economic cooperaT ion beT ween Serbia and croaT ia iS STable and increa Singly more in T enSe

aleKSandar radoVanoVić Head of the Centre for Regional Cooperation at Chamber of Commerce and Industry of Serbia

value of exchange was largely influenced by the increase in trade with of energy products, mineral fertilizers, textile and food products, pipes for rail vehicles, new products that were the subject of exchange during 2022, but also the inflation that affected our economies due to the war in Ukraine.

Today, Croatia is among the top 20 investors in the Republic of Serbia, with around 900 million euro invested in different sectors – from trade (where they are market leaders) and services to processing industry, with a total number of around 13,000 employees. Among these, the investments of Agrokor (Dijamant, Frikom, Mercator-S), Atlantic Group (Štark, Atlantic Brands) and Nexe Group particularly stand out.

On the other hand, data on Serbian investments in Croatia are not so favourable and until a few years ago investments of Serbian companies in Croatian market were practically neglectable. The reasons were mainly unrelated to economy, but that period is behind us now. A breakthrough was achieved over the past several years, where significant investment activity of Serbian companies was recorded in a short time. This includes: MK Group, Aleksandar Gradnja, Matijević Meat Industry, Kappa Star, Delta, Mondo INC, which were focused to hotel in- dustry, agriculture and food industry, advertising and real estate.

The number of Serbian companies expressing interest in investing in Croatia is increasing, and it is expected that, in the coming years, conditions for investment will be more and more favorable and open. There are no economic reasons why this shouldn’t happen, because Serbian companies have made substantial progress in terms of technology, finances, as well as in terms of quality. They have proven to be very successful, as evidenced by investments from your immediate neighbourhood - in Slovenia, Serbian companies are the owners of major hotel chains, airports, banks, IT, construction and food companies, and they achieve outstanding results.

What is the greatest obstacle for development and deepening of these relations? What are the biggest issues and how to resolve them in the best possible interest?

The influence of politics can often be an obstacle to the improvement of business, because it does not always follow economic interests of the economy. It often happens that initiatives that are in the interest of the economy and depend on the goodwill and cooperation of state institutions are postponed or left unresolved. Also, the news aired in the media is often not positive and have a negative effect on communication and economic cooperation, which is not used to its full extent.

When it comes to the biggest issues which directly affect Croatian and Serbian businessmen, it’s the long waiting time we have at our joint road and railway border crossings, which have not been solved for years.

We should especially mention the detention of cargo vehicles at the border crossing Batrovci-Bajakovo. At this crossing, 378,000 trucks pass annually in both directions. The waiting time at the border is longer than acceptable - more than six hours on average, and that‘s just for the trucks to be in line for border services to process the shipment. This slow flow of vehicles and the overloading of border crossings leads to the formation of long rows (several kilometres), at both border crossings, starting from the entrance ramps, across the space between the border crossings, at the border crossing itself and further into the territory of Serbia and Croatia.

Such time losses generate additional financial costs for the economies of both countries, and due to the slowed and difficult supply flows and the direct costs of the transport sector, the competitiveness of products is significantly reduced. The result of insufficient exploitation of transport sector vehicles leads to large business losses. Due to the impossibility to plan the time that transport companies spend at border crossings, it is also impossible to plan the redistribution of driving time, compliance with contractual obligations regarding delivery deadlines, as well as inventory planning and production dynamics.

There are no railway border crossings with the Republic of Croatia through which goods subject to veterinary and phytosanitary inspection could be transported. Limiting the flow of goods that are subject to phytosanitary and veterinary controls only to road traffic is not in accordance with the strategic documents of the EU and the Western Balkans. Bearing in mind the fact that the ŠidTovarnik border crossing is located on Corridor 10 and that a large part of transport of goods is carried out by rail, with the use of the port of Rijeka for the placement of goods to further destinations, it is extremely important that the border crossings on both sides are fully functional, i.e. that all inspection services are present at the crossing, and this would unburden the Batrovci - Bajakovo highway border crossing.

To make the trade with goods more efficient through our border crossings, it is also necessary to establish and harmonize working hours of inspection services, to increase the number of employees at border crossings, built the lacking infrastructure, secure and install equipment that will enable more efficient implementation of the necessary procedures.

In which areas is there the most room for development of relations and whether businessmen from the two countries are considering a joint performance in third markets?

The economies of Serbia and Croatia are complementary in many areas, so there are opportunities for far more intensive growth of trade and economic relations. For reference, the level of trade exchange that the two republics had in the former common state was about 5 billion dollars. Also, the possibilities are huge when it comes to increasing the volume of mutual and joint investment.

From a sectoral point of view, the untapped potential of cooperation in the field of energy should be highlighted. There are significant opportunities for improving cooperation in the field of gas infrastructure development in order to connect the two countries, but also the entire region, with the aim of ensuring safe supply, the need for diversification and ensuring competitive conditions for supplying the economy and the citizens with gas. Therefore, it is necessary to work jointly, at the bilateral level, on accelerating the construction of the gas interconnection between the two countries, as well as on removing political, planning, financial and technical obstacles.

Croatia’s market offers great opportunities for placement of Serbian products and services, because the tourism economy accounts, on average, almost 20% of Croatia‘s GDP. The tourism industry of Croatia can hire Serbian companies to carry out works on the reconstruction of existing and construction of new tourist facilities and the supply of building materials produced in Serbia. Serbian agricultural and food products can become part of the supply chains of large hotel complexes, catering establishments and small and family hotels thanks to their high quality.

The interest of companies in strengthening economic cooperation is also expressed in other sectors of the economy, such as processing industry, pharmaceutical industry and the industry of manufacturing rail vehicles intended for third markets.

Cross-border municipalities on both sides of the Danube River also represent a significant economic potential that can contribute to further improvement of relations. Due to its strategic location, this area is suitable for the de- velopment of industry and the export of products to the European Union.

To what extent does the fact that Croatia is a member of the EU affect mutual cooperation or is there no difference in that sense (legislation, practice…)?

Serbia’s economy inclines towards the European Union, its export to EU amounted by 17.7 billion euro in 2022, which makes for almost two thirds of Serbia’s total international export. Accordingly, Serbian companies respect and apply the principles and standards of business in the European Union. Domestic companies comply with the prescribed criteria for doing business on the EU market, even in areas where the standards are not yet harmonized with those in the EU, as part of their accession to full membership. Therefore, business entities speed up the process of European integration, because it is in their interest.

What is it that CCIS does and what are the plans for improving business cooperation between Serbia and Croatia?

As a continuation of good cooperation on improving the business environment, CCIS plans to continue to work on solving the problems of the business community and represent their interests before the decision maker together with colleagues from Croatian Chamber of Economy (CCE), through the Joint Committee for the Implementation and Facilitation of Economic Cooperation between the Republic of Serbia and the Republic of Croatia (JC Joint Committee). The Joint Committee consists of representatives of relevant institutions of the Republic of Serbia and the Republic of Croatia, as well as representatives of national business associations, and was established with the aim of creating a more stimulating environment for business, especially when it comes to border crossings and cooperation in the field of energy. In accordance with the above, CCIS has prepared a proposal for measures that could offer results in improving the movement of goods and people across border crossings in a short term. This includes minor infrastructure investments and better organization of border services.

CCIS will continue to provide support to both domestic and Croatian companies when starting business in both markets. It will also continue to encourage its members to invest more in assets and technologies in Croatia.

Both chambers are working on connecting companies through different forms of cooperation (inclusion in supplier chains, exchange of technologies and experts, etc.), and this form of cooperation will continue.