia, with an approach and desire to provide a service to every entrepreneur by taking into account all the specifics, dynamics of its operations, seasonality and rhythm of payments, as well as recommending what is best for that business to do and what is not.

“The importance of such recommendations and our reputation as an advisor is gaining weight due to economic developments planned for the next financial year. There are indications of a positive scenario for Serbia in 2014, but still below the desired growth and recovery given the expected growth of unemployment in the first half of the year, a further drop in domestic demand and more difficult collection of receivables, which will be the leading problem for Serbian companies,” says Svetlana Tolmačeva Dingarac, Chairperson of ProCredit Bank’s Executive Board.

“Higher growth and development is expected in 2015.

Before all of that, what clients now see as a problem is how to remain liquid and deciding whether to invest further. We consider clients’ caution and prudence in every business step as the right approach, which we support through our advisory role aimed at leading the client to a stable operation, which is confirmed by our experience to date, as well as an exceptionally large number of investment projects that local companies realised while receiving the advice and financial support of our bank.”

comes to savings?

- Operational stability and responsibility in the behaviour of the bank is reflected in the investments that it prefers, and in that regard investments that are transparent and are not high risk can provide long-term care-free savings.

Our goal is not to place loans at any cost, but rather through talks with the client to come to a solution that fits a specific investment, and therefore also borrowing. Responsible operations, which is at the basis of ProCredit Bank’s lending policies, involves careful analysis and risk management in approving credit.

We are proud that ProCredit Bank does not finance highrisk jobs and unviable projects. Promoting saving as a way to invest in the future and its use for investment in the development of small businesses and agriculture, with previous careful analysis, is the principle on which our daily operations are based. As a result of that, the bank has a transparent profile with a low level of risk, which ensures clients’ savings are totally secure.

In accordance with that, the educational site www.mojepare.rs was launched recently and it clearly shows the way in which the bank utilises its depositors’ savings.

Responsible behaviour also requires a very careful relationship towards our clients’ money, so we do not finance high-risk stock market and speculative activities, and do not promote consumer loans but rather encourage savings as a way of investing in the future.

ProCredit Bank is at the very top when it comes to the collection of receivables, with delays in payments to our bank five times less than the average for the banking sector in Serbia. Careful analysis of creditworthiness, avoiding the overindebtedness of clients and reducing credit risk to a minimum are the reasons why ProCredit Bank has a very low rate of repayment delay, only 4.75%, as opposed to the 26.91% recorded by the banking sector as a whole. We believe that this fact is fascinating in today’s market conditions. ■

A pronounced responsible approach to investment, with low risk, ensures clients’ savings are completely secure

How and to what extent does the assuredness of the bank’s operations influence customer choice when it

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2013/14 Guide to Foreign Investors Council in serbia 63

Intervju

Nataša Marjanović

Director of the Delta Generali Voluntary Pension Fund and director of Delta Generali Insurance’s asset management and financial operations directorate

Good Results Despite the Crisis There can be no substantial development of pension funds without changing relations towards the future. At times of a general lack of money, people give up on the future easily and thus fall into a vicious cycle. It is necessary to develop awareness that we ourselves can influence, making tomorrow better

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even years of the operations of Delta Generali’s Voluntary Pension Fund also marks seven years of the voluntary pension funds industry in Serbia, as Delta Generali was the first to obtain a pension fund license from the National Bank of Serbia.

“Since the establishment of property funds managed by the company, it has increased more than twentyfold and amounts to 5 billion dinars, which accounts for more than a quarter of the voluntary pension funds market. Almost 50,000 members are saving within the Delta Generali Basic and Delta Generali Index funds, while realised yields since establishing are higher than the industry average,” says Nataša Marjanović, director of the Delta Generali Voluntary Pension Fund and director of Delta Generali Insurance’s asset management and financial operations. ► How do you assess the busine-

► Why do you think voluntary pension funds haven’t be-

come more active in Serbia?

- The main reason is certainly the financial crisis, which took place at the beginning of the voluntary pension fund industry and inevitably shifted focus from worrying about saving for the future to ‘survival’ worries. However, I want to point out that although the assets of our voluntary pension funds are not comparable to other developed countries, the assets of all voluntary pension funds, of nearly 20 billion dinars, are certainly not insignificant. I am deeply convinced that time is on our side and that in some, hopefully near, future, when the financial crisis is no longer in focus, savings in voluntary pension funds will continue to grow incomparably faster.

It is necessary to develop awareness that we ourselves can influence a better tomorrow. Such a stance does not require significant financial investment, just a change in the way of thinking

ss climate in Serbia for the voluntary pension fund industry?

- Although the current state of the market is not in line with expectations when this industry’s development began, it can be characterised as stable. Voluntary pension funds have been and are going through times of crisis much better than other capital market players. There is also a constant increase in funds’ assets.

Further room for development is significant, primarily in the field of popularising this form of saving, which, given the state of the public pension system, is a necessity and not a luxury.

► What

voluntary pension funds and that the main role of the state should be to educate about the necessity of saving for old age. There can be no substantial development of pension funds without changing relations towards the future. At times of a general lack of money people easily give up on the future and thus fall into a vicious cycle. It is necessary to develop awareness that we ourselves can influence a better tomorrow. Such a stance does not require significant financial investment, just a change in the way of thinking.

should the government do within the regulatory framework to promote the development of this industry?

- The regulatory framework envisages tax incentives for savings in voluntary pension funds, but our analysis and comparisons with other pension systems lead us to conclude that different, more explicit forms of incentives would provide better results. However, I believe the current regulatory framework is not an obstacle to the development of

Could the insurance industry, alongside the banking system, be a significant investor in the Serbian economy?

- The Serbian market is undoubtedly bank-orientated.

However, the field of long-term savings, in which I would include bank savings for periods exceeding two years, voluntary pension-fund savings and savings in life insurance, comprise a significant part. Precisely that longer term type of saving is the most appropriate source of funding for development projects. ■

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64 Guide to Foreign Investors Council in serbia 2013/14

Interview Stelios Koutsivitis Executive Director of the Metropol Palace Hotel, Belgrade

The Largest Conference Centre Meetings and events account for more than $250 billion of annual business volume globally. Their economic value as an enabler and facilitator of business and policy decisions is far broader

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etropol Palace’s management has resurrected Belgrade’s top luxury hotel and is now set to take advantage of emerging opportunities in the evolution of international meetings, events and conferences.

Metropol Palace was acquired in 2006. After the heavy refurbishment and re-launching of the hotel, do you consider it a successful privatisation project?

- I believe that the privatisation of the Metropol Palace is a unique good example of how government can raise revenue from the sale of state assets, collect taxes and create jobs, also adding value in the respective sector of the economy. In this case, through the private investor and management company, one of the top luxury global recognised brands, that of Luxury Collection Hotels of US hospitality chain Starwood, came to Serbia, creating conditions for Belgrade to attract the attention of the world tourism industry. An international award from premier global tourism magazine Condé Nast Traveller, received by Metropol Palace in the first year of operations, brought Belgrade to the centre of the globally mostprestigious tourism media. The privatisation of Metropol Palace shows that, with the right foreign investments, originated by private companies with industry expertise, the state can have really positive effects and add value in the economy.

The latest positive developments in Serbia, linked to the country’s EU accession, place on the agenda the issue of transition to a freer economy. Privatisation is one of the components of this transition process.

►

Tourism is an essential contributor to GDP and job creation in all G20 countries and has a great impact on economic growth and the reduction of global macroeconomic imbalances. Following the economic crisis, countries that need to recover significantly, such as Serbia, Greece and the rest of south-east Europe, must take advantage of surging tourism demand, both domestic and international, to buttress the growth of their economies.

► What are the future plans for Metropol Palace? Are you planning any other investments?

- As a company we’ve very heavily penetrated the business travel segment, which is the most dynamic tourism segment in Belgrade, but soon we will focus on other relevant markets, whether that’s international conferences or international corporate meetings, which comprise different segments of the overall corporate market. There are emerging opportunities in the evolution of international meetings, events and conferences that we need to make sure we are primed to take advantage of. Our next big project is the development of the biggest hotel conference centre in Belgrade. Although our existing facilities consist of 2000 sqm of meeting and events space, we are ready to construct another 2,000 sqm and develop a convention space able to host 1,500 conference participants. This adds a great competitive advantage to Belgrade, transforming the existing business travel destination to an international conference destination. Belgrade, with its ideal central location, can be a great conference hub. As a prerequisite it needs the branding, which has already been ensured with the world premier brand of Starwood chain and the development of the necessary infrastructure, which is our main strategic investment priority for the next year.

Belgrade is likely to experience qualitative benefits from the presence of such big conferences. These include global attention, reinforcing the city’s brand as a world-class city and elevating Serbia’s role as a host of future global events. ■

The privatisation of the Metropol Palace is a unique good example of how government can raise revenue from the sale of state assets, collect taxes and create jobs, also adding value in the respective sector of the economy

► Is it possible for the Serbian economy to have a posi-

tive economic impact because of the further development of tourism?

- Travel and tourism have a profound global impact, employing more than 235 million people worldwide and generating some 2.5% of global GDP.

2013/14 Guide to Foreign Investors Council in serbia 65

comment Andrew Peirson FIC Real-Estate Committee President (Jones Lang LaSalle d.o.o. Beograd)

Construction and Development Need Support The FIC Real-Estate Committee President insists that the current tax system discourages new construction and development, leading to non-use of the most valuable national resource and resulting in a poor economic outlook. He says that construction and development must be supported through low initial development costs

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form. The main problem any investor in Serbia faces he real-estate market is regulated with an is poor administration, slow and unpredictable proextremely complex legal system. Changes cedures, and corruption. We believe public adminin one segment or law often affect applicaistration improvement should be very highly position of another law, meaning that change tioned on the list of national priorities, and although should be well planned. Moreover, there is signifithis reform may take some time, Serbia must adjust cant public focus on real estate, and changes can and/or adopt regulation in a way that can be implecause intense public reaction. This means that any mented by public administration, even if this means potential reformers in the real-estate segment will postponing some reforms. There is no use for any potentially suffer political consequences, and we modern law which cannot be implemented because express hope that the current Government will the public administration does not have sufficient show true willingness to accept these risks and capacities. We should have implementable laws in implement much-needed reforms in this segment. place until public administration is capable of imLand ownership, construction and restitution plementing more advanced solutions and carrying are three topics that have very different issues out reform. behind them. Land ownership The current tax system is mainly affected by converThere is no use for a modern law which discourages new construction sion of ‘right to use’ to freehold cannot be implemented because the public and development, leads to right over construction land. non-use of the most valuable The Law on Spatial Planning administration does not have sufficient national resources and results and Construction amendments in a poor economic outlook. from December 2012 have just capacities. We should have implementable Construction and real-estate partially and temporarily mitilaws in place until public administration is development must be supgated this issue, and it remains ported through low initial the key factor for the future of capable of implementing more advanced development costs (reducing the real-estate market. solutions and carrying out reform the Initial Development Fee).

‘Right to use’ cannot funcReduced city revenue from the tion any further as it did before IDF should be compensated through property tax 2009 due to lost confidence in that specific propand especially through increased tax for non-used erty right. Prior to investing, buying, lending, mortresources (properties, land and buildings). gaging or developing, any investor, developer or fiThe impact of the Law on Restitution cannot be nancial institution would require absolute freehold fully assessed due to the short timeframe in which right over the land. Any further delay in resolving it has been enforced. However, until now, it has this issue would have further negative impacts on demonstrated slow and uneven implementation. the real-estate market, construction industry and We are satisfied to have the opportunity to see entire economy. Solving this issue does not require and comment on the draft Law on Spatial Planning any funds, simply political will. and Construction. In terms of our expectations There are several issues regarding the conregarding this law, we would like to see that the struction industry. The main issues are the connumber of current remaining problems in land struction approval issuing process and taxation. ownership, construction and restitution are reTo speed up construction approval, Serbia solved in a good manner. ■ would need to undertake public administration re66 Guide to Foreign Investors Council in serbia 2013/14

Interview Ronan Conroy Director, BPI d.o.o.

Pragmatic Approach – Basis for Future Growth BPI has taken a pragmatic approach to its businesses in agriculture and real estate, with a view to establishing a secure foundation for future growth

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even years after arriving in Serbia, BPI Holding continues to make inroads in the agriculture and real-estate sectors and is keen to see consistency in the implementation of legislation on the part of the Serbian authorities ► BPI Holding has been operating in Serbia since 2006.

How much has the business climate in the country changed since your arrival and in which ways?

- The predominant change is the extent to which Serbia has become increasingly exposed to the international stage.

From 2006, and in particular when this exposure predominantly evidenced itself through the international credit crisis in 2008-2009, we believe this exposure has moved from being largely challenging to now representing a viable business opportunity for Serbia. From 2006-2008, which may be viewed as a phase of innumerable opportunities largely fuelled by readily available credit, the business climate experienced a tightening of credit, which saw businesses being required to take a revised approach.

For BPI this has seen us take a pragmatic approach to our businesses in agriculture and real estate, with a view to establishing a secure foundation for future growth. The real-estate sector has been dormant and with that we have taken a wait-and-see approach. With agriculture and its essence of continual cycles, we have internally structured our businesses so as to develop stronger relationships with our partners. We believe this approach will extend further into our agriculture business and we look forward to exploring opportunities with our partners using this model.

- The novelties of legislation associated with various business sectors in Serbia is something businesses need to keep adept of. This is nothing new for businesses operating in an environment such as Serbia, which is undergoing changes associated with exposure to international business environments, such as Serbian ambitions towards EU membership. However, the real challenge must be viewed as being consistent implementation of legislation. An inconsistent approach in respect of any aspect of business is hardly sustainable when an environment is constant; however, when one considers the novelties of legislation associated with a changing business environment, as in Serbia, inconsistency must be avoided.

An incongruous approach to the implementation of legislation not only poses huge challenges to businesses, but also ironically for many operating within the administrative bodies.

Additionally, a selective approach to the implementation of legislation can often undermine the principle or objective of a piece of legislation and when incongruousness pervades that implementation other positive ambitions of the authorities for the general business environment are undermined.

An inconsistent approach in respect of any aspect of business is hardly sustainable when an environment is constant

► In Serbia, BPI Holding operates in two sectors – agriculture in Vojvodina and real estate in Belgrade. How satisfied are you with the way these segments are regulated and with the implementation of the laws that regulate them?

► How is Serbia placed in the western Balkans in terms

of the segments in which you operate? Which of BPI’s activities and projects in Serbia would you single out?

- BPI believes the aforementioned positive ambitions of the Serbian authorities with respect to the local business environment should continue to be undertaken with a view to the competitive advantages Serbia possesses vis-à-vis competing regional environments. These competitive advantages include the quality of human capital, long-standing strengths in high-end agriculture production and geographical location. Be it legislative, educational, financial or infrastructural developments, these should be viewed as support frameworks upon which the competitive advantages of Serbia are reinforced and further developed. ■

2013/14 Guide to Foreign Investors Council in serbia 67

comment Ivan Rakić President of the FIC Tax Committee (Ernst & Young Beograd d.o.o.)

We Seek Only Consistency and Predictability

I

n the previous period there were significant changes to tax regulations and I can express satisfaction that the Ministry of Finance recognised the problems the FIC indicated in the White Book as problems hampering the tax system and requiring a change in regulation. Moreover, the public debate on amending tax legislation saw the adoption of FIC Tax Committee proposals that were not in the initial version of the law’s draft amendments (e.g. changes in relation to calculating tax depreciation), which I see as a sign of recognition of the FIC as a partner in the process of changing regulations, all with the aim of improving the business climate in Serbia.

In this regard, I think that progress is two-fold. First of all, the change to regulations will make doing business in Serbia simpler and faster, at least from the standpoint of tax regulations. Furthermore, and what I believe to be very important, the changes are a clear signal that Serbia recognises and wants to honour the ‘voice’ of investors with the aim of improving the business climate and facilitating the arrival of new investments.

If I had to briefly summarise the main complaints of investors regarding the Serbian tax system, then I would definitely call for “consistency in the application of regulations” and “predictability of the tax system”. I think Serbia will have problems attracting new foreign investment if there is no improvement in these areas. In fact, if our tax system provides for some exemptions and investors have problems in their implementation, it will definitely reflect on their future decisions to invest further in our country.

I very often emphasise in conversations with media representatives the fact that foreign investors who have invested funds here and who seek to expand their capacities make the best promoters for future investments.

But if, for instance, the manager of a multinational company operating here notifies his headquarters that he is having difficulties in the application of tax regulations in Serbia, that what is prescribed by the regulations is not

I think Serbia will have problems attracting new foreign investment if there is no improvement in the consistent application of regulations and predictability of the tax system enforced in practice, then there is little chance that new investments will be forthcoming.

Parafiscal taxes are just an example of what does not contribute to the predictability of the tax system and I wouldn’t highlight these as a separate problem, but rather as part of the problem. In fact, none of the investors bring into question the sovereign right of Serbia to introduce new taxes or increase tax rates, but what is important is for changes in the tax burden (including increases/ parafiscal introductions) to be published in a timely manner, in order to leave enough time for businesses to revise their operations. As an example I would mention that during the economic crisis in Australia, an additional charge for the mining industry was introduced, but two years were set aside before the regulations were applied, thus giving more than enough time for the country’s industry to adapt their business plans to the new levies. In my view, this is a key element in the predictability of the tax system, in which I objectively think there is room for improvement when it comes to Serbia.

Starting from 30 May 2013, in order to achieve unique implementation of regulations from the Ministry of Finance and Economy, the opinions given by the Minister of Finance, or a person authorised by him, will be binding for the treatment of the Tax Administration. Legally binding opinions are a tangible and very good step towards improving the predictability of the tax system and consistency in the application of tax regulations. This step will not solve all of the problems, of course, because it is very important to ensure that the mentioned opinions are applied in practice. I also think that legally binding opinions will help the tax authorities, and that they will speed up the actions of tax bodies in taxation controls. ■

The changes are a clear signal that Serbia recognises and wants to honour the ‘voice’ of investors, with the aim of improving the business climate and facilitating new investments

68 Guide to Foreign Investors Council in serbia 2013/14

Interview Ove Fredheim CEO of Telenor Serbia

Dynamic Development Telenor Serbia’s CEO believes that the process of cutting red tape should be sped up and that creating an adequate regulatory framework should follow the industry’s rapid growth and trends

A

s competition and market conditions are becoming more complex and challenging, Telenor Serbia’s management thinks the Regulatory Authority could take action by continuously assessing any deviations in fair market competition and intervening with appropriate measures

► What do you think of conditions for doing business in Serbia’s telecommunications sector and what has the state done so far to improve the situation?

- We can say that strong determination exists from the government to improve the business climate. The government has recognised key issues and started consultations on all important laws. The key preconditions are cutting administrative barriers and maintaining continuous consultations between the government and business stakeholders.

At the end of 2012 the government adopted an Action Plan for 2013-2014 that specifies in detail the implementation of the Strategy for Development of Electronic Communications until 2020. Four out of eight FIC recommendations have marked some progress. In the coming period the ‘red tape’ process should be sped up, while institutional development and creating an adequate regulatory framework should follow the industry’s rapid growth and trends.

competition and intervene with appropriate measures.

Our electronic communications sector is characterised by tough competition in mobile telephony, while fixed telephony end users have not yet benefited from competition. As an illustration, the Regulatory Authority postponed fixed number portability, which would create conditions for end users to enjoy the freedom of selecting a provider of fixed communication services. Nevertheless, we have a strong promise that it will be enabled in March 2014. ► What

was the rationale behind Telenor’s decision to buy the equity and assets of KBC Bank?

- Telenor Group identified financial services as a key strategic opportunity with a global revenue ambition of $1 billion by 2016. Following the Group’s strategy, Telenor Serbia joined the initiative. We believe there is enormous potential to offer modern mobile financial services, closely linked with existing telecommunications business in Serbia.

Once we open the bank we hope our mobile financial services will improve customers’ experience, make it simpler and more intuitive. We want mobile phones to substitute client’s wallets and eliminate the need to be physically present at a bank’s counter.

We have received all the necessary approvals and the immense support received from the government during this process has been highly appreciated. Now we are waiting to become the official new owner, which is expected by year’s end.

We want mobile phones to substitute client’s wallets and eliminate the need to be physically present at a bank’s counter

Considering that one of the mobile telephone companies in Serbia is state-owned, have you noticed any breaches of competition rules?

- Telenor believes that only an independent and competent regulatory authority can set a level playing field to promote competition. Competition is a key driver for operators when investing in advanced technologies, better quality and more innovative services. Over the last couple of years the Regulatory Authority in Serbia has increased its capacity to regulate the market. As competition and market conditions are becoming more complex and challenging, we believe the Regulatory Authority could take action by continuously assessing any deviations in fair market

►

► Do you have any new investment plans?

- Our plans tend to be dynamic and depend on what is happening around us at a given moment. We will continue to invest in several areas, firstly in further development of our network, in terms of expanding its capacity and data coverage. We also hope that the spectrum assignment will happen by the end of this year and that we will gain access to additional spectrum. We will continue to invest in expanding our portfolio of devices and services and offer convergent solutions to our business customers. ■

2013/14 Guide to Foreign Investors Council in serbia 69

comment Zdravko Drčelić President of the FIC Telecommunications and IT Committee (Hewlett Packard d.o.o.)

E-governance – Key to Reforming State Administration

F

ollowing adoption of Serbia’s Strategy for Development of Electronic Communications 2010-2020 in September 2010, an action plan was adopted to implement this strategy. This plan defines the priority actions and measures needed to enable the electronic communications market from 2012 to 2014 for the use of advanced technology and meeting customers’ needs for modern communications services.

Activities were identified in the areas of developing electronic communications, the transition from analogue to digital TV, the digital dividend and strengthening the inspection of electronic communications. A deadline was set for each activity for the preparation, or adoption of relevant documents, and institutions responsible for their implementation were appointed.

The action plan represents a basic strategic document for the development of the telecommunications market, but it’s relatively late adoption – only at the start of 2013 – slowed development of the market, considering that the deadline for the implementation of most activities was set for the end of 2013.

This particularly refers to the development of an analysis on the state ofthe constructed electronic communications networks as abasis for developing broadband, then the development plans for the distribution of radio frequency bands for individual purposes. Furthermore, it refers to making timely decisions on the allocation of digital dividendswhich will be released after the transition to digital broadcasting aimed at achieving predictability for further development and investment in the future etc.

The Strategy for the Development of Information Society in Serbia up to 2020 was adopted in mid-2010, with an the action plan for the next two years adopted in August 2013. This action plan defines measures and activities for the advancement of the information society. Envisaged activities comply with the EU’s recommendations and represent obligations which Serbia needs to fulfil as part of the European integration pro-

The Foreign Investors Council supports the adoption of a new action plan for the development and advancement of Serbia’s information society cess. For these reasons, very short deadlines were set for the implementation of individual activities. Of the many activities, particular importance is given to reform tasks in the field of electronic conversion of public administration, economics, education, culture, as well as in the field of information security (e-government, e-justice, e-commerce, e-health, etc.).

The FIC supports the adoption of the new Action Plan for Development and Advancement of Information Society in Serbia and is ready to assist in the successful implementation of the set objectives.

E-governance is key to the reform of Serbia’s state administration. It will make the administration more efficient, which in turn will attract more foreign investment.

The E-Government Portal now includes a range of services and it appears that the Tax Administration has taken a decisive step in the implementation and expansion of its IT infrastructure, with a large number of improvements. Efforts exerted during the last year have raised Serbia’s position by 30 places in the UN’s annual survey in the field of e-government, placing the country 51st among 190 countries worldwide.

Although successful projects have been undertaken related to the digitisation of the country’s education system, the overall effect is rather limited.

Without a systematic approach, which would encompass the development of corresponding educational applications, and without adequate teacher training, such programmes will have only a minor influence on the development of IT skills among Serbia’s younger generations. Accessibility to basic IT infrastructure hardware in Serbian schools is far from the level that would enable students to keep up with their contemporaries in the EU. ■

It appears that the Tax Administration has taken a decisive step in the implementation and expansion of its IT infrastructure, so there are a large number of improvements

70 Guide to Foreign Investors Council in serbia 2013/14

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office@aim.rs • www.cordmagazine.com 2013/14 Guide to Foreign Investors Council in serbia 71

Interview Ana Firtel Executive Director of the Foreign Investors Council

We Highlight Problems and Offer Solutions Our expectation is a sustainable and predictable business environment, systemic reforms that require time, political will and consistent work, and those are processes that cannot happen overnight. But we also don’t forget the little short- and important medium-term things and the steps that can lead to improvements in the environment. And we also try to notice the shifts and the lack of progress on all three fronts on strengthening processes, mechanisms and structures in order to advance corporate governance and increase the active participation of members, but also standardising communication with external partners through precise guidelines and procedures for cooperation.” ► Are many of the suggestions from the first White Book

T

he significance of the FIC White Book is that it shows in practical terms the actions that the FIC advocates – transparency in work and expectations to create a predictable business environment that enables sustainable development, says Ana Firtel, before explaining: “This transparency has two aspects – internal and external. The way the book is written within the association is crucial. FIC members lead internal structured dialogue about the topics with a very precise decision-making system and in the end member companies come up with common views, opinions and proposals. It is a sublimate of membership debate.

The debate that exists within the association makes the White Book important.

“From that internal dialogue emerges the public importance of the White Book. The fact that the book is written over the course of almost half a year demonstrates the seriousness of the dialogue process.

“Viewed from the outside, the White Book is a unique product of its kind in the region, in terms of its extent and the detailed analysis of topics it covers. We try to show by practical example how you can do business predictably in Serbia. In the last five or six years we have worked mainly

still current today?

- Our expectation is for a sustainable and predictable business environment, systemic reforms that require time, political will and consistent work, and those are processes that cannot happen in one day. But we also don’t forget the little short- and important medium-term things and the steps that can lead to improvements in the environment. And we also try to notice the shifts and the lack of progress on all three fronts – the short, medium and long term.

For these 11 years, and especially in the last five years, there has been one prevailing current problem. There is significant progress in changing regulations, but the problem is their implementation. It seems that the process of European integration and transition has helped the government to adopt a plan of work which states what legal provisions should be amended. But everything that goes behind the law – strong institutions, trained public servants, bylaws, capable administration – that is still a shortcoming. And this is one of the key messages.

The aim of the White Book is to convey the experience of our members with this market and their home markets and to offer solutions The White Book

The White Book is a unique product of its kind in the region, in terms of its extent and the detailed analysis.

► The

White Book also offers solutions?

- Yes. We see ourselves as constructive critics. The aim of the Council and the White Book is to convey the experience of our members with this market and the markets where their

72 Guide to Foreign Investors Council in serbia 2013/14

dialogue

proposals

interest

The stronger, better and more transparent dialogue is between the private sector and the government, the better the solutions.

The proposals we offer are not ours alone, but also those of, for instance, international financial institutions.

It is in our interest for the whole economy to be strong and our proposals do not reflect any particular narrow interest, but rather the broader interest.

parent companies do business, and to offer solutions based on this experience.

The expectations we relay about the business environment are not just ours and that can be seen in the fact that they are also pointed out by other business associations. And that’s good because the stronger, better and more transparent dialogue is between the private sector and the government, the better the solutions – the chances are greater to change and arrange the framework.

The Council has introduced another innovation: with each subsequent White Book it reviews the previous year’s edition and analyses what the government has done in response to the recommendations offered in the previous White Books.

- This is the third edition of the White Book in which we have introduced the balance score card that monitors, in a visible way, the success of the execution of recommendations. But it is important to note that the White Book has always had such a structure whereby in every topic positive changes are highlighted, but also the lack of progress between each two editions. ►

► Has

Does the FIC intend to expand its activities at all?

- We are constantly expanding activities. We have a clear and defined mandate and I do not believe we will extend it. Every year at the session of the annual assembly, the membership analyses our work and defines the mandate for the next year. I have worked for six years in the Council and during that time the message of the membership has always been that the mandate should remain very clearly defined within this framework – analysis of the regulatory framework, professional debate within the association and participation in privatepublic dialogue regarding regulatory solutions. We are not a chamber of commerce and do not offer membership services in that way.

We expand and deepen activities within the mandate and seek ways of more effectively conveying our messages to the government and other key institutions and organisations relevant to the transformation of the business environment.

We will continue to communicate with the state, but we will strive to expand our dialogue both with the government and with other partners – business associations, diplomatic representatives, international financial institutions etc.

What the FIC proposes can be useful for all of them to hear. ■ ►

For these 11 years, and especially in the last five years, there has been one prevailing current problem. There is significant progress in changing regulations, but the problem is their implementation

What is the influence of the White Book on the introduction of positive solutions?

- Influence undoubtedly exists – just how much is difficult to assess. This is because the proposals we offer are not ours alone, but also those of, for instance, international financial institutions. The specificity of the White Book is that our proposals are very concrete, because they come from practitioners who confront the good and bad sides of the Serbian regulatory framework in their daily operations.

The White Book is not an end in itself. For us it is a mechanism to formulate what we stand for and then, based on that, we develop a dialogue with the government, to explain what problems are being faced by the members of the Council and what is behind the recommendations we give. ►

Then by 2012 their investments totalled almost €17 billion, they employed 88,000 workers in Serbia and accounted for a 16% share of GDP in 2011. In 2013, FIC members’ total investment in Serbia exceeds €20 billion, with over 95,000 employees and direct participation of 17.5% of GDP for 2012.

That is a healthy, innovative and competitive segment of the Serbian economy that is integrated into the world market. This is our connection that ‘hooks’ us to the world.

We need to work on it, to grow it, and our companies will continue to be good ambassadors for Serbia as an investment destination.

It is in our interest for the whole economy to be strong and our proposals do not reflect any particular narrow interest, but rather the broader interest. This is because, at the end of the day, our member companies need someone in Serbia to sell their products and services, and that someone should have solid business results, i.e. a decent standard.

membership grown in the meantime?

- It has. When the Council was formed in 2003, its members had invested €150 million in Serbia, had 3,160 employees in the country and their share in the nation’s GDP was 1.24%.

2013/14 Guide to Foreign Investors Council in serbia 73

digest MESSAGES Ivica Dačić Serbian Prime Minister “The government, in cooperation with relevant stakeholders, will develop tangible plans in order to increase the efficiency of state institutions and simplify bureaucratic procedures, but not at the expense of quality.”

Zorana Mihajlović Serbian Minister of Energy, Development and Environmental Protection “A prerequisite for establishing a good business climate is dismantling this system, which we are working on. Tax reform must be such that it attracts foreign investment, as well as encouraging entrepreneurship and job creation.”

Frederic Coin President of the Foreign Investors Council “It’s good that the will exists to implement reforms and that the government has shown its intention to work with us and the private sector, to discuss reforms, open specific themes and implement some reforms.”

Gabor Bekefi Vice President of the Foreign Investors Council “We expect continued coordination of monetary and fiscal policy in order to address the key issues of fiscal deficit and public debt, price instability and inflation and its association with economic growth and employment.”

Srđan Lazović Vice President of the Foreign Investors Council “We expect continued coordination of monetary and fiscal policy in order to address the key issues of fiscal deficit and public debt, price instability and inflation and its association with economic growth and employment.”

Milica Stefanović President of the FIC Food and Agriculture Committee “As the biggest positive change in 2013 when it comes to food and agriculture, I would single out the longawaited adoption of the Rulebook on Labelling, Marking and Food Advertising.”

Dejan Ječmenica President of the FIC Human Resources Committe “The education system requires radical reform that would be the basis for social and economic progress. Without that we will not be able to enter the increasingly competitive contest in domestic and foreign markets.”

Christoph Leitner President of the FIC Leasing and Insurance Committee “Regulation of operational leasing is very important, given that this type of leasing accounts for 18% of all approved leasing arrangements in Serbia and plays an increasingly important role in the leasing markets of western Europe and the United States.”

Milica Subotić President of the FIC Legal Committee “The Commission for the Protection of Competition has raised awareness of the importance of competition through the application of all the authority entrusted to it by the existing Law on the Protection of Competition.”

Andrew Peirson President of the FIC Real-Estate Committee “Improving the state administration should be one of the priorities and, despite the fact that reforming administration will take a long time, Serbia needs to adapt and/or adopt laws in such a way that the state administration can implement them.”

74 Guide to Foreign Investors Council in serbia 2013/14

Saša Radulović Serbian Economy Minister “The main aim of the measures we are preparing and implementing is to reduce the deficit in the state budget, relieve the local economy and create a good business climate for economic growth.”

Ivan Rakić President of the FIC Taxation Committee “I can express satisfaction that the Finance Ministry recognised the problems indicated by the FIC in the White Book as problems of the tax system that require change.”

Zdravko Drčelić President of the FIC Telecommunications and

IT Committee “The FIC supports the adoption of the new Action Plan for the development and advancement of information society in Serbia and is ready on its part to help ensure the goals set are reached successfully.”

Toni Verhejen World Bank Country Manager for Serbia “Laws and regulations must be simple, unambiguous and transparent, leaving as little room as possible for decisions that are based on someone’s discretion. In their implementation all should be equal before the law. “ Ana Firtel Executive Director of the Foreign Investors Council “The aim of the FIC and the White Book is to convey the experiences of members on this market and the markets where their parent companies do business and to offer solutions based on that experience.”

Directory

Foreign Investors Council in Serbia 2013/14 2013/14 Guide to Foreign Investors Council in serbia 75

Board of Directors President of the Board: Frederic Coin, Societe Generale Banka Srbija a.d.

Vice President of the Board: Srđan Lazović, British American Tobacco SEE d.o.o. Beograd Vice President of the Board: Gabor Bekefi, Carlsberg Srbija d.o.o.

Member of the Board: John Kyritsis, Delhaize Serbia d.o.o.

Member of the Board: Antonio Cesare Ferrara, Fiat automobili Srbija d.o.o.

Member of the Board: Christoph Till, Henkel Srbija d.o.o.

Member of the Board: Dimitrije Knjeginjić, Lafarge Srbija Member of the Board: Michalis Orfanoudakis, PepsiCo Western Balkans Member of the Board: Ove Fredheim, Telenor d.o.o.

Committees

Food & Agriculture Committee President: Milica Stefanović, The Coca-Cola Company (Barlan S&M d.o.o.)

Vice President: Dejan Simić, Mondelez d.o.o. Beograd Human Resources Committee President: Dejan Ječmenica, Wiener Staedtische osiguranje a.d.o. Beograd Vice President: Milena Jaksić Papac, Karanovic & Nikolic Leasing & Insurance Committee President: Christoph Leitner, VB Leasing doo Beograd Vice President: Ljubiša Veljković, Wiener Staedtische osiguranje a.d.o. Beograd Legal Committee President: Milica Subotić, Janković, Popović & Mitić o.d.

Vice President: Marjan Poljak, Karanovic & Nikolic Real-Estate Committee President: Andrew Peirson, Jones Lang LaSalle d.o.o.

Vice President: Steven Boel, Delhaize Serbia d.o.o.

Taxation Committee President: Ivan Rakić, Ernst&Young d.o.o. Beograd Vice President: Biljana BuJić, KPMG d.o.o.

Telecommunications & IT Committee President: Zdravko Drčelić, Hewlett Packard d.o.o.

Vice President: Jasmina Vignjević, Telenor d.o.o.

Executive Office

Ana Firtel, Executive Director Milica Djordjevic, Communication Officer Jelena Lazarevic, Regulatory Officer

Foreign Investors Council, 37, Svetogorska Street, I Floor, 11000 Belgrade, Serbia; Phone: +381 11 303 5550; Fax: +381 11 303 5560; www.fic.org.rs; e-mail: office@fic.org.rs

AIRPORT CITY BELGRADE Omladinskih brigada 88, 11070 Beograd Tel: 011 3189 516 E-mail: office@airportcitybelgrade.com Web: www.airportcitybelgrade.com Enrolment date: 2005

AXA OSIGURANJE Bulevar Mihaila Pupina 6, 11070 Beograd Tel: 011 2200 400; Fax: 011 2200 401 E-mail: contact@axa.rs Web: www.axa.rs Enrolment date: 2011

ALCATEL LUCENT SERBIA - OGRANAK BEOGRAD Omladinskih brigada 88A, 11070 Beograd Tel: 011 2286 781; Fax: 011 2288 298 E-mail: alu.belgrade@alcatel-lucent.com Web: www.alcatel-lucent.com Enrolment date: 2010

BAKLAJA & IGRIC LAW OFFICE Gospodar Jevremova 47/12, 11000 Beograd Tel: 011 3038 822; 011 3812 140; Fax: 011 3038 309 E-mail: advokati@baklaja-igric.com Web: www.baklaja-igric.com Enrolment date: 2004

law office Zaštitne boje logotipa Pantone 491 C

Crna 100%

ALPHA BANK SRBIJA A.D. Kralja Milana 11, 11000 Beograd Tel: 0800 250 250; Fax: 011 3243 516 E-mail: gm-office@alphabankserbia.com Web: www.alphabankserbia.com Enrolment date: 2006

BALL PACKAGING EUROPE BELGRADE LTD. Batajnički drum 21A, 11080 Zemun - Beograd Tel: 011 3770 600 Fax: 011 3770 752 Web: www.ball-europe.com Enrolment date: 2004

ATTORNEYS AT LAW SPASIC AND PARTNERS O.D. BELGRADE

BANCA INTESA A.D. BEOGRAD Milentija Popovića 7b, 11070 Beograd Tel: 011 310 8888 E-mail: kabinet@bancaintesa.rs Web: www.bancaintesa.rs Enrolment date: 2004

Gospodar Jovanova 73, 11000 Beograd Tel: 011 2633 872; Fax: 011 3283 677 E-mail: office@spasicpartners.com Web: www.spasicpartners.com Enrolment date: 2013

76 Guide to Foreign Investors Council in serbia 2013/14

BASF SRBIJA D.O.O. Omladinskih brigada 90B, 11070 Beograd Tel: 011 3093 403 Fax: 011 3093 423 Web: www.basf.rs Enrolment date: 2009

DANUBE FOODS D.O.O. Batajnički drum 10 deo 1b, 11000 Beograd Tel.: 011 2222 500 Fax: 011 2222 533 E-mail: office@salford.rs Enrolment date: 2011

BASLER INSURANCE Resavska 29, 11000 Beograd Tel: 011 2222 800; Fax: 011 334 2903 E-mail: office@basler.rs Web: www.basler.rs Enrolment date: 2012

DDOR NOVI SAD A.D.O Bulevar Mihajla Pupina 8, 21000 Novi Sad Tel: 021 4886 141; Fax: 021 4720 675 E-mail: kabinet@ddor.co.rs Web: www.ddor.co.rs Enrolment date: 2012

BAYER D.O.O. Omladinskih brigada 88b, 11070 Beograd Tel: 011 20 70 251 Fax: 011 20 70 261 Web: www.bayer.rs Enrolment date: 2009

DELHAIZE SERBIA D.O.O. Jurija Gagarina 14, 11070 Novi Beograd Tel: 011 7153 400; Fax: 011 7153 900 E-mail: office@delhaize.rs Web: www.maxi.rs, www.delhaizegroup.com Enrolment date: 2011

BDK ADVOKATI/ATTORNEYS AT LAW Dobračina 38, 11000 Beograd Tel.: 011 3284 212; Fax: 011 3284 213 E-mail: office@bdklegal.com Web: www.bdklegal.com Enrolment date: 2011

DELOITTE D.O.O. Terazije 8, 11000 Beograd Tel: 011 3812 100; Fax : 011 3812 112 E-mail: ceyuinfo@deloittece.com Web: www.deloitte.com/rs Enrolment date: 2003

BOJOVIC & PARTNERS A.O.D. BEOGRAD Čika Ljubina 16/II, 11000 Beograd Tel: 011 7850 336; Fax: 011 7850 337 E-mail: office@bojovicpartners.com Web: www.bojovicpartners.com Enrolment date: 2013

DHL INTERNATIONAL BEOGRAD D.O.O. Jurija Gagarina 36 V, 11070 Beograd Tel: 011 3105 500 E-mail: info-rs@dhl.com Web: www.dhl.rs Enrolment date: 2002

BPI D.O.O. Imotska 1, 11000 Beograd Venac Radomira Putnika 1, 25000 Sombor Tel: 025 451 800; Fax: 025 451 800 Web: www.bpi-holding.com Enrolment date: 2010

DIRECT GROUP DOO BEOGRAD Autoput za Novi Sad 96, 11080 Beograd Tel: 011 3532 900; Fax: 011 3532 908 E-mail: office@direct-group.com Web: www.direct-group.com Enrolment date: 2013

BRITISH AMERICAN TOBACCO SOUTH-EAST EUROPE D.O.O. BEOGRAD Bulevar Mihaila Pupina 165g, 11070 Beograd Tel: 011 3108 700 Web: www.bat.com Enrolment date: 2002, Founder

DUPONT SRB D.O.O. Omladinskih brigada 88, 11070 Beograd Tel: 011 2090 580 Fax: 011 2090 598 Web: www.rs.ag.dupont.com Enrolment date: 2009

CARLSBERG SRBIJA D.O.O. Proleterska 17, 21413 Čelarevo Tel: 021 7550 646; Fax: 021 7550 658 E-mail: info@carlsberg.rs Web: www.carlsbergsrbija.rs Enrolment date: 2005

EC HARRIS D.O.O. Bulevar Zorana Đinđića 144v, 11070 Beograd Tel: 011 3535 400; Fax: 011 3535 401 E-mail: sasa.trajkovic@echarris.com Web: www.echarris.com Enrolment date: 2006

CMS REICH-ROHRWIG HAINZ D.O.O. Cincar Jankova 3, 11000 Beograd Tel: 011 3208 900; Fax: 011 3038 930 E-mail: belgrade@cms-rrh.com Web: www.cms-rrh.com Enrolment date: 2004

ECOLAB HYGIENE D.O.O. Milana Tankosića 8, 11000 Beograd Tel: 011 2076 800; Fax: 011 2076 802 E-mail: office.belgrade@ecolab.com Web: www.ecolab.rs Enrolment date: 2008

COCA-COLA HBC - SRBIJA D.O.O. Batajnički drum 14-16, 11080 Beograd Tel: 011 3073 100 Fax: 011 3073 199 Web: www.coca-colahellenic.com Enrolment date: 2002

EKO SERBIA A.D. Member of Hellenic Petroleum group Tošin bunar 274a, 11070 Novi Beograd Tel: 011 2061 500; Fax: 011 2061 555 E-mail: administracija@hellenic-petroleum.rs Web: www.ekoserbia.com Enrolment date: 2004

CREDIT AGRICOLE SRBIJA A.D. NOVI SAD Braće Ribnikar 4-6, 21000 Novi Sad Tel: 021 4876 876; Fax: 021 4876 976 E-mail: info@creditagricole.rs Web: www.creditagricole.rs Enrolment date: 2006

EOS MATRIX Đorđa Stanojevića 14, 11070 Beograd Tel: 011 3300 700; Fax: 011 3300 777 E-mail: infoyu@eos-matrix.com Web: www.eos-matrix.rs Enrolment date: 2012

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ERNST & YOUNG D.O.O. BEOGRAD Španskih boraca 3, "Blue Center", 11070 Beograd Tel: 011 2095 800 E-mail: ey.office@rs.ey.com Web: www.ey.com/rs Enrolment date: 2004

HARRISONS Bulevar Mihajla Pupina 6, PC Ušće, 11000 Belgrade Tel: 011 3129 825; Fax: 011 3129 823 E-mail: office@harrison-solicitors.com Web: www.harrison-solicitors.com Enrolment date: 2004

ERSTE BANK A.D. NOVI SAD Bulevar oslobođenja 5, 21000 Novi Sad Tel: 800 201 201, 060 7979 000; E-mail: info@erstebank.rs Erste Poslovni centar - Milutina Milankovića 11b 11000 Beograd, Tel: 800 201 201, 060 7979 000 Web: www.erstebank.rs; Enrolment date: 2005

HAUZMAJSTOR d.o.o.

Dunavska 57a, 11000 Beograd Tel: 011 3034 034; Fax: 011 2764 932 E-mail: office@hauzmajstor.rs Web: www.hauzmajstor.rs Enrolment date: 2008

ERSTE GROUP IMMORENT SERBIA D.O.O. Milutina Milankovića 11a, 11070 Belgrade Tel: 011 2287 480; Fax: 011 2287 482 E-mail: office.rs@immorent.com Web: www.erstegroupimmorent.rs Enrolment date: 2008

HEMOFARM A.D. Beogradski put bb, 26300 Vršac Tel: 013 803 500; Fax: 013 831 503 E-mail: svakodobro@hemofarm.com Web: www.hemofarm.rs Enrolment date: 2013

EUROBANK A.D. BEOGRAD Vuka Karadžića 10, 11000 Beograd Tel: 011 3082 860; Fax: 011 3376 807 E-mail: office@eurobank.rs Web: www.eurobank.rs Enrolment date: 2003

HENKEL SRBIJA D.O.O. Bulevar oslobođenja 383, 11040 Beograd Tel: 011 2072 200 Fax: 011 2072 294 Web: www.henkel.rs Enrolment date: 2004

EURONET SERVICES D.O.O. Španskih boraca 3, Building B, 4th floor, 11070 Beograd Tel: 011 30 82 331 Fax: 011 30 82 342 Web: www.euronetworldwide.com Enrolment date: 2006

HEWLETT PACKARD d.o.o.

Omladinskih brigada 90B, 11070 Beograd Tel: 011 2055 800 Fax: 011 2055 936 Web: www.hp.rs Enrolment date: 2005

FIAT AUTOMOBILI SRBIJA D.O.O. Kosovska 4, 34000 Kragujevac Tel: 034 502 622 Fax: 034 323 000 Web: www.fiatsrbija.rs, www.fiat.com Enrolment date: 2011

HINTTECH D.O.O. Mornarska 7, 21000 Novi Sad Tel: 021 6301 548; Fax: 021 6392 826 E-mail: serbia@hinttech.com Web: www.hinttech.com Enrolment date: 2010

FINDOMESTIC BNP PARIBAS GROUP Bulevar Mihaila Pupina 115a, 11000 Beograd Tel: 011 333 17 33; Fax: 011 333 17 66 E-mail: office@findomestic.rs Web: www.findomestic.rs Enrolment date: 2012

HUAWEI TECHNOLOGIES D.O.O. Vladimira Popovića 38/V, 11070 Beograd Tel: 011 2209 607; Fax: 011 2209 607 E-mail: office.serbia@huawei.com Web: www.huawei.com Enrolment date: 2010

FRESENIUS MEDICAL CARE SRBIJA D.O.O. Beogradski put bb, 26300 Vršac Tel: 011 3951 000; Fax: 011 3951 090 E-mail: vera.trunic@fmc-ag.com Web: www.fmc-ag.com Enrolment date: 2013

HYATT REGENCY BELGRADE Milentija Popovića 5, PO Box 07,11070 Beograd Tel: 011 3011 234; Fax: 011 3112 330 E-mail: belgrade.regency@hyatt.com Web: www.belgrade.regency.hyatt.com Enrolment date: 2002, Founder

G4S SECURE SOLUTIONS d.o.o.

Viline Vode 6, 11000 Beograd Tel: 011 2097 900; Fax: 011 2097 914 E-mail: direkcija@rs.g4s.com Web: www.g4s.rs Enrolment date: 2009

HYPO ALPE-ADRIA-BANK A.D. BEOGRAD Bulevar Mihajla Pupina 6, 11070 Beograd Tel: 011 2226 000; Fax: 011 2226 555 E-mail: office@hypo-alpe-adria.rs Web: www.hypo-alpe-adria.rs Enrolment date: 2002

GRAND CASINO BEOGRAD Bulevar Nikole Tesle 3, 11080 Beograd Tel: 011 2202 800; Fax: 011 2202 810 E-mail: info@grandcasinobeograd.com Web: www.grandcasinobeograd.com Enrolment date: 2008

HYPO ALPE-ADRIA-LEASING D.O.O. BEOGRAD Poslovni centar Ušće, Bulevar Mihajla Pupina 6 11070 Beograd; Tel: 011 2227 000; Fax: 011 2227 099 E-mail: leasing.belgrade@hypo-alpe-adria.rs Web: www.hypo-alpe-adria.rs Enrolment date: 2003

GRUNDFOS SRBIJA D.O.O. Obilazni put Sever 21, 22320 Inđija Tel: 022 367 300 Fax: 022 367 302 Web: www.grundfos.rs; www.grundfos.com Enrolment date: 2013

IKEA SRBIJA D.O.O. Autoput 22 11070 Beograd Tel: 011 2098 802 Web: www.ikea.com Enrolment date: 2008

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INTERALLIS CHEMICALS Neznanog junaka 27a, 11040 Beograd Tel: 011 3679 230; Fax: 011 3679 231 E-mail: serbia@interallis.com Web: www.interallis.com Enrolment date: 2005

LAFARGE BFC D.O.O. Trg BFC 1, 21300 Beočin Tel: 021 874 102; 011 655 61 20; Fax: 021 874 143 E-mail: lbfc.office@bfc.lafarge.com Web: www.lafarge.rs, www.lafarge.com Enrolment date: 2002

INTESA LEASING D.O.O. BEOGRAD Cara Uroša 54, 11000 Beograd Tel: 011 2025 400; Fax: 011 2025 433 E-mail: ilbhead@intesaleasing.rs Web: www.intesaleasing.rs Enrolment date: 2010

LUKOIL SRBIJA AD Bulevar Mihajla Pupina 165d, 11070 Beograd Tel: 011 222 0 200 Fax: 011 222 0 294 Web: www.lukoil.rs Enrolment date: 2009

JANKOVIĆ, POPOVIĆ & MITIĆ O.D. Vladimira Popovića 6, NBGP Apt. 11070 Beograd Tel: 011 2076 850; Fax: 011 2076 899 E-mail: office@jpm.rs Web: www.jpm.rs Enrolment date: 2009

L‘OREAL BALKAN d.o.o.

Bulevar Zorana Đinđića 64a, 11070 Beograd Tel: 011 2205 900 Fax: 011 2205 901 Web: www.loreal.com Enrolment date: 2004

JONES LANG LASALLE D.O.O. Danube Business Center, Bulevar Mihajla Pupina 10 L 11070 Novi Beograd; Tel: 011 7850 600; Fax: 011 7850 597 E-mail: belgrade@eu.jll.com Web: www.joneslanglasalle.rs Enrolment date: 2008

MACE D.O.O. Bulevar Mihajla Pupina 6, 11070 Beograd Tel: 011 2200 250; Fax: 011 2200 265 E-mail: serbia.office@macegroup.com Web: www.mace.co.rs, www.macegroup.com Enrolment date: 2010

JT INTERNATIONAL A.D. SENTA Subotički drum 17, 24400 Senta Tel: 011 2050 300 Fax: 011 2050 301 Web: www.jti.com Enrolment date: 2003

MARIC, MALISIC & DOSTANIC O.A.D. CORRESPONDENT LAW FIRM OF GIDE LOYRETTE NOUEL Resavska 32/4, 11000 Beograd; Tel: 011 3024 900; Fax: 011 3024 910; E-mail: office@mmd-associates.com Web: www.gide.com, www.mmd-associates.com Enrolment date: 2005

KAPSCH D.O.O. Sava Business Center, Milentija Popovića 5B 11070 Beograd Tel: 060 073 0303; Fax: 011 2282 679 E-mail: kapsch.srb@kapsch.net Web: www.kapsch.net; www.kapsch.rs Enrolment date: 2009

MERCEDES-BENZ SRBIJA I CRNA GORA D.O.O. Omladinskih brigada 33, 11070 Beograd Tel: 011 3019 001; Fax: 011 3019 036 E-mail: informacije@daimler.com Web: www.mercedes-benz.rs Enrolment date: 2002, Founder

KARANOVIC & NIKOLIC Resavska 23, 11000 Beograd Tel: 011 3094 200; Fax: 011 3094 223 E-mail: knserbia@karanovic-nikolic.com Web: www.karanovic-nikolic.com Enrolment date: 2003

MERKUR OSIGURANJE A.D.O Bulevar Mihaila Pupina 6/22, 11070 Beograd Tel: 011 2201 250; Fax: 011 2201 251 E-mail: office@merkur.rs Web: www.merkur.rs Enrolment date: 2011

KBC BANKA A.D. BEOGRAD Omladinskih brigada 90v, 11070 Beograd Tel: 011 3050 575 Fax: 011 2282 028 Web: www.kbcbanka.rs, www.kbc.com Enrolment date: 2010

MESSER TEHNOGAS KRAFT FOODS D.O.O.A.D. Banjički put 62, 1100088b/III, Beograd Omladinskih brigada 11070 Beograd Tel: 011 200;800 Fax: 011 3537 291 +3813537 11 3530 E-mail: postoffice@messer.rs Fax: +381 11 3133 788 Web: www.messer.rs www.kraftfoodscompany.com Enrolment date: 2002, 2010 Founder

KNAUF INSULATION D.O.O. Batajnički drum 16b, 11080 Beograd Tel: 011 3310 800; Fax: 011 3310 801 E-mail: office.belgrade@knaufinsulation.com Web: www.knaufinsulation.rs,www.knaufinsulation.com Enrolment date: 2011

METINVEST SMC D.O.O. Alekse Bačvanskog 6, 11040 Beograd Tel: 011 2660 007; Fax: 011 2660 006 E-mail: office@metinvestsmc.rs Web: www.metinvestholding.com Enrolment date: 2010

KOMERCIJALNA BANKA A.D. Svetog Save 14, 11000 Beograd Tel: 011 3080 100;Fax: 011 3440 033 E-mail: posta@kombank.com Web: www.kombank.com Enrolment date: 2008

METRO CASH & CARRY Autoput za Novi Sad 120, 11080 Beograd Tel: 011 3777 254; Fax: 011 3777 607 E-mail: pr@metro.rs Web: www.metro.rs Enrolment date: 2003

KPMG D.O.O. Kraljice Natalije 11, 11000 Beograd Tel: 011 2050 500; Fax: 011 2050 550 E-mail: info@kpmg.rs Web: www.kpmg.rs Enrolment date: 2002

METROPOL PALACE D.O.O. Bulevar Kralja Aleksandra 69, 11000 Beograd Tel: 011 3333 100; Fax: 011 3333 300 E-mail: office@metropolpalace.com Web: www.metropolpalace.com Enrolment date: 2012

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MINI PANI D.O.O. Hipodromska bb, 24107 Subotica Tel: 024 621 521; Fax: 024 621 522 E-mail: kontakt@minipani.com Web: www.minipani.com Enrolment date: 2012

PERNOD RICARD SERBIA Bulevar oslobođenja 211, 11000 Beograd Tel: 011 3975 246 Fax: 011 3974 380 Web: www.pernodricard.com Enrolment date: 2003

MONDELEZ D.O.O. BEOGRAD Omladinskih brigada 88b/III, 11070 Beograd Tel: 011 3530 800 Fax: 011 3133 788 Web: www.mondelezinternational.com Enrolment date: 2010

PHILIP MORRIS SERVICES D.O.O. BEOGRAD Bulevar Zorana Đinđića 64a, 11070 Beograd Tel: 011 2010 800 Fax: 011 2010 824 Web: www.philipmorrisinternational.com Enrolment date: 2004

NBG LEASING D.O.O. Airport City, Omladinskih brigada 88, 11070 Beograd Tel: 011 2287 982; 2288 071; 2288 074; 2288 079; Fax: 011 2287 984; E-mail: office@nbgleasing.co.rs Web: www.nbgleasing.rs Enrolment date: 2004

PIRAEUS BANK A.D. BEOGRAD Milentija Popovića 5b, 11070 Beograd Tel: 011 3024 000; Fax: 011 3024 400 E-mail: banka@piraeusbank.rs Web: www.piraeusbank.rs Enrolment date: 2006

NESTLÉ ADRIATIC S D.O.O. Železnička 131, 11271 Beograd-Surčin Tel: 011 2019 301; Fax: 011 3132 022 E-mail: info@rs.nestle.com Web: www.nestle.rs Enrolment date: 2002, Founder

PIRAEUS LEASING D.O.O. Milentija Popovića 5b, 11170 Beograd Tel: 011 222 8600; Fax: 011 222 8601 E-mail: office@piraeusleasing.rs Web: www.piraeusleasing.rs Enrolment date: 2010

NIS A.D. NOVI SAD (NAFTNA INDUSTRIJA SRBIJE) Narodnog fronta 12, 21000 Novi Sad Tel.: 021 481 1111; Fax: 021 481 3037 E-mail: office@nis.eu Web: www.nis.rs Enrolment date: 2011

PRICEWATERHOUSECOOPERS D.O.O. Airport City Belgrade, Omladinskih brigada 88a 11070 Beograd Tel: 011 3302 100; Fax: 011 3302 101 Web: www.pwc.rs Enrolment date: 2002, Founder

NOKIA SOLUTIONS AND NETWORKS SERBIA D.O.O. BEOGRAD Đorđa Stanojevića 14, 11070 Beograd Belgrade Office Park, Building II, Gallery Floor Tel: +381 11 3070 123; 3070 111; Fax: +381 11 3070 167 Web: www.nsn.com; Enrolment date: 2009

PRISTOP Bulevar Milutina Milankovića 136, ulaz A / I 11070 Beograd Tel: 011 7151 764; Fax: 011 7151 740 E-mail: office@pristop.rs; Web: www.pristop.rs Enrolment date: 2010

OPPORTUNITY BANKA AD NOVI SAD Bulevar oslobođenja 2A, 21000 Novi Sad Tel: 021 530 111; Fax: 021 4893 123 E-mail: office@obs.rs Web: www.obs.rs Enrolment date: 2013

PROCREDIT BANK Milutina Milankovića 17, 11000 Beograd Tel: 011 2077 906; Fax: 011 2077 905 E-mail: info@procreditbank.rs Web: www.procreditbank.rs Enrolment date: 2004

ORION TELEKOM D.O.O. Gandijeva 76a, 11070 Beograd Tel: 011 2228 333; Fax: 011 2228 336 E-mail: office@oriontelekom.rs Web: www.oriontelekom.rs Enrolment date: 2010

RAIFFEISEN BANKA A.D. BEOGRAD Đorđa Stanojevića 16, 11070 Beograd Tel: 011 3202 100 E-mail: info@raiffeisenbank.rs Web: www.raiffeisenbank.rs Enrolment date: 2002

OTP BANKA SRBIJA A.D. NOVI SAD Bulevar oslobodjenja 80, 21000 Novi Sad Tel: 021 4800 001; Fax: 021 4800 032 E-mail: office@otpbanka.rs Web: www.otpbanka.rs Enrolment date: 2010

RAIFFEISEN LEASING d.o.o. Đorđa Stanojevića 16, 11070 Beograd Tel: 011 2207 400; Fax: 011 2289 007 E-mail: info.leasing@raiffeisen-leasing.rs Web: www.raiffeisen-leasing.rs Enrolment date: 2003

PATRIMONS d.o.o.

Sterijina 7, 11000 Beograd Tel: 011 277 2729; Fax: 011 278 1829 E-mail: office@patrimons.com Web: www.patrimons.rs Enrolment date: 2008

RAUCH SERBIA D.O.O. Baja Pivljanina 13, 11000 Beograd Tel: 011 2652 225; Fax: 011 2652 298 E-mail: office.serbia@rauch.cc Web: www.rauch.cc Enrolment date: 2011

PEPSICO Đorđa Stanojevića 14, 11070 Beograd Tel: 011 3637 000; Fax: 011 3637 069 E-mail: belgrade.office@pepsico.com Web: www.pepsico.com; www.pepsico.rs Enrolment date: 2009

RENEWABLE ENERGY VENTURES D.O.O. (REV D.O.O.) Sitnička 29, 11000 Beograd Tel: 011 3066 582; Fax: 011 3690 119 E-mail: office@reservoircapitalcorp.com Web: www.reservoircapitalcorp.com Enrolment date: 2008

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RIO TINTO RIO SAVA EXPLORATION D.O.O. Takovska 45/IV, 11000 Beograd Tel: 011 2761 477; Fax: 011 2752 376 Web: www.riotinto.com, www.riotintoserbia.com Enrolment date: 2004

SOGELEASE SRBIJA D.O.O. Bulevar Zorana Đinđića 48/B, 11070 Beograd Tel: 011 2221 369; Fax: 011 2221 388 E-mail: sogelease.srbija@socgen.com Web: www.sogelease.rs Enrolment date: 2011

ROBNE KUĆE BEOGRAD D.O.O. Makenzijeva 57, 11000 Beograd Tel: 011 3206 540; Fax: 011 3206 550 E-mail: office@rkbeograd.rs Web: www.rkbeograd.rs Enrolment date: 2010

STRAUSS ADRIATIC D.O.O. Miloša Obilića 41, 22310 Šimanovci Tel: 022 408 000; Fax: 022 408 067 E-mail: info@strauss-group.rs Web: www.strauss-group.rs; www.strauss-group.com Enrolment date: 2013

ROCHE D.O.O. Milutina Milankovića 11a, 11070 Beograd Tel: 011 2022 803; Fax: 011 2022 808 E-mail: serbia.office@roche.com Web: www.rochesrbija.rs; www.roche.com Enrolment date: 2013

SYNGENTA AGRO D.O.O. Sava Business Center, Milentija Popovića 5a 11070 Beograd Tel: 011 3129 981; 3129 982; Fax: 011 3129 980 Web: www.syngenta.rs, www.syngenta.com Enrolment date: 2009

S & T SERBIA D.O.O. Đorđa Stanojevića 14/III, 11070 Beograd Tel: 011 311 6221; Fax: 011 311 7665 E-mail: info@snt.rs Web: www.snt.rs Enrolment date: 2003

TELEGROUP D.O.O. BEOGRAD Svetozara Miletića 9a, 11000 Beograd Tel: 011 3081 981; Fax: 011 3081 991 E-mail: office@telegroup.rs Web: www.telegroup-ltd.com Enrolment date: 2011

S-LEASING D.O.O. Đorđa Stanojevića 12/III, 11070 Novi Beograd Tel: 011 2010 700; 2010 701; Fax: 011 2010 702 E-mail: office@s-leasing.rs Web: www.s-leasing.rs Enrolment date: 2003

TELEKOM SRBIJA a.d.

Takovska 2, 11000 Beograd Tel: 011 3337 171; Mob: 064 789 E-mail: prsektor@telekom.rs Web: www.telekom.rs Enrolment date: 2007

SBB SERBIAN BROADBAND Bulevar Zorana Đinđića 8a, 11000 Beograd Tel: 011 3305 252 E-mail: info@sbb.co.rs Web: www.sbb.rs Enrolment date: 2004

TELENOR d.o.o.

Omladinskih brigada 90 11070 Beograd Mob: 063 9000 Web: www.telenor.rs Enrolment date: 2006

SBERBANK SRBIJA A.D. BEOGRAD Bulevar Mihaila Pupina 165g, 11070 Beograd Tel: 0700 700 800, 011 2257 498; Fax: 011 2013 270 E-mail: info@sberbank.rs Web: www.sberbank.rs Enrolment date: 2004

TETRA PAK PRODUCTION Milutina Milankovića 11b, 11070 Beograd Tel: 011 2017 361 Fax: 011 2017 380 Web: www.tetrapak.rs Enrolment date: 2002,Founder

SCHNEIDER ELECTRIC SRBIJA D.O.O Vladimira Popovića 38-40, 11070 Beograd Tel: 011 3773 100 E-mail: podrska.klijentima@schneider-electric.com Web: www.schneider-electric.com Enrolment date: 2012

THE COCA-COLA COMPANY (BARLAN S&M D.O.O.) Batajnički drum 14-16, 11080 Beograd Tel: 011 3081 100; Fax: 011 3081 166 E-mail: obelgrade@eur.ko.com Web: www.thecoca-colacompany.com Enrolment date: 2002

SIEMENS D.O.O. BEOGRAD Omladinskih brigada 21, 11070 Beograd Tel: 011 2096 305; Fax: 011 2096 061 E-mail: office.rs@siemens.com Web: www.siemens.rs Enrolment date: 2002, Founder

TIGAR TYRES, D.O.O. PIROT PREDUZECE ZA PROIZVODNJU GUMA Nikola Pašić 213, 18300 Pirot Tel: 010 215 7000; Fax: 010 215 7010 Web: www.michelin.rs Enrolment date: 2009

SLADARA MALTINEX D.O.O. Industrijska zona b.b., 21400 Bačka Palanka Tel: 021 752 910 Fax: 021 6042 399 Web: www.soufflet.com Enrolment date: 2004

TITAN CEMENTARA KOSJERIĆ D.O.O. Živojina Mišića b.b., 31260 Kosjerić Tel: 031 590 300 Fax: 031 590 398 Web: www.titan.rs Enrolment date: 2004

SOCIETE GENERALE BANKA SRBIJA A.D. BEOGRAD, CLOSED JOINT STOCK COMPANY Bulevar Zorana Đinđića

TPA HORWATH TAX & FINANCE D.O.O. Terazije 5/4, 11000 Beograd Tel: 011 3223 985 E-mail: office@tpa-horwath.rs Web: www.tpa-horwath.com Enrolment date: 2012

50 a/b, 11070 Beograd; Tel: 011 3011 400; 011 222 1200; Fax: 011 3132 885; E-mail: Retail banking - stanovnistvo.sgs@socgen. com; Corporate clients - privreda.sgs@socgen.com; Web: www. societegenerale.rs; Enrolment date: 2002, Founder

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UNICREDIT BANK SERBIA JSC Rajićeva 27-29, 11000 Beograd Tel: 011 3204 500; Fax: 011 3342 200 E-mail: office@unicreditgroup.rs Web: www.unicreditbank.rs Enrolment date: 2013

VIP MOBILE d.o.o.

Omladinskih brigada 21, 11070 Beograd Tel: 060 1234; Fax: 011 2253 334 E-mail: komunikacije@vipmobile.rs Web: www.vipmobile.rs Enrolment date: 2007

UNICREDIT LEASING SRBIJA DOO Trešnjinog cveta 1, poslovna zgrada VIG Plaza 11070 Beograd; Tel: 011 3093 500; Fax: 011 3093 501 E-mail: office@unicreditleasing.rs Web: www.unicreditleasing.rs Enrolment date: 2011

VOJVOĐANSKA BANKA A.D. Member of NBG Group Trg Slobode 5-7, 21000 Novi Sad Tel: 021 4886 600; Fax: 021 6624 859 E-mail: office@voban.co.rs Web: www.voban.co.rs Enrolment date: 2003

UNIQA NEŽIVOTNO OSIGURANJE ADO Milutina Milankovića 134G, 11070 Novi Beograd Tel: 011 2024 100 E-mail: info@uniqa.rs Web: www.uniqa.rs Enrolment date: 2006

WIENER STAEDTISCHE OSIGURANJE A.D.O. BEOGRAD Trešnjinog cveta 1, 11070 Beograd Tel: 011 2209 901;Fax: 011 2209 900 E-mail: office@wiener.co.rs; Web: www.wiener.co.rs Enrolment date: 2003

UNITED SERBIAN BREWERIES, Member of the Heineken Group Omladinskih brigada 90b, 11070 Beograd Tel: 011 353 86 00; Fax: 011 3538 691 E-mail: info.serbia@heineken.com Web: www.heinekeninternational.com Enrolment date: 2003

WOLF THEISS IN COOPERATION WITH LAW OFFICE MIROSLAV STOJANOVIC Poslovni centar Ušće, Bulevar Mihajla Pupina 6 11070 Beograd; Tel: 011 3302 900; Fax: 011 3302 925 E-mail: beograd@wolftheiss.com; Web: www.wolftheiss.com Enrolment date: 2003

VB LEASING D.O.O. BEOGRAD Đorđa Stanojevića 12, 11070 Beograd Tel: 011 2016 500; Fax: 011 2016 567 E-mail: office@vbleasing.rs Web: www.vbleasing.rs Enrolment date: 2011

ŽELEZARA SMEDEREVO D.O.O. Radinac, 11300 Smederevo Tel: 026 4624 730 Fax: 026 4621 076 Web: www.zelsd.rs Enrolment date: 2008

VICTORIA GROUP A.D. Bulevar Mihajla Pupina 115b, 11070 Beograd Tel: 011 3532 700; Fax: 011 3532 728 E-mail: office@victoriagroup.rs Web: www.victoriagroup.rs Enrolment date: 2013

ZIVKOVIC SAMARDZIC A.O.D. BEOGRAD Makedonska 30, 11000 Beograd Tel: 011 2636 636; Fax: 011 2635 555 E-mail: office@zslaw.rs Web: www.zslaw.rs Enrolment date: 2011

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