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Autumn 2018

Logistics & Infrastructure: More crucial than ever before Investment Promotion Agencies: Who performs the best? Emerging Europe on Film: Making movies in CEE Croatian Football: Does World Cup success mask problems at home? Outlook on Serbia: Growth continues, problems remain

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Invest in Bydgoszcz Poland

• CIJ Awards Poland 2017: Best Investor-Friendly City • CEE Shared Services and Outsourcing Awards 2016: Emerging City of the Year • Eurobuild Awards 2015: Most Investor-Friendly City

• More than 1 million residents within 50 km • 1st place in The World Bank’s report – Doing Business in Poland 2015 • Regional economic centre • Academic hub of the region • International airport located within 3.5 km from the city center

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INBRIEF More than six months after failing in his first attempt and almost nine months since parliamentary elections, Czech Prime Minister Andrej Babiš finally managed to form a government in mid-July, thanks primarily to a deal his ANO party made with the country’s Communists. While the Communists have agreed to support a minority coalition between ANO and the Social Democrats, they will remain outside government, and will not hold any cabinet posts. Greece agreed to recognise its northern neighbour under a new name, the Republic of Northern Macedonia, ending a long-running and often bitter dispute over rival claims to the name Macedonia. Known hitherto by either by its acronym, FYROM, or simply as Macedonia, Northern Macedonia is a geographical qualifier that ends any fear in Athens of territorial ambition against the neighbouring Greek province of the same name. Macedonian voters must now agree to the deal – which paves the way for NATO and, eventually, EU membership – in a referendum, set to be held on September 30. A Serb lawyer who helped defend the country’s former dictator Slobodan Milošević at his war crimes trial was shot dead. Dragoslav Ognjanović, 57, was gunned down in front of his apartment building in the Novi Beograd neighbourhood of the Serb capital. His 26-year-old son was wounded in the right arm. Mr Ognjanović was part of the legal team that defended Mr Milošević at the UN tribunal in The Hague, where he was tried for war crimes which took place during the Balkan wars of the 1990s. Mr Milošević died of a heart attack in 2006 before his trial could be concluded.

The European Commission sent a formal warning to Hungary concerning new legislation which criminalises activities that support asylum and residence applications and further restricts the right to request asylum. The new legislation – so-called “Stop  Soros” by the Hungarian authorities – criminalises any assistance offered by any person on behalf of national, international and non-governmental organisations to people wishing to apply for asylum or for a residence permit in Hungary. The laws also include measures which restrict individual freedoms, by preventing anyone who is subject to a criminal procedure under these laws from approaching the transit zones at Hungary’s borders, where asylum seekers are held. Sanctions range from temporary confinement to imprisonment of up to one year and expulsion from the country.

Radio Free Europe/Radio Liberty (RFE/RL) is to return to Bulgaria and Romania after more than 10 years of silence, in a bid to strengthen the media landscape in both countries. From December 2018, RFE/RL will provide multi-media reporting and analysis in Bulgarian and Romanian and partner with local media to amplify existing projects that promote public accountability and debunk false news. The BMW Group announced that it is to build a new production facility in Hungary, close to the eastern city of Debrecen. Total investment in the new plant, which will produce 150,000  vehicles per  year and employ more than 1,000 people, will be approximately 1 billion euros. BMW said that Debrecen was chosen primarily for its very good infrastructure, suitable logistics connections 3

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and proximity to an established supplier network. Qualified personnel in the local area were another key advantage. It was revealed that the number of Ukrainians leaving the country for work has increased to record levels. Officials believe that the Ukrainian job market has lost around 1.3 million employee over that period, meaning that businesses are forced to recruit from a shrinking pool of workers demanding higher wages and social benefits. Serhii  Marchenko, the owner of a recruitment agency in Ukraine, said that the country faces problems in finding workers across every category, from top management to young professionals. Romania boasts the fifth fastest internet in the world, and easily the fastest in emerging Europe. In an analysis of more than 160 million broadband speed tests conducted across 200 countries only Singapore – once again the world’s fastest country – Sweden, Denmark and Norway registered more impressive speeds. Yemen came last. According to the analysis, carried out by Cable.co.uk during the 12  months to May 29, Romania achieved an average speed of 38.60Mbps , which means downloading a 5GB  HD movie would typically take just under 18 minutes. Georgia became the first country in the former Soviet Union to legalise the consumption of marijuana. The country’s constitutional court released a statement on July 30 stating that the administrative fines usually handed out for the smoking of weed had effectively been abolished. Zurab Japaridze, a libertarian MP, said that the ruling had made Georgia a “freer country.”


THE REPORT AND RANKING WERE PRODUCED TO: assess how each national IPA from twenty-three countries in the region performed acknowledge best practice set new benchmarks for the region’s IPAs help investment promotion agencies better allocate their marketing and communication resources and empower their investor relations teams.

Email offi ce@emerging-europe.com to obtain a copy.

A GROUNDBREAKING FIRST OF ITS KIND 60-PAGE REPORT

including best practice and most common shortfalls and a ranking of 23 national investment promotion agencies from our region.


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FROM THE EDITOR The new divide

When BMW announced at the beginning of August that it is to spend more than one billion euros constructing a new factory on a greenfield site close to Debrecen in Hungary, it announced what is likely to be the biggest single foreign direct investment anywhere in emerging Europe this year. While BMW made all the right noises about plenty of skilled, qualified personnel being readily available in the area (and talent is undoubtedly crucial), top of the German giant’s list for choosing Debrecen was its outstanding infrastructure and logistics connections. Hungary may have its problems – an increasingly autocratic prime minister who now talks of exporting illiberal democracy to the rest of Europe is not the least of them – but its road infrastructure is the envy of emerging Europe (and beyond). A look at the map is proof enough: motorways fan out from the capital, Budapest, in every direction, including to Debrecen in the east of the country. When it comes to infrastructure, the rest of our region is playing catch up; only the Czech Republic and Slovenia come close to matching Hungary. No wonder BMW looked no further east than Debrecen. No matter how talented the workforce in neighbouring Romania might be, most of the country lacks motorways. Earlier this year the country’s Minister of Labour Olguţa  Vasilescu suggested that the

reason large firms avoid investing in northeast Romania (the poorest part of the country) was because there are no motorways there. No shit, Sherlock! The further east in our region you go, the worse it gets. Even Poland, the largest economy in emerging Europe, has only recently got its act together, although the spurt of motorway construction kick-started by the country hosting the European football championships in 2012 has now slowed. Even the Baltic states – otherwise emerging European champions at just about everything – have roads which are often less than decent. Of the roads in Belarus, Moldova and all points east, the less said the better. Hungary’s motorways, most of which were built between 2000 and 2010, came at great cost: the country spent far more on them than it could afford. Towards the end of the decade the centre-left government led by the MSZP had to make deep cuts to the budget elsewhere to prevent a crippling recession: cuts which cost it key support. It could be argued that the party has never recovered. Construction of the motorways was also riddled with accusations of corruption, which did not help the ruling party at the time. Those Hungarians who have directly benefitted from construction of the motorways will say it was a price worth paying. And there are millions of them. Hungary is richer and more 5

prosperous for having them: BMW is just the latest in a long line of foreign (and domestic) investors who have made a safe bet. With the vast majority of companies across the world now working on the principle of ‘just in time’, parts, produce and goods need to be moved quickly and without delay. Even the most efficient logistics companies can only work with what they have. Hungary offers them assurance. The rest of the region needs to take notes. Having removed one iron curtain less than three decades ago a new divide now threatens to fall across the region: this time based on infrastructure. Those countries which find themselves on the wrong side could be left behind.

CRAIG TURP


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TABLE OF CONTENTS

Which IPA is doing most to attract greenfield investment? Find out on pages 32-35

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CURRENT AFFAIRS

To save democracy, the EU may need to stop sending cash to the east, on pages 20-21

10

Food for thought

12

The Emerging Europe Awards

18

A view from…

20

To save democracy, the EU may need to stop sending cash to the east

22

Emerging Politicians

24

No more clickbait

26

Azerbaijan’s human rights problems mount

28

Has the US sold Montenegro out? 8


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BUSINESS

32

Emerging Europe’s IPAs need to improve

36

Emerging Europe on film

38

Europe’s new blue banana

40

Reasons to invest in Croatia

Reasons to invest in Croatia, on pages 40-41

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Made in Emerging Europe

OUTLOOK ON SERBIA

46

Serbia’s growing potential as an FDI destination

48

Serbia’s economy looks positive, but problems remain

52

Serbian energy: A windy attempt to reach a renewables target

54

Serbian Manufacturing: Steady, solid growth

56

Serbia’s growing ICT scene

58

Serbian Automotive: A most attractive industry for investors

59

Serbian talent to the fore

60

Treat claims about Russia’s influence in Serbia with caution

62

How to end the Serbia-Kosovo impasse?

66

Topical Arts

68

The Georgian MP who plays the guitar down the pub

70

Transforming cultural memory through art

72

Croatia’s World Cup success masks trouble at home

74

The Accidental Chef

76

48 hours in Banja Luka

78

48 hours in Debrecen

80

Kosovo: Life in the land of popstars

82

Emerging Europe must do more for its disabled

Everything you always wanted to know about Serbia is in our outlook, pages 46-62

AFTER HOURS

How to spend 48 hours in Banja Luka. See pages 76-77

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FOOD FOR THOUGHT Nature still abhors a vacuum

Photo: Aspen Institute Romania

Mircea Geoană President of the Aspen Institute Romania

There are moments in history when things go wild, when the order of things is being questioned, put in doubt, or actually assailed. Such moments occur when dominant power(s) reach the point of ‘imperial overstretch’ and their willingness or capabilities to function as a guarantor and ultimate enforcer of the the system they created is under question. They are the

result of deeper structural, economic, technological or cultural mega-trends which challenge the societal statusquos. But they are also precipitated by leaders or events that are putt ing history in super-turbo mode, what we call “accidents of history’. We are living such moments. The signs of overstretch of the Pax Americana and the wake-up call of the euphorical European  Union were tangible before the election of Donald  Trump or Brexit. The more structural trends are long now known and recognisable. The mismanagement of the crushing victory in the Cold War or of the post 9/11 period are today evident. After exporting previous fi nancial crisis to the emerging world, the US and Europe were hit by the worst fi nancial and economic crisis in generations. They were preceded by rampant deregulation, by the creation of the euro-currency on foundations that were political, not competitive. They should be case-studies of the root causes of the unravelling of the world order we are facing today. The rise of Asia, the resurgence of a vindicative Russia, the ‘re-Ottomanisation’ of Turkey, the illiberal temptations 10

in Central and Eastern Europe, the wave of protectionism and ‘deglobalisation’, the impact of technology and digitalisation on the business and social compacts are just facets of the same profound phenomenon: the world is in flux, the commanding heights are up for grabs, competition intensifies, ‘providential’ leaders and false prophets are coming to the forefront, giving the illusion of a simple answer to an overwhelming reality for the guy on main street, facing the stress and anxiety of a dislocation of epic proportions. Historically, these are the most dangerous times, when trivial incidents, the psychology of leaders tend to count more than usual. Difficult times require strong leaders with bold visions but they also come with their big egos and messianic temptations. And so history bends gently or more abruptly in the good or wrong direction. But the fundamental rule of nature and geopolitics will continue to operate, no matter the circumstances. The vacuum - the absence of functional and predictable world governance system - needs to be fi lled. The sooner, the better, because history becomes again impatient.


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Making sure everyone can realise their potential

Photo: EBRD

By Sir Suma Chakrabarti EBRD President

In a well-functioning market economy, opportunities to receive an education, have a good job and earn a sufficient income should not be limited by gender, place of birth or parental background. And yet, in many countries where the EBRD invests, 20-50 per  cent of income inequality is due to circumstances at birth. Parental background is the most important determinant of inequality of opportunity across the EBRD region, followed by gender. Th is is more than just unfair. It is also inefficient. A society that fails to capitalise on the potential of all its members misses out on significant economic gains. It also risks compromising the stability of countries and markets. In countries where inequality of opportunity is higher, people express less support for market reforms and democracy – and backsliding is possible. Economic inclusion is therefore not an optional extra. Rather, it is a core

necessity. Th is is why we at the EBRD are committed to strengthening fair access to meaningful economic opportunities, for all, including the most vulnerable among us. We do this by working in partnership with our clients, addressing regulatory barriers to individuals’ full participation in the labour market and, crucially, harnessing the private sector’s power to develop skills and open up employment opportunities. In doing so, we create access to skills, jobs and entrepreneurship opportunities for women, young people, refugees and other groups who would otherwise face disproportionate barriers to fulfi lling their potential. For the sad fact remains is that those who lack such opportunities tend to live shorter and less healthy lives and are often unable to break the vicious circle of poor education, low skills and limited employment prospects. At the EBRD we use our leverage with the private sector to support our clients to address business challenges such as skills mismatches or low workforce diversity. In Croatia, for example, we have launched a partnership with the Croatian Employers’ Association to help young people train for and secure better internships and mentoring opportunities. So far 140 private sector companies and 40  academic institutions are participating, offering over 620  internships to youth in Croatia. We are very proud that the initiative was named runner-up in this year’s Emerging Europe Awards. 11

In Jordan, where tourism accounts for 20 per  cent of all private sector employment, employers face a serious challenge to recruit young women and men who have the right skills for today’s labour market. In May this year, I signed a memorandum of understanding with the government of Jordan in Amman to set up a Sector Skills Council for Hospitality and Tourism to uplift national skills standards in the sector in partnership with the private sector. We are now aiming to do something similar in Albania and other countries of operations. Another priority for our work is improving access to fi nance, especially for women. To address that problem, our Women in Business programmes provides fi nancing and business advice in 18  countries, with nearly 500 million euros invested to help over 35,000 women entrepreneurs build up their businesses. Our history shows that political commitment to economic inclusion is important – but in the long run it is not enough. Across the board, if we are to make real progress, we need to look beyond social policy and programming towards the private sector. Only by putt ing aside conventional notions that it is the government’s role to drive economic inclusion – and understanding and addressing all types of different market experiences, expectations and ambitions – can we ensure more sustainable market economies and greater wellbeing for all. •


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Emerging Europe

AWARDS

Branko T. Nešković, former Ambassador of BiH to the UK, Günter Verheugen, former Vice President of the European Commission, Tamar Beruchashvili, Georgian Ambassador to the UK

Peter Stračar, CEO, GE Europe, Olgra, Grygier Siddons, former CEO, Pwc CEE; Samuel Burke, CNN (right)

“The last few years have strengthened our conviction that the region still needs to emerge in Western minds and it seems that this experience is shared by all our countries, regardless of their GDP. In 2018, Emerging Europe is celebrating its fifth anniversary, but most importantly, celebrating over 100 outstanding projects and initiatives, successful organisations and businesses that originate from the emerging Europe region at the first Emerging Europe Awards,” said Andrew Wrobel, the co-founding partner and head of content strategy and publishing at Emerging Europe, at the welcome reception held at the Palace of Westminster.

Peter Stračar, CEO, GE Europe, Daniel Bilak, CEO, Ukraine Invest (right)

The first ever Emerging Europe Awards were handed out on June 22 2018 at the European Bank for Reconstruction and Development headquarters in London. The organiser, Emerging Europe, a think tank committed to boosting the social and economic development of 23 countries of Eastern Europe and raising awareness about the region was joined by PwC in Central and Eastern Europe, the strategic partner of the Awards.

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Invest Lithuania was named as the best Investment Promotion Agency (IPA) in central and eastern Europe.

Arturas Rtiščev, Invest Lithuania

“Last year we managed to attract more than 40 direct investment projects to Lithuania,” said Arturas Rtiščev, Invest Lithuania’s head of business development in the UK, when accepting the award. The prize for City FDI Promotion Strategy of the Year went to Wroclaw in Poland, with Plečnik’s Ljubljana in Slovenia being named Tourism Campaign of the Year. Siemens Czech Republic won in the Research and Development Category, while Solaris, the Polish producer of city, intercity and special-purpose buses and lowfloor trams was chosen as Emerging Europe’s Global Champion of the Year. “It’s down to one per cent inspiration, 99  per  cent hard work,” said Dariusz Michalak, deputy CEO of Solaris during his acceptance speech. Other winners at the awards ceremony included Amazon, the FDI Project of the Year, and the City of Tirana, which won Best Urban Renewal Project for its renovation of the New Bazaar. “The bazaar has made a huge change to the city, giving life to more than

(from left) Richard Stephens, Emerging Europe, Piotr Kobza, Deputy Head of Mission, Polish Embassy, Dariusz Michalak, deputy CEO, Solaris, Andrew Wrobel, Emerging Europe

Arber Mazniku, Deputy Mayor of Tirana

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200 businesses. It has made noises beyond Albania,” said Tirana’s deputy mayor Arber  Mazniku, who accepted the award. In the social categories, there were popular wins for some incredibly innovative programmes. Teach for Armenia, which addresses educational inequality in Armenia by organising passionate people to spend two years teaching in rural communities throughout the country, was named Young Empowerment Initiative of the Year. “This is a huge honour,” said Larisa Hovannisian, the organisation’s founder.


Günter Verheugen

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advanced software solutions for the healthcare industry was given the Social Impact Start-Up of the Year Award, and the WeCare/MenCare initiative from Georgia – which aims to break the stereotype that family, its health and well being is a woman’s responsibility – was named Equality-Friendly Initiative of the Year. There was also a Lifetime Achievement Award for Günter Verheugen, the former European Commissioner for Enlargement who did so much to bring about the eastern expansion of the European Union during his term in office. “This is my first lifetime achievement award and I have very mixed feelings,” he joked when receiving the award.

Larisa Hovannisian, Teach for Armenia

“I’ve come as one but I’m here on behalf of tens of thousands.” Deepdee, a start-up from Belarus specialising in the development of

Jaroslav Likhachevskiy, CEO, Deepdee (in the middle)

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“So let’s call it an award for lifetime achievement so far.” “I will continue to work, and while and I’m not in a position to make decisions anymore, a couple of weeks ago I became aware that there is now a new position, called influencer.” “I see myself as an influencer for the future of Europe.” Professor Verheugen has also kindly lent his name to the future Lifetime Achievement Awards has become the first member of the Emerging Europe Council, which is going to choose future laureates. "Now that the Emerging Europe Awards is firmly established on the regional calendar, we're going to build on the


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Richard Stephens, Emerging Europe, Piotr Kobza, Deputy Head of Mission, Polish Embassy, Dariusz Piasecki, City of Wrocław, Wojciech Stando, London Bureau Chief, PAIH, Andrew Wrobel, Emerging Europe

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success of the first event to make an even bigger and better event in 2019. For starters, there will be more categories, allowing us to promote an even greater number of amazing companies and initiatives from the emerging Europe region,” says Richard Stephens, director of the Emerging Europe Awards. •


Current Affairs


The Estonian army has formed a special cybercrime commando unit, formed of 300 people, to help the country combat the threat of online attacks. Estonia is one of the most technologically advanced countries in the world, and has pioneered the use of online public services.


CURRENT AFFAIRS

A VIEW FROM... MARIO HOLZNER

Mario Holzner is deputy director of the Vienna Institute for International Economic Studies (wiiw).

Vienna Since 2013 GDP growth has picked up continuously in the EU member states of Central and Eastern Europe (EU-CEE), reaching an average of above four per cent in 2017. Similarly, unemployment went down stepwise and is now at about six per cent on average. Some countries are approaching full employment. For instance, the Czech Republic is expected to have an unemployment rate of 2.4  per  cent in 2018. However, until recently wages have lagged substantially behind productivity growth. Two exceptions are Romania and Bulgaria. There, wages have risen more quickly, albeit from a much lower starting point and to a large extent There is no description. thanks to minimum wage hikes. The statutory minimum wage remains one of the few income policy tools in the region. One of the reasons for the meagre wage growth in EU-CEE has been the increased liberalisation and

flexibility of labour markets. Partly in response to the economic crisis of 2008-09, labour market institutions were often transferred from the national and sectoral to the firm level. Collective bargaining mechanisms, which had been already weaker than in Western and even Southern Europe at the onset of the economic crisis, were weakened further. These reforms were accompanied by a falling degree of organisation of both employees and employers, resulting in the decentralisation of wage bargaining. Uncoordinated wage setting typically leads to an over- and undershooting of wages with respect to productivity developments. Highly corporatist countries such as Austria have a strongly centralised wage bargaining system that acts in a macroeconomic responsible way and performs a long-run productivity-oriented incomes policy. Moreover, these systems are also useful

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in organising education, qualification and on-the-job training. CEE countries will need refined policies to meet the challenges in the years to come. Recent labour market tightening in the region is not only caused by higher economic growth. To a large extent, this reflects a combination of natural population decline and negative net migration. Continuous emigration has further exacerbated the decline in population, as the emigration of the youngest and most productive age group has contributed negatively to birth rates. Forecasts of the change in working age population expect a massive drop by 15-30 per  cent over the next decades. Coordinating labour market institutions could help to cope with these challenges and ensure macroeconomic stability and long-run convergence to western European income levels.


CURRENT AFFAIRS

Washington US-Europe relations have been on an uncertain footing ever since Donald Trump’s election as US  President. On July  15, just after the challenging NATO summit and before the Helsinki summit, Trump named the EU first when asked to list US enemies, labelling the EU as a “foe.” In an interview with the US  TV network Fox immediately after his meeting with Vladimir Putin, Mr Trump questioned whether the US would come to the aid of NATO member Montenegro if it were attacked. What about the July 25 Whit House meeting with EU  President  Juncker and Trade Commissioner Malmström? There is clear relief that Mr  Trump agreed not to impose tariffs on auto imports from Europe but there was no mention of lifting the penalty tariffs on imports of steel and aluminium. For supporters of TTIP, there must be surprise and renewed hope as the two sides apparently agreed to start work on an agreement to abolish tariffs, non-tariff barriers and subsidies on industrial goods, as well as increase

TIM BENNETT

trade in services, chemicals, pharmaceuticals, and medical products. These latter three sectors were the ones on which the most progress was made during the TTIP negotiations, while negotiations on always politically sensitive agricultural products were not included in the announcement, nor was the extremely controversial issue of investor protection. This all sounded positive, but on July 26 Mr  Trump told a crowd at an Iowa event that "We just opened up Europe for you farmers. You're not going to be too angry with Trump, I can tell you…you have just gotten yourself one big market." This is a big red flag: agriculture will not be included in any upcoming negotiations, and the EU statement that it will increase imports of soybeans is meaningless as the EU as an institution is not an importer of products; the market will determine import levels. As for the EU importing “vast amounts of LNG” from the US, that too is dubious. Mr  Trump’s statement in Iowa once again reflects

his seeming ignorance of details, past history, and context yet gave him an opportunity to deflect for the moment the growing tide of criticism over his trade war with various countries. Trump has taken numerous steps to undo policies and actions by the Obama Administration. What happens when Trump is informed that his July 25 agreement with Mr  Juncker basically revives a key part of Mr  Obama’s second term trade policy? As for NATO there remains serious concern among many in the US over the president’s sustained support for the organisation and its obligations. Reflecting that concern, a bipartisan group of senators introduced legislation on July 26 which would require Senate approval before the US could withdraw from NATO. Bottom line: the July 25 White House meeting produced a positive outcome, but supporters of a strong transatlantic relationship must continue to find ways to assure the US President of the importance and benefits of a strong transatlantic relationship.

Tim Bennett is a former US trade negotiator and served as Director-General/CEO of the TransAtlantic Business Council for over five years before retiring in March.

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CURRENT AFFAIRS

To save democracy, the EU may need to stop sending cash to the east The dismissal of emerging Europe’s most effective anti-corruption prosecutor raises new questions about about the rule of law across the region. Craig Turp

Since taking over at the DNA, Romania’s anti-corruption unit, in 2013, Mrs Kövesi had overseen the prosecution of thousands of corrupt politicians. Mayors, MPs and even former prime ministers have been found guilty of graft and sentenced to prison on her watch. Most recently, Romania’s de facto prime minister, Liviu Dragnea, the leader of the ruling PSD, was sentenced to three years and six months in prison for abuse of office. He remains free on appeal. Indeed, as Mrs  Kövesi told me in an interview shortly before her dismissal, so successful has the DNA become that it was now a model for the rest of emerging Europe. “Yes, the results that we have

achieved have made us something of a model in the region,” she said. “The DNA has been presented as an example of good practice by the European Union. I was personally an EU expert for Moldova and Montenegro, evaluating their justice systems.” Left with no choice In March Romania’s Justice Minister Tudorel  Toader formally called on the Mr Iohannis, to dismiss Mrs Kövesi from office. He refused to do so. In June, however, Romania’s Constitutional Court ruled that Mr  Iohannis was obliged to fire Mrs Kövesi. He was left with no choice. “He did what he was obliged to do,”

Laura Codruta Kovesi

Y

ou could hear the groans of disappointment all over Bucharest. When Mădălina Dobrovolschi, the spokesperson for Romanian President Klaus Iohannis, announced that the president had reluctantly signed a decree removing the country’s highly effective anti-corruption boss Laura Codruța  Kövesi from her post, it was as though the wind had gone out of Romania’s fight against corruption once and for all. Mircea  Cărtărescu, a writer, perfectly summed up the nation’s mood when he said that Mrs  Kövesi “was, and will remain, a symbol of a better Romania.”

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CURRENT AFFAIRS

said Augustin Zegrean, a respected former head of the Constitutional Court. Romania’s ruling coalition has been attempting to overhaul the country’s justice system since it took office in January 2017. At the end of that month it issued an emergency ordinance which decriminalised corruption involving sums of less than 200,000  lei (around 43,000  euros) and amnestied several incarcerated senior politicians and businessmen previously convicted of corruption. After a week of protests, which at their height saw more than 600,000 people on the streets of Bucharest and other major cities around the country, the government backtracked and annulled the ordinance. Since then, the government has changed tactics and has sought to change the justice system piecemeal, drip-feeding various pieces of legislation through parliament. The latest raft of changes, passed in June, would see courts of appeal barred from convicting a person found innocent by a lower court, unless new evidence is brought by prosecutors. Wire-tapping that is not directly connected with the criminal act for which a person is under investigation will no longer be taken into account, and the maximum length for criminal investigations will be limited to one year “These changes would make it difficult to investigate not just corruption cases, but crimes in general,” Mrs Kövesi told Emerging Europe.

the EU’s eastern and western wings. At the end of July, the Court of Justice of the European Union  (CJEU) ruled that Ireland is obliged to refuse to extradite a Polish national sought by a European arrest warrant if it concludes that the lack of independence of Polish courts would compromise the suspect’s right to a fair trial in Poland. “A judicial authority called upon to execute a European arrest warrant must refrain from giving effect to it if it considers that there is a real risk that the individual concerned would suffer a breach of his fundamental right to an independent tribunal and, therefore, of the essence of his fundamental right to a fair trial on account of deficiencies liable to affect the independence of the judiciary in the issuing Member State,” stated the CJUE when delivering its verdict, casting serious doubt on the independence of Polish courts. The Polish government has so far paid scant lip service to EU concerns about its assault on the rule of law, dismissing them as unwanted interference in national politics. Even the triggering of Article 7  procedures, which could eventually lead to the country losing its voting rights in the European Council of Ministers, have had little effect: Hungary, a staunch Polish ally, has said that it will block any sanctions. Perhaps losing its ability to combat crime through cooperation with other EU states will wake it up to the consequences of its dangerous path.

European anger

Boiled to death

Unsurprisingly, Romania’s European partners were not impressed. The Council of Europe’s advisory body, the Venice Commission, says in its latest report on Romania that the government’s plans for a judicial overhaul would be likely to undermine the independence of magistrates and sap public confidence in the judiciary. Romania’s conflict with its western partners comes as Poland continues to very publicly clash with Brussels over so-called judicial reforms. The proposed changes in the two former Communist states have widened the gap between

Something, however, clearly needs to be done. Professor Laurent Pech, an expert in European Law at Middlesex University, has gone so far as to say that Polish democracy is being boiled to death while the world watches. “Poland is no longer a state governed by the rule of law,” he said. “I am for instance in full agreement with the diagnosis offered by the European Commission and many other international respected bodies. In essence, Poland’s so-called ‘judicial reforms’ are not reforms at all but rather a set of deliberate 21

systemic attacks on the independence of the Polish judiciary.” Adam Bodnar, the Polish Commissioner for Human Rights, agrees. “The various actions that were made over the last three years, were in order to restrict the ability for independent institutions to work,” he told Emerging Europe. “I am one of the last very independent institutions.” Given that on his most recent appearance before parliament Poland’s ruling Law and Justice party walked out, it might be expected that Mr Bodnar should fear for his job, that he may go the same way as Mrs Kövesi in Romania. He remains, however, optimistic. “I think that the government feels it would look bad to dismiss me or to even make an attempt to dismiss me,” he said. “It would cause new problems for them from an international point of view. But on the other hand they do not want to show any legitimacy or support for me, which means that my role is to a large extent marginalised.” Cashflow interrupted As widely expected, earlier this year the European Commission proposed a budget for the 2021-2027 period which ties European  Union funding to the rule of law. Specifically, the Commission is proposing a new mechanism to protect the EU budget from financial risks linked to generalised deficiencies regarding the rule of law in member states. The new proposed tools would allow the Union to suspend, reduce or restrict access to EU funding in a manner proportionate to the nature, gravity and scope of the rule of law deficiencies. Crucially, such a decision would be proposed by the Commission and adopted by the Council through reverse qualified majority voting, making it all but impossible for one or two countries to block punitive measures. As Emerging Europe has suggested in the past: the threat of running out of cash could be what ends up saving democracy in the troublesome states of the region. •


CURRENT AFFAIRS

EMERGING POLITICIANS Andrei Pop At 31, Andrei Pop is one of the youngest MPs in the Romanian parliament. He is the secretary of the parliament’s Budget, Finance and Banking Committee, and a member of its Committee for Information Technology. Since his youth, he has been involved in his family business, a company active in the field of industrial production related to energy, telecommunications and oil and gas. His appetite for politics is strongly related to his desire to promote pragmatic initiatives and policies that contribute to the wellbeing of society through education, and a fiscal framework that places great emphasis on social programmes.

The Western model, based on the care of democracy and the capitalist economic system, was the foundation on which the countries of central and eastern Europe were rebuilt after the fall of communism in 1989. The democratic and economic gap between the former communist countries and those which had already consolidated democracy (such as the UK, France, Germany and Italy) or a greater democratic experience (such as Greece, Spain, Portugal) was high, and the political desire to mitigate this gap was strong. After 11 years of EU membership, it is now cleat that there will never be a real integration within the EU between the old and the new democracies, if these gaps continue to persist. I believe that from a macro perspective, maintaining economic growth, protecting and stimulating the business environment, and the fair redistribution of resources in society, are priorities that Romania must preserve. In a fluid international political context, in a Europe shaken by euroscepticism and extremism, Romania continues along a path it began following decades ago. Romania remains a state involved in the European and transatlantic democratic system, a strong member of the NATO alliance and among the few countries that have allocated two  per  cent of GDP for military spending. Although I am relatively new to politics, I have an entrepreneur’s background and from this point of view I believe that Romania cannot develop without a strong, sustainable economy, well integrated into the world trade system. Autarchy and nationalism are not the right solutions. But a cleverly used protectionist policy might be healthy and useful to the entire global econo22

my. If we take a look at history, markets and political systems have only been developed and democratised through a complex system of interdependence. Romania must remain in this system of global interdependence, both politically and economically. And I say this also in view of the fact that our country profile has a major investment potential, one of the lowest corporate income tax rates in the EU, a highly skilled labour force, macroeconomic stability and a very dynamic IT sector. But foreign investors should not only look at Bucharest or other developed regions, where about 70 per  cent of foreign investment is concentrated, but should also take into account the country’s other regions. For example, Ialomița county, the constituency I represent, has major investment potential in several areas, such as agriculture, tourism, trade-services and industry, and it would be worth investors taking a closer look. Invest in Ialomița, a project I started this year, has had the role of highlighting the investment potential of the county, and it’s been a real success. Romania celebrates an important centenary this year, marking 100 years since Transylvania was united with the rest of the country. It is a pride and honour for me to be part of a generation of politicians contemporary to this event which carries such a huge weight of symbolism, culture and identity for all Romanians. Moreover, we have an obligation to sustain the ideal that was accomplished a century ago, to not let ourselves be disappointed. We must remain responsible, to generate prosperity, and to ensure the continued freedom of a country located on the eastern flank of NATO, in a volatile security environment and a constantly changing world. •


CURRENT AFFAIRS

Lana Prlić Lana Prlić is vice-president of Bosnia and Herzegovina’s Social Democratic Party (SDP), of which she has been a member since 2010. She holds a bachelor’s degree in International and Public Relations, and an MBA in International Business and Administration. When she was elected as vice-president of the SDP she became the youngest woman in the region to hold such a position. This year she is running for office, as a candidate for Bosnia and Herzegovina’s parliament.

Being a young politician in the Balkans is challenging. If you add the fact that I am from Bosnia and Herzegovina into the mix, then to others it can be seen as a mission impossible. And we all know that the Balkans is always interesting when it come to the nature

of its political culture. But here I am, aged 25, living in Bosnia and Herzegovina, in the city of Mostar, a Master of International Business and Finance and the youngest vice-president of a Social Democratic Party (SDP) in the Balkans. I started in politics as a local activist, when I was 17. In 2014, when I was 21, I was elected as vice-president of the SDP, just two months after my party lost the elections. Everyone thought that election was the end of the SDP, but introducing young people into the party leadership has made it the leading opposition party in Bosnia. If young people can help a political party recover, then young people can help the state recover too. Bosnia and Herzegovina has the most complex political system in the world. I chose the SPD because it answered my frustrations about a system in which my generation lives, and is increasingly, unfortunately, leaving. As a young politician I have responsibly to try to change the system, to make create a better state for the generation which is about to have a family here, as well as for our parents and grandparents: a generation who gave us everything and who decided to stay here during 1990s despite all the challenges they had to face. Unfortunately, over the last four years Bosnia and Herzegovina has never faced so many issues. Young people are leaving, corruption is so widespread that it has become part of the culture, education is divided based on nationality, the pension fund has collapsed, there is no infrastructure, people are frustrated in their everyday life because their lives are based on their ethnicity, not on their education and capabilities. My struggle is real, and started before I joined a political party. As I already mentioned, my country has a very complex political system and if we add to that the fact that 23

Bosnia is not one country but three, divided into ethnic groups and not a country of all its citizens then we face not just a state crisis, but also an identity crisis. That is the consequence of the constitution, written as part of the Dayton Peace Agreement, which limits normal development. It pushes people to declare themselves according to their ethnicity in order to survive and automatically raise generations which has the wrong values and does not think outside of the box. My biggest struggle is with the educational system, which is a core of every society, but here education is divided. We have the shameful phenomenon of “two schools under one roof,” a shame not just for us but for the whole of Europe, where kids are divided into different classes in separate parts of schools based on their ethnicity. More than 80.000 youths have left Bosnia and Herzegovina over the past two years, because they cannot find employment, because of the high level of corruption, a lack of respect for human rights and for the simple fact that Bosnia is today one of the poorest countries in Europe. The next elections are in October  2018. This is when the future of this country will be decided. This election will show can we start living in 21st century: politics in Bosnia over the past 20 years have been rooted very much in the 1990s, with nationalist parties and politicians. Now, however, the generation born in 2000 will have the right to vote, and I think this year we should start thinking about future and not about the past. We cannot agree on the past, but maybe we can agree on the future. My goal is to make this country a place where differences are respected, and to bring back optimism and the will to stay in Bosnia and Herzegovina. If people continue to leave, for whom are we building a future? •


CURRENT AFFAIRS

No more clickbait Anamaria Dutceac Segesten is political scientist and director of Central and Eastern European Studies at Lund University. A specialist in the political use of social media, she talks to Craig Turp about how it can best be used as a political tool for good, not least in combatting the phenomenon of fake news. Craig Turp

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namaria Dutceac Segesten has not been back to Bucharest - her home city - for some time. “I’m still trying to get my bearings,” she says, as we order coffee at one of the city’s fashionable cafes. “Things have changed, it looks so much better now.” If only the same could be said for the country’s political scene. “I appear to have arrived during a political storm,” she tells me. “I see these anti-corruption protests taking place and it confirms the fact that social media is being used as a tool for mobilisation. That’s what social media can do for central and eastern Europe: the opposition is making use of social media much better than the government. In Poland, Hungary, Slovakia, the Czech Republic and now in Romania governments have exerted a certain influence in traditional media, either via control of public service television in Hungary and Poland, or private channels as in Romania, Slovakia and Czech Republic. That’s why social media in CEE has emerged as an alternative voice: it is a voice that the government cannot control.” Ms  Segesten believes that social media has so far been used best as a tool for mobilisation, partly because while its message is often political, it is not ideological. “Nowhere in the world have we seen any one party capitalise on the use of social media in elections,” she says, “but there is a social movement and popular current that is in opposition to the government and has a more general message, be it anti-corruption, be it protecting the environment, or protecting the freedom of the internet. A lot of these protests have

Photo: Anamaria Dutceac Segesten

been organised around a principle and not a particular party.” Echo chambers But does she not feel that there is a chance such use of social media will create bubbles, no matter how carefully we might curate our newsfeeds? “Oh yes,” she replies. “Echo chambers at work!” “This is something we see across the world, in the UK and the US as much as anywhere. Social media is not being used as a means of persuasion, but as a tool for mobilisation. It is about confirming your base, giving people who already sympathise with you a reason to go and cast their vote. I have looked in depth at the Brexit discussions and only about 10 per cent of posts actually contain reasoned argumentation. 24

Most of what gets posted is just expression of opinion or sentiment from users. So social media is not a place where persuasion takes place. Research shows that face-to-face canvassing remains far more effective as a tool for converting people who might be sitting on the fence. Nothing replaces somebody coming to your door. That is what changes people’s minds. It does not always work, but persuasion is better via personal contact.” So can social media ever be used as a means of persuasion? “We need to keep in mind that social media is dependent on technology,” says Ms Segesten. “The way it is set up today I think that social media is being used to probably its maximum potential as a means of mobilisation. But the technology is evolving, which makes research difficult. If I look at what is happening in social media today compared to an election four years ago it is almost impossible to make any comparisons because the set up has changed. The digital architecture is different. What users are empowered to do now is different on each platform: they can do more, there are more technological possibilities. And there will be more and more as the technology evolves. Augmented reality, holograms, voice-activated assistants: Siri, Alexa, Google  Assistant. What if that voice started talking to you: Have you thought about voting for a certain candidate? Imagine if somebody could hack that!” Nuances Which sounds as threatening as it does promising, and makes it crucial


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that ordinary people are as media literate as possible, else the reach of fake news could become all-encompassing. But can social media be used as a way of combatting fake news? “Fake news consists of lies which maintain the appearance of truth,” says Ms Segesten. “There are websites which exist simply to present lies as news. That is the fake part: attempting, very obviously, to imitate a credible news source.” Ms  Segesten feels that journalists have been guilty of conflating a number of different things: fake news, propaganda, misinformation and simply lumping them together as fake news. This has done the public a service by making people aware of the phenomenon, but also a disservice by confusing various terms. “It is easier to convey the falsity of things with the phrase fake news,” she says. “But by calling all these things fake news you lose the nuances.” So how do we spot the difference between what is real and what’s fake news? Ms  Segesten believes that the answer is education, although she is aware that it is not a panacea. “I am an educator,” she says “and of course I feel that more money should go towards education. But formal education – schools, universities – provide

just one way of learning. We also learn by watching television, films, the news. We do not only activate ‘learning mode’ when somebody is standing in front of us trying to teach us something.” While Ms Segesten feels that the battle against fake news should be a governmental effort, with money dedicated to making sure people understand the need to be critical, she also feels that the purveyors of news need to do more to make sure that their output is reliable. “Fake news stories only reach a wide public if they get picked up by traditional media. So it is the media itself which should be the first line of defence. It should be the responsibility of editors and bosses to invest in people who will not spread stories which are false. They need to be given the time: journalists should not be under any pressure to deliver immediately on the basis of unverified information.” The need for regulation For this to happen she thinks that what she terms ‘media logic’ needs to change. No more clickbait, basically. “Clickbait, sensationalist news, the need to be the first, the most outrageous. This kind of media logic encourages the spread of fake news because 25

the more outrageous something is the more likely people are to click on it: this is human nature and impossible to change. But the concern is that if you follow this to its logical conclusion then all we will have is sensationalist news.” She sees the need for a two-pronged approach: teaching media literacy, educating schoolchildren to be critical of anything they see or read, be it news or marketing. But then there is also the responsibility of media channels to invest in journalists, to give them the time to investigate stories and sources so that they are not spreading fake news, even though in the short term such clickbait might increase their revenue. The problem is convincing media channels not to publish stories which bring them income. “One approach is regulatory,” she suggests. “Without being too paternalistic, I think that television channels, newspapers, websites, influencers, bloggers and anyone who intentionally promotes incorrect information in order to get more clicks and income should not be encouraged economically but in fact punished. Give those involved a sense of responsibility: What am I putting my name to? Am I going to suffer consequences? If so, then I should check this. Governments could also reward in some way those media outlets which do a good job.” •


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Azerbaijan’s human rights problems mount Two major reports describing the systemic torture of prisoners, together with an electoral system which falls far short of international standards, have once again placed huge question marks against Azerbaijan’s commitment to human rights and the rule of law. Craig Turp

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here was much talk of a bright new future for EU-Azerbaijan relations earlier this year, not least after the Azeri President Ilham Aliyev’s successful visit to Brussels in February, where he met with the EU’s High Commissioner for Foreign Affairs and Security Federica Mogherini. Ms  Mogherini went so far as to express hope for a quick conclusion of talks on a new agreement between the two sides, dubbed the Strategic Partnership Agreement (SPA). Since then, Azerbaijan has been backsliding at great pace. Firstly, the president called a snap presidential election for April, bring-

ing forward the date of the vote from October, a move his allies said was necessary to avoid presidential and parliamentary elections clashing in 2025. Mr Aliyev was first elected in October 2003, two months before the death of his father, Heydar Aliyev, who ruled for 10 years. He cemented his position with two referendums, one in 2009 that scrapped a two-term presidential limit and another in 2016 that extended the presidential term to seven years from five. OSCE report The election was boycotted by the main opposition parties, and Mr  Ali26

yev predictably won a landslide victory, taking more than 86 per cent of the vote on a 75 per cent turn out. International watchdogs were not impressed. The International Election Observation Mission of the Organisation for Security and Co-operation in Europe (OSCE) said that the vote took place within a restrictive political environment and under a legal framework that curtails fundamental rights and freedoms, which are pre-requisites for genuine democratic elections. “Against this background and in the absence of pluralism, including in the media, this election lacked genuine competition. Other candidates refrained from directly challenging or


CURRENT AFFAIRS

criticising the incumbent, and distinction was not made between his campaign and official activities,” read the OSCE’s preliminary report into the vote. The OSCE’s final report, published in July, was even more damning. It recommends that a thorough and independent investigation of election day irregularities be conducted, including a review of web camera footage, where available, signed voter lists and valid and invalid ballots. Highlighting that the formula for appointing election commissions does not provide for an impartial election administration in practice, the report recommends a revision of the composition of election commissions to enhance their impartiality and public confidence in their work. Noting a number of campaign events where public sector staff appeared to be coerced to attend by party officials or police, the report also recommends that election campaigning be conducted in an atmosphere free from intimidation and fear of retribution, and that the authorities and political parties refrain from pressuring public sector employees and others. ‘Torture, impunity and corruption’ Although Azerbaijan is party to multiple human rights treaties, including the UN Convention against Torture and the European Convention on Human Rights, which prohibit torture and other forms of ill-treatment of detainees, the Council of Europe’s Committee for the Prevention of Torture and Inhuman or Degrading Treatment or Punishment (CPT) claims that torture, impunity and corruption in law enforcement remain systemic and widespread. The CPT’s overall impression of the situation in Azerbaijan is that torture and other forms of physical ill-treatment by the police, other law enforcement agencies and the army, corruption in the whole law enforcement system and impunity remain systemic, widespread and endemic. There is a serious problem of impunity and lack of proper investigation of ill-treatment

allegations, as well as and ineffective legal safeguards for detained persons, such as access to a lawyer, notification of custody, access to a doctor, receiving information on rights. Furthermore, despite legislative reforms and efforts to renovate old and build new prisons, there is an ongoing problem of prison overcrowding, poor material conditions, lack of activities (especially for remand and life-sentenced prisoners), inadequate medical care and insufficient and poorly paid prison staff. These issues make it harder to fight corruption and prevent inter-prisoner violence. The CPT report does, however, welcome the decision of the Azerbaijani authorities to publish its reports, which it feels could signal a new commitment to transparency in confronting many of the serious issues raised. Major breakthrough “Azerbaijan’s decision to publish all reports which have so far remained confidential is a major breakthrough; it heralds a new era in our co-operation with Azerbaijan and is a clear indication of the authorities’ resolve to enhance their dialogue with the Committee and to address effectively the serious problems the Committee has highlighted,” said Mykola Gnatovskyy, president of the CPT. However, Mr  Gnatovskyy also makes it clear that Azerbaijain needs to clean up its act. “It is high time that the Azerbaijani authorities took decisive action to stamp out torture in the country and implement to the fullest extent the Committee’s recommendations,” he stresses. “As a first step, as repeatedly stated in the past, the anti-torture committee wishes to see the highestlevel political authorities in the country making a public, firm and unequivocal statement of zero tolerance towards torture and other forms of ill-treatment of persons deprived of their liberty in Azerbaijan.” Publicising police abuse can invite official retaliation. Mehman Huseynov, 27

one of Azerbaijan’s most popular bloggers, is serving a two-year prison term on grounds that he ‘defamed’ police officers because he went public about the ill-treatment he had suffered in custody. A group of plainclothed officers attacked Mr Huseynov, blindfolded and gagged him, forced a bag over his head, used an electroshock weapon on his groin, and punched him, bloodying his nose. The investigation into Huseynov’s allegations was swiftly closed after a summary finding that they were groundless. EU response The European Parliament has responded to Azerbaijan’s backsliding by adopting a resolution which, while reiterating its commitment to strengthening ties with the country, makes it clear that this will not be done at the expense of human rights. In fact, members of parliament have said that they will not ratify any agreement with any country that fails to respect fundamental EU values and rights. Phillipe  Dam, advocacy director, Europe and Central Asia Division at Human Rights Watch now wants the European Commission to follow the parliament’s lead. “The European Commission should now follow through with a clear message — Azerbaijan’s crackdown on dissent must end and political prisoners freed,” he says. “The EU’s eagerness to engage with Azerbaijan reflected, at best, wishful thinking – that giving the country’s leadership what they desired could lead to further improvements of the country’s abysmal human rights record — or at worst, it reflected worrying cynicism on the EU’s part, with hydrocarbon interests trumping rights concerns.” Rapprochement with the EU initially came as a result of Azerbaijan releasing 17 political prisoners and journalists in 2017. It would appear that an even bigger show of good faith will now be needed if the country wants to rescue the Strategic Partnership Agreement. •


CURRENT AFFAIRS

Has the US sold Montenegro out? Donald Trump's comments about an aggressive Montenegro were laughed of by most commentators as little more than ignorance. But do they perhaps mask a shift in US policy? Andrew Wrobel

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ontenegro is a tiny country with very strong people,” President Donald Trump told a Fox  News host the day after meeting with Russian President Vladimir  Putin in Helsinki in mid-July. “They have very aggressive people. And they may get aggressive, and congratulations, you are in World War III,” he added. Ironically, so far, the only time the North  Atlantic  Treaty Organisation’s Article  5, committ ing all members to protect each other and sett ing a spirit of solidarity, has been invoked was by the  United  States, after the terror attacks conducted by al-Qaida on September 11, 2001. Would Mr  Trump now say to his NATO allies (whom he recently called “foes”) that Washington will not honour Article 5 of the treaty and join its allies to defend Montenegro in the case of an armed Russian incursion in the country? Would the other 27 members come to Montenegro’s aid? Nestled in the Adriatic coastline between Albania and Croatia — both NATO members since 2009 — Montenegro with a population of about 630,000 might seem an easy spot for Russia to wound NATO without ever engaging its forces head-on. The Russian stake in Montenegro is evident. Russian foreign direct investment makes up close to a third of the country’s gross domestic product (GDP). The country is the single largest direct investor in Montenegro, with 1.27  billion  US  dollars in cumulative investments – equal to 13 per cent of all FDI stock in the country, according to the Centre  for  Democratic Transi-

tion. Russia’s share of the overall Montenegrin economy shrank significantly in recent years, from 29.4 per  cent of total revenue in 2006 to around 5.5  per  cent in 2015. Th is is largely a result of the withdrawal of Russian capital from the Podgorica  Aluminium  Plant  (KA P), one of the largest companies in the country. Officially, about 4200  Russians are registered as residents in Montenegro. Some 2600 own properties in Budva, the country’s primary tourist destination, nicknamed “Moscow on the Sea.” In 2016, some 300,000 Russian tourists visited Montenegro and in 2017, visitors from Russia accounted for 26.7 per cent of all overnight stays in the country. But Montenegro, and the rest of the Balkans for that matter, have long been the stage for Russian competition with the West. In 2016, Russian intelligence officers plotted to assassinate the prime minister to prevent Montenegro from joining NATO. When, in 2017, after the Montenegrin Parliament voted in favour of joining NATO, the Russian Foreign Ministry said the government had “ignored the voice of reason and conscience” and that Russia reserved “the right to take steps aimed at defending our interests and national security.” In April 2017, the Russian  Federation banned imports from the largest Montenegrin winemaker, and the Russian foreign ministry warned that tourists could “expect provocations and detentions” due to “anti-Russian hysteria.” As a result, Russians reportedly accounted for 7.3 per cent of all tourist stays in March, down from 19.2 per cent a year earlier. President  Trump’s recent comments about Montenegro give Russia 28

a new platform to destabilise NATO’s newest member. In the worst case scenario, Mr Trump’s words might reflect President  Putin’s own views, raising serious concerns that the two presidents came to an understanding about Montenegro during the twohour secret meeting. "I would like to make it clear to all: [the Russian Federation] will continue to actively defend the rights of Russians, our compatriots abroad, using the entire range of available means — from political and economic to operations under international humanitarian law and the right of self-defence," President Vladimir Putin said in his remarks to Russian ambassadors and permanent representatives in July 2014. But Mr Putin’s vows had been put in practice much earlier. In 2008, Russia invaded NATO applicant Georgia and still occupies part of the country to this day. Earlier in 2014, the Russian Federation had annexed Crimea and occupied eastern Ukraine in response to the Ukrainian revolution of 2014 and the EU’s invitation to Ukraine to join it. Since then, Moscow has engaged in hundreds of near-miss provocations of NATO forces in the air and at sea and has concluded that it can challenge Western interests with minimal response, so long as it doesn’t take the West on directly. How will the West react to its taking Montenegro with Mr Trump’s quasi-approval? •


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Adjara Group Adjara Group is a leading Georgian company in hospitality and lifestyle development. The company entered the Georgian hospitality sector by bringing the first international hotel franchise Holiday InnÂŽ to the local market. It soon gained worldwide recognition for its trend-setting establishments and entrepreneurial projects by founding the independent lifestyle hotel brand Rooms Hotels, which quickly emerged as the premier leader of distinctive hospitality experiences in Tbilisi and Kazbegi. The hip Fabrika, also created by Adjara Group, is a youth-oriented, communal-vibe, design hostel bringing new energy to the capital of Tbilisi. The company is soon opening a local luxury hotel Stamba which has already become an esteemed member of Design Hotels and presents many unique features including an exceptional style casino Aviator

www.adjaragroup.com


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Vilnius airport, first port of call for most investors heading to Lithuania. The country heads our ranking of Investment Promotion Agencies, but as we reveal on pages 32-35, even emerging Europe’s best performers need to up their game.


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S T O R Y

Emerging Europe’s IPAs need to improve Invest Lithuania, emerging Europe’s best investment promotion agency (IPA), scored just 65.55 out of a possible 100 in a major new report looking at IPA performance across the region. Invest Lithuania’s winning score shows how much more work needs to be done to serve foreign investors better. Collaboration will be key.

2018

INVESTMENT PROMOTION REPORT

Craig Turp and Shakhil Shah

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he emerging Europe region today consists of 23 countries, including a total population of 200 million and a nominal GDP of over 2  trillion  US  dollars. Most of these economies offer very business friendly environments — 3/4 of them are in the top 50of the World Bank’s Doing Business report for 2018, and inbound foreign direct investment (FDI) amounted to almost 44  billion  US  dollars according to the United Nations Conference on Trade and Development: World Investment Report 2018. “When emerging Europe politicians travel abroad they always have the same message: our country is open for business,” said Emerging Europe’s head of content strategy and publishing Andrew  Wrobel, presenting the Investment Promotion Report at the inaugural edition of the Emerging Europe Awards, held during the summer at the headquarters of the European Bank for Reconstruction and Development (EBRD) in London. “Unfortunately, our research has shown that the reality is somewhat different to the political message,” said Mr Wrobel. “While we are happy to recognise the achievement of this year’s highest-rated IPAs — including Invest Lithuania, which did very well at communications but worse at en-

quiry handling — all countries in the region need to do much more.” No response Emerging Europe’s research looked primarily at how IPAs communicate and handle enquiries. In a number of cases, contacting an IPA as a potential investor proved impossible. Under half — 48 per  cent — responded to enquiries, usually offering generic information. Not one offered to set up a meeting with their UK representative. The website is often the fi rst aspect of an IPA that is seen, therefore it is shocking that often the website is neglected, updates are only made to downloadable content and not the site itself and quite often sector contacts are not provided. The communications component of the research was carried out in February and March 2018, where the vast majority of macroeconomic data for 2017 was available. Yet only 13 per cent of IPAs had data not older than 12  months. Only 26 per cent of them had relevant information about key sectors. Not a single agency provided such information about the labour market and available talent. The emerging Europe region is constantly talking about talent, and how people in the region are extremely 32

Comparing IPA performance, recognising best practice and analysing shortfalls in attracting FDI across 23 emerging Europe countries 1

qualified to suit any job out there. Based on the fi ndings there seems to be some disconnect between what the IPAs are promoting and whether or not they are implementing the same practices in house. The entire region boasts about the fact that the talent is linguistically adept, however only 22 per  cent of the English version of IPA websites had few or no mistakes, like wise 13  per  cent with regards to the newsletter and zero per cent with regards to social media. “Talent, then talent, then talent,” said Olga  Grygier-Siddons, CEO of PwC CEE, during a high-level roundtable discussion which followed Mr  Wrobel’s presentation, featuring senior business and political leaders, heads of IPAs and diplomats. There was general agreement that more needed to be done to promote investment in emerging Europe.


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Photo: The business district of Vilnius

“IPAs are not making public the fact that there is so much talent in our countries. We are missing a trick. Investors only know about this wealth of talent from anecdotes, from companies which have already invested in the region. Central and Eastern Europe should stick together. We have something to offer on the global stage,” she added. No suprises “I am not surprised by the results of the investment promotion agency survey,” said Gunter  Verheugen, the former European  Commissioner for Enlargement, who did much to ensure that ten emerging European countries became EU members. “The survey is important because

benchmarking is key to improvement. We need to make sure that we exchange information regarding best practices. Let’s learn together and concentrate on such exchanges.” Another of the region’s business heavyweights, Peter Stračar, the CEO of GE Europe, believes that emerging Europe is at a crucial stage and that it needs to make sure it attracts the right kind of investors. “We are at a crossroads,” he said. “Job creation is no longer a priority. Some areas of the region have almost no unemployment. Attracting investors is now about creating value-added jobs. How do we do this?” Mr  Stračar believes that IPAs should be more prepared to look outside of their home markets. 33

“They need to take a look at what they can do for their target markets,” he said. “They need to ask themselves: What is our value proposition? Why should firms do business in our country? They need to remember that they are competing: with China, with India, with Western Europe.” Focus on service “Let’s focus on service,” said Daniel Bilak, CEO of Ukraine Invest. “We need to identify the right people to staff IPAs. Sometimes IPAs are competing with the private sector for talent. We need to get people on board who are enthusiastic about promoting investment in their countries and who are ready to do it as a labour of love.”


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Mr Bilak also agreed that there should be more sharing of best practice. “I would love to see what has been successful, with less focus on what has been done poorly. But overall this is the first time I’ve seen anything that’s tried to take a general and holistic view of IPA evolution. This private sector approach is extremely important.” Encouragingly, this year’s leading IPA, Invest  Lithuania, has taken the findings of the IPA report and is already in the process of implementing some key changes. “We have learnt that we need to foster better cooperation between IPAs in the region,” said Arturas  Rtiščev, Invest  Lithuania’s head of business development in the UK. “Investment promotion is extremely important. IPAs are publicly funded government institutions, they have a duty to deliver on behalf of the people who fund them to do so. Constant restructuring of agencies must not be a priority. We need to focus on servicing clients instead.” Armen  Avak  Avakian of Business Armenia also said that his own organisation was undergoing restructuring. “These findings are useful,” he said. “They offer plenty of food for thought for the development of our agency moving forward. Everything needs to be put in the cultural context.” Mr Avakian also believes that sharing experience is vital. “It is very important,” he said, “I have only been doing this for a year, so I am relatively new to the game. But I have been meeting a lot of IPAs, talking to them, and there are two things worth mentioning. Number one is that it’s important to talk and 34


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share experiences because you always want to know that you are not alone. For example, the struggle between digital and analogue is the same for everyone. Every single IPA has the same problems that they deal with in different ways. The second thing is actually sharing solutions; and the services that we provided. We don’t want to reinvent the wheel; if mistakes have been made, and surely, they have, we don’t want to repeat them. Smart people learn from their mistakes; wise people learn from others’ mistakes.” Tanya Koicheva, minister plenipotentiary economic and commercial at the Embassy of Bulgaria in London also feels that more progress could be made by combining forces. “My experience is that if we promote Emerging Europe as a brand then we can go further. We can take the brand to Silicon  Valley. We can take it global.” The Emerging  Europe  Alliance, which announced the appointment of its first senior executives during the Emerging  Europe  Awards, could be just the vehicle to achieve that. “The CEE region brings together a rich talent pool of highly educated, multilingual resources, combined with an innovative and service orientated culture, making it an attractive BPO destination. I’m proud to be part of a group that is truly passionate about making a difference, and together we will contribute to unlocking the region’s full potential,” said Paula  Kennedy  Garcia, VP of EMEA markets at Convergys, and a member of the alliance’s steering group. •

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Emerging Europe on film Be a movie set on Mars or on the island of Manhattan, there is no better place than central and eastern Europe to start shooting. Thanks to financial incentives, qualified people and wonderful landscapes, the CEE region is rapidly turning into a European Hollywood. Claudia Patricolo

Tax incentives

“The filming here was amazing. We couldn’t find a place like the Prague waterfront - which we’re using as a stand-in for part of Oslo - anywhere,” said Norwegian producer Espen Horn, commenting the upcoming Norwegian-Swedish-Czech co-production Amundsen. “We had a choice of several locations, including Hungary or Lithuania, basically under very similar conditions. But we chose Prague, and we are very happy we did,” he added.

One of the main reasons to shoot a movie in eastern Europe are the cheap costs involved, as well as tax incentives, which act as huge accelerators for foreign productions. “The Lithuanian Film Tax Incentive came into effect in January 2014 as a new policy measure to foster local and foreign film production in the country,” Dovilė Butnoriūtė, head of the Department of Film Promotion, Information and Heritage at the Lithuanian Film Centre, tells Emerging Europe. “It offers an opportunity to save up to 20  per  cent of the film production budget through a private investment scheme. Since its introduction there has been a rapid growth in the number of foreign film productions.” “The strength and growth of the Hungarian film industry relies on multiple factors, each of which strengthen each other and together create a business environment and culture, which today are ideal for international filmmaking”, explains Daniel  Kresmery, head of production and development at Korda Studios, the second biggest studios in Europe after London. “First and foremost, Hungary has a long history and tradition of filmmaking, dating back to the late 1800s. Secondly, Hungary has a reputable and trusted (i.e. “bankable”) Film Rebate system, which is one of the strongest in Europe. Thirdly, there are multiple experienced, hardworking crews with top-level international filmmaking experience. And last, but not least, the infrastructure is here - for example a world-class Film Studio like Korda Stu36

dios,” he tells Emerging Europe. “Hungary was put on the filmmaking map for cost-saving reasons, and still to this day remains competitive (although there are much cheaper options further East), but it is a combination of all of the above, which in turn allow for first-rate films to be produced in Hungary, that makes Hungary such an attractive filmmaking hub.” Georgia is also a unique location due to its strategic position between Europe and Asia. And the different climate zones make the country an attractive destination for the film industry. The country also has a unique architecture which has been influenced by both eastern and western cultures but also retains its own distinct features. There are ancient buildings and constructions built as far back as the 3rd or 4th century BC: they include fortresses, shrines, houses, cave cities and churches. “In one day it is possible to shoot in snowy mountains, the desert or the seaside”, David  Vashadze, Film  Commissioner at the Georgian National Film Center tells Emerging Europe. “But we understood that merely being home to unique locations is not enough, and we decided to bring a financial incentive, which many countries are using to attract foreign productions. At the moment, Georgia really has the most financially useful and at the same time easy accessible cursory bank system.” Georgia in fact offers a 20 per cent cash rebate on qualified expenses incurred in the country. An additional rebate of up to five per cent is available if a production promotes Georgia as a destination.


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An old tradition

A successful present

Although central and eastern Europe is has only recently begun to emerge on the international film-making scene, many countries have a long and important tradition of film-making. In many places however, propaganda trumped art. Film-making in Lithuania dates back to 1897, but it took almost half a century to become the form of entertainment it is today, and it was only really in the 1960s that a true Lithuanian cinema was born. Students and young generations started to shoot films in order to tell the truth about post-war life. According to Linas Vildziunas, a film critic and president of the Lithuanian Chamber of Film Critic, in the 1960s the typical characteristics of Lithuanian cinema emerged: slow and thoughtful narrative, poetic metaphors and evocative plasticity of monochrome. In 2018 Georgia celebrates 110 years of film making: the first production appeared in 1908. “In the early 1920s, many directors were producing anti-Soviet films, the reason that some of them didn’t have the chance to make another movie. After the collapse of the Soviet Union, there were of course economic problems that also affected the film business so there were not many productions during the 1990s,” says Mr Vashadze. “After 2001 we changed our financing system. Before then it was the government funding movies. Now trends and markets are different and most of the films are shot together with European productions and European funding. It is always hard to shoot mainstream blockbusters in Georgia, because it is a small country, but some Georgian movies have been distributed abroad, such as Tangerines, which was distributed in 25 countries, or My Happy Family, acquired by Netflix,” he adds.

Hungary won an Oscar in 2015 for best foreign language film, Son of Saul, which follows a day-and-a-half in the life of Saul  Ausländer, a Hungarian member of the Sonderkommando at Auschwitz during World War II. And in only three years, Budapest has attracted more and more US directors. To quote only the latest examples: Red Sparrow, the spy thriller with Jennifer  Lawrence takes place in Budapest; Blade Runner 2049, sequel of the 1982 movie and directed by Ridley  Scott, starring Ryan  Gosling and Harrison Ford was filmed at the Korda  Studios; the Tura  castle, only 30 minutes away from the Hungarian capital is the set of the fantasy movie Fallen. “A lot of historical and fantasy movies come to Hungary, partly because of the locations (Budapest is very beautiful, versatile, and film-friendly), and partly because of the set construction. Hungarian set construction is topnotch, and most of the big productions that choose Hungary have large set builds. Recently, Sci-Fi movies have also begun to prefer Hungary, for the same reason,” Mr Keresmery adds. “Budapest is amazing because it can double for various cities. It has been shot as Paris, Berlin, Munich, New  York, Buenos  Aires and Vienna – to name just a few. We recently just coproduced a 13  episode season for a North  American television series, shot almost entirely in Budapest. Each episode takes place in a different city or region, including Boston, Montreal, Toronto, Vienna, Berlin and Paris Each of these we managed to recreate in Budapest.” On the other hand, Lithuania recreated Russia during the Napoleon’s military campaign in the 2016 BBC series War and Peace. It also pretended to be Belarus during the Nazi occupation in the war movie The Defiance. 37

“Being in Lithuania has restored my faith in film making”, commented The Defiance producer Pieter Jan Brugge. Orlando  Bloom is the latest actor who travelled to eastern Europe to shoot a movie. The series Carnival  Row from the American companies Amazon  Studios and Legendary Television about a detective suspected of murder was among the most costly productions ever filmed in the Czech Republic. American producer Gideon  Amir has nothing but praise for the Czech team: “The Czech Republic has a fantastic film base. As for artistic craftmanship, there is no assignment that Czech filmmakers cannot manage. For anything – literally whatever you want from them – they always have an ingenious solution.” •


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Europe’s new blue banana When it comes to the logistics sector, the CEE region is rapidly turning into the main hub of industrial demand. Claudia Patricolo

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he share of real estate investors targeting European logistics has more than doubled from 27 per cent in 2012 to 59 per cent in 2016, and while Eurostat foresees an increase of 36 per cent across the EU by 2050, the CEE markets will see some of the largest growth with Poland (54  per  cent) and Czech Republic (46 per cent) well above the average. “Clearly, the region is in an extremely good position of Europe both for the two most growing sectors, e-commerce and production”, says Robert  Dobrzycki, CEO of Panattoni Europe, tells Emerging Europe. According to Martin  Polák, managing director and regional head for the CEE region at Prologis, 2017 saw investment volumes into central and eastern Europe logistics/real estate reach a record level of around 13 billion euros. “Underpinning the growth in CEE is solid region-wide economic growth and the accompanying rise in consumption, wages and employment levels,” he tells Emerging Europe. “Driving developments in CEE is the rapid growth of e-commerce, creating greater demand for warehouse space.” For Agnieszka  Haik, business development director at Raben  Group, despite the unstable environment logistics operators have been clamping down cooperation year by year, offering a growing range of services with a modern technology and significant capacity. “The logistics sector in eastern Europe is a relatively young market. What was common in the western market in

the early 2000s, has in CEE only just begun to appear, such as the full outsourcing of logistics services,” she tells Emerging Europe. “For example, in Poland, there are currently 13.4 million  sq  m of modern warehouses on the market modern, 22 per cent more than in 2016.” Also driving this growth are the relatively cheap costs in CEE, which have attracted companies such as Amazon (Slovakia) and Alibaba (Poland). “It is obvious that the costs of human labour and the cost of warehouse space are still driving the development of logistics in CEE. Estimated hourly labour costs in 2017 for the EU-28 is 26 euros (in Denmark it’s 42 euros, France 36  euros, Germany 35  euros) because it is significantly undervalued by central European markets. Labour costs per hour in the Czech  Republic and Slovakia are around 11 euros and for Poland, Hungary, Latvia, nearly 10 euros, while in Romania the cost is just 7 euros,” she continues. Infrastructures and labour shortage: an inverse relationship Western Europe still accounts for more than 90 per cent of contract logistics activity with Germany dominating as central and eastern Europe is witnessing major challenges due to a lack of infrastructure and labour shortages. “The stable condition of the developed western economies, particularly Germany, which is the main trading partner of most countries in the region, translates into an increase in export production. In turn, constantly accelerating economies and export 38

development have a significant impact on decreasing unemployment,” explains Łukasz Michałowski, international distribution development manager at Raben Logistics Poland. “Infrastructure has improved a lot in recent years, especially in Poland and in the Czech  Republic,” Panattoni’s Mr Dobrzycki adds.


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are located in the Czech Republic and Poland. Both countries, together with Hungary and increasingly Slovakia operate across pan-European networks. Raben Groups’ Mr  Michałowski and Prologis’  Mr  Polak also point out the importance of high-density populated areas. “If we analyse the attractiveness of a particular place in terms of internal and retail consumption, then the obvious criterion will be access to the most populated areas - where there are a lot of consumers,” Mr Michałowski says. Prologis plans to launch three new investments in Poland’s key logistics markets, increasing its presence in the busy and very attractive Warsaw area with the expansion of Prologis Park Janki, building a third park in the Poznan region and creating our first park in the Lodz region of Central Poland.

“Poland and the Czech Republic are very well positioned, strategically close to western countries. The closer to western Europe the better; but it is also facing labour challenges,” he says. “The further east you go the worse the infrastructure gets, but labour skills are better. Infrastructure of course is opening more eastern locations. Hungary has always been a good market, well located but recent political challenges are affecting it. People in fact, not only look at strategic positions but also the political situation.” Taking the CEE nations as a whole, committed future investment in transport infrastructure projects is expected to amount to a further 54 billion euros, considerably more than any other part of Europe, an M&G Real Estate report claims. This investment will both improve the overall logistics performance of CEE markets and support increased demand for logistics space, leading to stronger rental growth in core hub locations which benefit from these structural improvements. “The challenges vary from country to country. There is, for example, a shortage of larger plots in the Czech Republic. And if they are available, then they are limited by the land use plans allowing only small-scale development. We should not forget that each country has different processes for obtaining a building permit: sometimes takes a while, sometimes it does not,” Mr Polak continues. According to Raben’s  Mr  Michałowski, despite the dynamic development of recent years, the road and rail network, as well as the port infrastructure, are still at a worse development level than in the “old EU.” “The next challenge is the shortage of labour. In the economies of the CEE countries, this is a relatively recent concept. For logistics, the biggest challenge in the coming years will be the shortage of professional drivers,” he continues.

“The greenest office buildings are mainly those occupied by the IT industry, which finds it very challenging to keep employees in Croatia,” Mrs Škevin tells Emerging Europe. Until now there have been few certified green buildings in Croatia as many offices are leftovers from the days of socialism, design according to the architectural standards of the day, but today often poorly maintained and in less than prime condition. “We have a few projects under construction which are going to have a green building certificate,” Mrs Škevin continues. “Inter  IKEA is developing a Designer Outlet Centre near Zagreb, while GTC is building the Matrix  Office Park in Zagreb which is going to be the first LEED  Gold certificated project in Croatia. We are very happy that the big real estate commercial projects in Croatia are realising they need to be green, a sign that awareness regarding sustainability is increasingly part of the real estate industry.”

Where to invest?

What millenials want

According to Colliers international, the main logistics hubs of the region

With continuous improvements to accessible and affordable technology,

The new logistics era: e-commerce

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it is becoming increasingly easier to search and purchase goods and services online. “In the past, production and real estate were the factors driving CEE but they were serving western European markets. E-commerce is now in the same position both in domestic and foreign markets. Poland and the Czech Republic mainly export to the west, but now Brexit will also affect the industry and confidence in CEE might benefit from it. If companies cannot be located in the UK, they will need to be on the continent and CEE is the current preferred location,” Mr Dobrzycki comments. “E-commerce is growing rapidly with a concurrent rise in consumer expectations towards the almost instantaneous delivery of goods and is having a radical impact on logistics real estate. Manufacturers and retailers are searching for locations near large population and consumption centres, as close to the final consumer as possible. We see that e-commerce really intensifies the focus on distribution centre location strategy,” adds Mr Polas. Prologis has done in-depth research into the current and future role of logistics real estate in these constantly evolving supply chains, according to which the rise of e-commerce is pulling supply chains closer to consumers, driving up demand for more costly logistics space, for example nearer urban centres. But it can also represent a challenge as in order to respond to the growing needs of consumers, the logistics industry must ensure the speedy of delivery of shipments, the possibility of their easy return, as well as offer the option of international shipments. “As e-commerce requires support from information technologies it puts pressure on the rapid development of such technology in the logistics industry. There is an industry expectation and demand to expand functionalities so far used only in e-commerce. Logistics will be under pressure to enable B2B purchases on line,” Mr  Michałowski concludes. •


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Reasons to invest in Croatia Croatia’s appearance in the World Cup final in July boosted the country’s image like never before. Even before the final, the Croatian tourist board announced it had observed a 250 per cent increase in website visits from across the world. Zdenko Lucić, managing director of the Croatian Agency for Investments and Competitiveness (AIK), spoke to Andrew Wrobel about what the country can offer investors, not only tourists. Andrew Wrobel

Andrew Wrobel (AW): In June 2018, Emerging Europe published the Investment Promotion Report 2018. During the roundtable discussion following the presentation of the findings, Olga Grygier-Siddons, ex-CEO of PwC in Central and Eastern Europe, said that competition for investment is global, not regional, and the region has to first get the attention of global investors and only later think which country fits best. How do you see that? Zdenko Lucić (ZL): One of the initial things that the investor is looking for is a safe business environment. This is a prerequisite not only for the country that he/she chooses but also for the wider region. Therefore, it is in every country’s interest to work together with other countries on making the wider region more desirable, which in turn has direct consequences on the country’s brand and image. So, regardless of the fact that the countries within the region may also be competing among themselves, they also have to make a lot of effort to jointly increase awareness of the region. AW: During that same discussion we talked about the changing role of an investment promotion agency in emerging Europe. Previously, 10-20 years ago, it was more about creating jobs, now it’s more about creating innovation. Has the role of the Agency changed over the years? ZL: Our agency is rather young; it has only existed for six years. However,

that doesn’t mean that we do not strive to continuously improve existing services and develop new ones. What we in the agency aim to do is to build the best framework to attract investments that will not only create new jobs but also foster innovation. That’s why we are continuously working on improving services within the agency. We are also working closely with the regional development agencies and other local partners in order to maximise their impact on attracting new investments in their region. In the past six years, the agency proved itself as a central point of contact for investors in Croatia and our role has strengthened over that time. AW: How does AIK assist foreign investors? ZL: First of all, within the agency we are making sure that all investors feel safe and comfortable when investing and doing business in Croatia. Our team is dedicated to providing every investor with a transparent and thorough service through a ‘tailor-made’ approach from the beginning to the final completion of their investment in our country. We are guiding them through every phase of their investment project in order to ensure that they benefit from our full and professional services, which are free of charge. AW: You travel the world to raise awareness about opportunities in Croatia. Which sectors are you promoting? 40

ZL: Lately, sectors which generate the biggest interest and have the highest growth potential are definitely IT, engineering, electronics, manufacturing, metal processing, production of plastic parts and components, pharmaceuticals and automotive. Great examples of recent investments in the ICT sector in Croatia are IBM’s Client Innovation Centre in Zagreb which was opened last year; Constellation Software’s acquisition of one of the largest IT companies in Croatia – IN2; and the opening of the Infosys development centre. Also, other multinational companies, like Ericsson, are constantly expanding their research and development facilities in Croatia. Other sectors are thriving as well, such as pharmaceutical production and research and development in the pharmaceutical sector, which are developing quickly and attracting hundreds of millions of euros. For example, Hospira, one of the biggest pharmaceutical and medical device companies and a member of the Pfizer Group, has a huge production site in Croatia that is grow-


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Zdenko Lucic. Photo by Marko Lukuni

ing constantly. Likewise, Teva Group Company — Pliva, Galapagos, and Xelia Pharmaceuticals are also investing a lot in Croatia and they are still expanding. These are all knowledge-based, hitech investments. AW: What are the most frequent questions and comments about Croatia you get from investors who have never been in the country? How do you address them? ZL: I guess the most frequent reaction I get from the investors is a surprise. A positive surprise! You see, when they come here and see the investment sites, look at the numbers, talk to the possible workers…they realise that not just being a great tourist destination, as it is perceived, Croatia is also

great for business. This claim is confirmed by the 33 billion euros worth of inward FDI we have seen over the past few years and by over 15,000 foreign companies already working in Croatia, including IBM, Siemens, Ericsson, Rolls-Royce, Teva, Pfizer and Porsche.. AW: That is why we are continuously working on raising awareness, promoting all the advantages which Croatia has to offer so that one day investors will be surprised if somebody is not considering Croatia as an investment destination. ZL:I mentioned the Investment Promotion Report 2018, where we discussed the most common shortfalls as well as best practices. The report iden41

tifies several examples of best practice that AIK could share. How important is it for investment promotion agencies across the region to share their experience and learn from one another? Enhancement of investment promotion and exchange of information and expertise through closer cooperation between our countries is a must and something that we are continuously doing. That’s why we have signed a memorandum of understanding with many of them in order to put our cooperation on a higher level. That means that not only are we helping their companies to set up their business in Croatia but also organise some joint events which are always followed by the exchange of information, best practices and promotion of businesses of both countries. •


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MADE IN

Emerging Europe Fibaro When it comes to smart homes, Poland’s FIBARO is no stranger to the world. FIBARO offers one of the most advanced wireless smart home systems currently around and is already available in over 100 countries spanning six continents. “Eight years ago, I decided to create a home that gives comfort and a sense of security to its residents. A home that is with you everywhere. With the app you have on your phone, you always know what’s going on. What’s more,

you can easily control it,” says Maciej Fiedler, Fibaro’s CEO. The company offers a wide range of products, from sensors and intercoms to remotes and gateways. One of their flagship products, the Motion Sensors, do more than just detect movement: they work well with smart devices to notify you of changes in temperature, offering the possibility to control lighting in the house via their mobile app or, for Apple users, via the Apple HomeKit.

Altersocks Altersocks, a Georgian StartUp established in 2016, is the first Georgian brand to offer consumers colourful socks in a range which now comprises 80 original designs. The company has more than ten branches around the country, in Tbilisi, Kutaisi and Batumi, and their socks highlight Georgian traditions, culture and symbols in its designs. It is therefore no surprise that visitors to Georgia love the socks and have become one of the biggest buyers of them, along with young locals. Since 2017, the company has been exporting the socks to Germany, Spain, the Baltic States and even the US market. Altersocks hopes to conquer Asia next. 42


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Dronamics Deeper Deeper is a Lithuanian designer and producer of smart electronic devices for sports and outdoor activities. Deeper first made a name for themselves back in 2016 when their Deeper Smart Sonar Plus won the Innovation Award for best Wireless Handset Accessory at CES 2016. Recognised as one of the most successful young hightech company in Lithuania, Deeper’s passion for innovation, and commitment to finding the optimum solutions for its customers, has also led to it receiving an award for Lithuania’s Most Successful High-Tech Company. The Deeper Smart Sonar is the world’s first GPS wireless fish finder compatible with both iOS and Android. Not only does the product scan the water, consumers can even build their own database of fishing spots with maps through the application, which can be used on multiple devices. In addition to the wireless connectivity, Deeper have developed a full range of accessories to add to your sonar, so that you an fish in many different conditions. •

Dronamics is an aerospace startup developing a new type of cargo airplane - unmanned and extremely fuel efficient - for use in emerging markets. Founded by two Bulgarian brothers, Konstantin and Svilen Rangelov, the company aims to enable denser and better optimised domestic networks in emerging markets. The brothers have developed the Black Swan, a cargo unmanned aerial system (UAS)

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that can transport 350 kg of cargo 2500 km at less than half the cost of traditional cargo aircraft. Able to fly autonomously, the Black  Swan can be monitored and managed remotely via satellite and is capable of taking off and landing from very small and unpaved airstrips. The company plans to build a full-scale prototype by 2019 and start operating mass-produced aircraft in 2020 as a service.


Outlook on Serbia


Business is booming in Serbia, and new office buildings abound throughout the country as growth in a number of industries – not least ICT – drives a real estate boom. Not yet an EU member, the largest country in the Western Balkans did move a step closer to membership this year, although a deal with Kosovo would appear to be further away than ever. One thing is for certain, however: Serbia is a country which now looks definitively west.


OUTLOOK ON SERBIA

Serbia’s growing potential as an FDI destination Overlooked for some time in favour of its neighbours who can already boast EU membership, Serbia’s star as an FDI location is rising. Yoan Stanev looks at the factors driving foreign investment. Yoan Stanev

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erbia is establishing itself as a market attracting an increasing number of foreign direct investments (FDI). According to data from the National Bank of Serbia, the gross inflow of FDI has been rising since 2014, and 2017 has seen a peak of 2.5 billion euros in FDI – an increase from just under 2.1  billion  euros in 2016. The Minister of Economy Goran Knežević stated that the increase in investment is the result of the country’s improved business climate. Despite not being a member of the EU and being on the receiving end of external political pressure to resolve its dispute with the authorities over the border in Priština, as well as additional pressure to orientate its foreign policy interests towards either the EU or the Kremlin, Serbia experienced a GDP growth rate of 1.87 per cent in 2017, according to World Bank data. The German-Serbian Chamber of Commerce (AHK Serbia) belongs to the network of German foreign trade and industrial chambers with 130  offices in 90  countries. Emerging Europe spoke to Martin Knapp, Executive Member of the Board of Directors of AHK Serbia. He praised the Serbian leadership, stating it “made a clear commitment to the country’s accession to the EU and is working consistently towards this goal,” therefore supporting the mission of AHK in maintaining strong business relations between Ger-

many and Serbia. Serbia’s willingness to convergence with EU norms was echoed by Rastko Petaković, a senior partner specialising in M&A, competition law and business regulation at the Karanović & Nikolić law firm that advises investors. Mr.  Petaković stated: “On its path towards the EU, [Serbia] is implementing policies and regulations aimed at closer aligning its framework to that of the EU. With low inflation rates, stable GDP growth, and low business costs, it is full of opportunities for foreign investors considering market entry.” Corruption It is no surprise that corruption is an issue that affects the entire Balkan peninsula and is a factor that hinders further FDI in the region. The EU’s Western Balkan Strategy published in February 2018 recognises corruption as a problem that continues to hinder the strengthening of the rule of law, and the region’s path towards EU accession. The problem of corruption is not unique to Serbia, as echoed by the organisations Emerging Europe spoke to. Mr. Petaković emphasised that there are no “Serbia-specific legal or bureaucratic hurdles and corruption.” He added that the state seeks to make the climate more competitive for investment by reducing regulatory barriers and pointed towards the World Bank’s Doing business survey as evidence of 46

this. The survey places Serbia 43rd out of 190 countries for Ease of Doing Business. Nonetheless, more corruption-related barriers still need to be overcome: the EU strategy states that “the negotiating frameworks for Montenegro and for Serbia [for their EU accession] place particular emphasis on the need for rule of law reforms to be addressed early in the negotiations” and that the EU ought to make greater use of the leverage it has in the accession process. A general presumption of corruption Martin Knapp points out that, although corruption is often mentioned in relation to South-eastern Europe, concrete examples are hardly ever given, making it much harder to understand the problem. He, too, emphasises that the problem of corruption is not unique to the Balkans: “There is also something like a ‘general presumption of corruption’. Many people in south eastern Europe imagine that almost everyone but themselves is corrupt,” he adds. This has undoubtedly hindered the effectives of the state administration and bureaucracy, as “civil servants frequently don’t have the courage to openly support an investment proposal, even if they believe that it would be good for the country.” TMF Services, an Amsterdambased multinational professional ser-


OUTLOOK ON SERBIA

vices firm that provides accounting, tax, HR and payroll services to businesses operating on an international scale, has stated that Serbia has made the process of starting a business significantly easier. Thanks to government reforms, it takes less than 12 days to form a new corporate entity. However, bureaucracy remains an issue: TMF state that “trading across borders is both a costly and bureaucratic process, taking almost two weeks to both import and export goods. It costs 1,455 US dollars to export containers and requires seven documents to be prepared, in contrast to 1,660 US dollars to import and seven documents.” At a conference in Perth, Australia, earlier this year, Andrew Latham, head of Rio Tinto Ventures - an Anglo-Australian multinational metals and mining corporation - praised the Serbian investment climate. He stated that Serbia offers “a strong combination of attractive investment characteristics”, due to the established democratic process supportive of foreign investment. Regarding the mining industry, “Serbia is a very favourable place to be,” he adds. “The country offers a skilled and productive labour force and costs remain competitive.” Road and rail infrastructure is widespread, but will need upgrading to meet the needs of Rio Tinto’s mining project in Jadar – a unique deposit near the town of Loznica. It contains jadarite – a new lithium sodium borosilicate mineral and Jadar is the only place in the world where this mineral can be found. EU prospects Serbia’s EU prospects are undoubtedly a factor contributing to foreign business interests in the country. EU membership will offer Serbia the world’s largest market and is already the destination for two thirds of Serbian exports. Andrew  Latham adds that the EU is also expected to

be “the second largest market worldwide for electric vehicles and we are seeing increasing interest from European auto makers to gain a secure feed of battery materials.” Mr. Petaković of Karanović & Nikolić recognises Serbia’s candidate status as an advantage over EU members in the region, namely Slovenia and Croatia. He states that Serbia is exempted “from what investors see as the strictness of EU laws, yet it affords them a sufficient measure of legal security to invest in this market.” However, brain drain is an ongoing problem affecting all of emerging Europe, and Serbia is no exception. EU membership may affect foreign businesses’ access to talent in Serbia, as an increasing number of young and qualified professionals will seek employment in EU member states with a higher standard of living. When asked about the issues surrounding businesses’ access to talent, Mr.  Knapp of AKH Serbia emphasised their commitment to dual vocational training – a system used in Europe’s German-speaking countries which combines apprenticeships in a company and vocational education at a vocational school in one course. “The Serbian Government has understood how important this issue is. Since November, we have a law intro47

ducing dual vocational training”, adds Mr. Knapp. “Such things as the Vocational Training Act show in particular, how consistently the government is working to improve the environment for local and foreign investors.” And it seems this law will contribute to the already promising situation of Serbian talent: “There is an abundance of talent in Serbia, and this is evidenced in the recent investments in R&D facilities by some of the largest multinationals, such as Microsoft and Continental,” says Mr. Petaković. The investments in staff training that companies in Serbia have made, especially tech-heaving businesses, has delivered high returns in terms of innovation and productivity. Despite positive trends in FDI in Serbia, the country still has undoubtedly a lot to do. There are concerns regarding the rule of law and state bureaucracy affecting the potential of Serbia’s economic growth. The issue of Kosovo may not be of direct interest to many investors, especially those who have praised Serbia’s business climate, but should Belgrade and Priština reach a workable agreement, the former will be one giant step closer to EU membership, which will increase the country’s market potential even more, and thus attract more businesses. •


OUTLOOK ON SERBIA

Serbia’s economy looks positive, but problems remain Stephen Ndegwa, the World Bank’s country manager for Serbia, and Peter Tabak, lead regional economist at the European Bank for Reconstruction and Development (EBRD) spoke to Andrew Wrobel, about the challenges the Serbian economy is facing and the opportunities it offers. Andrew Wrobel

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fter enjoying positive yet modest growth of 1.9 per  cent in 2017, the Serbian economy is expected to increase by 3.4 per cent in 2018 and by 3.2 per cent in 2019. According to Focus Economics, data for Q2 2018 shows a solid economic performance with the domestic economy expected to be the main engine of growth this year and next. This on the back of declining unemployment, rising wages and sizeable FDI inflows. Multiple challenges, however, remain. “The first quarter of this year was exceptionally strong, with 4.6 per cent growth, driven mainly by strong investment growth, but it remains to be seen if the performance can be repeated throughout the rest of the year,” says the EBRD’s Peter  Tabak. “Medium-term growth prospects depend on the implementation of structural reforms. An acceleration of medium-term growth would need further business environment reforms and restructuring or privatisation of poorly performing state-owned enterprises, as well as further non-performing loans (NPL) resolution and progress with corporate over-indebtedness.” Working on efficiency The World Bank’s Stephen Ndegwa agrees that regaining the momentum in resolving inefficient and costly stateowned enterprises (SOEs) is key. “Despite progress in recent years,

SOEs retain an important role, and impose significant cost,” he says. “They employ over 200,000 people and are the largest companies in many sectors of the economy, for example, in energy, mining, rail and road transport, insurance, telecommunications, construction, etc. The outsized presence of SOEs deters private investment, innovation and competitiveness. Furthermore, SOEs pose substantial fiscal risks. Although we have seen recent decline, expenditures supporting SOEs are large.” Over the past three years the government has spent more than two billion euros on propping up the SOEs — this includes direct subsidies, soft loans and payment of activated guarantees on loans. “The partnership between Serbia and the World Bank has been good for quite some time. Working together we made strides in reforming many areas, which ultimately helped macroeconomic stabilisation. Some of the reforms were politically and socially very challenging, for example, in an excellent cooperation with Serbian authorities and with our financial support a good part of the SOE legacy was resolved, though some tough cookies – such as Petrohemija, MSK, RTB Bor, Resavica mines – still remain an issue impacting public finances,” Mr Ndegwa adds. “Reducing these expenditures would free up significant public resources for more productive use, and resolving legacy SOEs, either through privatisation or bankruptcies, would open up important sectors of the 48


OUTLOOK ON SERBIA

economy to more investment,” he says. The EBRD’s Mr Tabak says that the private sector in Serbia accounts for around 70 per cent of total employment. “While small-scale privatisations have mostly been completed, some large companies remain publicly owned and operate with low efficiency and high cost. Our analysis shows that Serbia’s state-owned enterprises are among the least efficient and least profitable among their peers in central and south eastern Europe, barely breaking even on average. They might also receive explicit or implicit subsidies from public sources, for example, being allowed not to pay taxes or utility bills. Improving the efficiency of these enterprises or their privatisation could reduce strains on public finances and improve the quality of services. Last but not least, it would create a more level playing field where some public companies in the same sector do not get privileged treatment compared to other private ones,” he adds. Empowering the private sector In the meantime, smaller companies in Serbia face a number of issues, including the challenging business environment, competition from the grey economy, high para-fiscal (i.e. non-tax) charges and access to finance, while medium-sized and large companies often lack appropriate corporate governance and are frequently over-indebted, which limits their access to finance and thus their investment capacity. “While low wages make Serbia cost competitive in sectors such as manufacturing and construction, this is not desirable and sustainable in the long run. Serbia should invest more in education and training of its people – its most important asset. Long-term competitiveness also requires further 49


OUTLOOK ON SERBIA Peter Tabak. Photo: EBRD

improvement of the business environment, including a stronger focus on enhanced corporate governance in public and private enterprises, more efficient judicial processes, better quality public services, inclusive employment and education that better matches business needs. Our Investment Climate and Governance Initiative is aimed at tackling many of these issues, including governance in state-owned enterprises and public procurement practices,” Mr Tabak tells Emerging Europe. The EBRD’s lead regional economist believes that although there are some foreign and locally-owned companies that operate as efficiently as those in western Europe, the majority of Serbian companies are significantly less productive, with value added per employee five times lower than the EU average. “Our latest diagnostic paper shows that more inclusive labour practices (for example involving more young

people at an early stage through training and internship programmes) and better governance (both in the public and private sectors) would support productivity the most. Higher-quality infrastructure, improved energy efficiency and a more stable macroeconomic environment would also be important contributors,” he says. Corruption still a big issue Serbia’s EU prospects are undoIn the World Bank's Doing Business Report 2018, Serbia ranked 43rd, four notches higher than in 2017. When we look at individual elements it seems that starting a business is relatively easy. Getting electricity, paying taxes, protecting minority inversions and enforcing contracts are still problematic. “In terms of the business environment, Serbia has made excellent progress in some areas over the past few 50

years,” Mr Ndegwa says. “However, surveys suggest that rule of law remains a key issue. For instance, according to the World Bank Doing Business survey, on the indicator related to Enforcing Contracts, the distance to frontier is 61.4 per cent, well below the regional average. It takes 635 days to enforce a contract in Serbia, and the cost reaches 41 per cent of the claim value. Similarly, the World Justice Report’s Rule of Law Index shows Serbia as a negative outlier in the region, with especially weak rankings for ‘Constraints on Government Powers’, ‘Absence of Corruption’ and ‘Criminal  Justice’. It is often the SMEs that struggle most with cumbersome and expensive court and administrative procedures and addressing these should now be top priorities for growth to flourish,” he adds. According to Transparency International’s Corruption Perception Index, Serbia is ranked 77th among 180 countries worldwide. “Among Serbia’s Western  Balkans peers only Montenegro is rated higher,” Mr  Tabak says. “However, there is no room for complacency: in the past two years Serbia has dropped six places and it remains the only Western  Balkans country on the Financial  Action  Task Force black list — high risk and other monitored jurisdictions — identified as having strategic deficiencies related to anti-money laundering and combating the financing of terrorism,” he adds. Mr  Ndegwa notices another challenge — despite neighbouring the European Union, the country is not fully benefiting from its location. “Serbia has a fairly well-educated labour force and is competitive in terms of costs. However, despite these advantages, until recently its exports underperformed,” he says. “In other successful middle-income economies exports were driving economic activity. Happily, recently, we are seeing a similar trend in Serbia’s economy, as exports in some segments of the economy are growing strongly. We observe this across the sectors, and it is two groups of companies that are at the forefront of this trend – companies es-


OUTLOOK ON SERBIA Stephen Ndegwa. Photo: World Bank

tablished through green-field foreign direct investment (FDI) and domestic de-novo SMEs. This presents a tremendous opportunity that the government can further strengthen by enhancing stability and predictability of the business environment.” The role of FDI According to the UNCTAD World Investment Report, in 2017, Serbia attracted FDI worth 2.87 billion US dollars, 22 per cent more than in 2016. “Over the last several years Serbia has been very successful in attracting foreign direct investment (FDI). It is among the top ranked countries in Europe in terms of FDI jobs created per capita. Yet companies established through FDI are almost fully reliant on foreign suppliers. There seems to be significant untapped opportunities in linking local SMEs to FDI companies through targeted SME upgrading programs, so that foreign investors use more local inputs beside labour,” Mr Ndegwa says. He believes there are important opportunities in the ecosystem of innovative entrepreneurs, including in IT, digital and creative industries. “This sector is growing strongly, but the momentum could be lost due to constrained supply of IT, managerial, and creative skills; and lack of financing for innovative early-stage and growthstage enterprises,” Mr Ndegwa adds. He feels that the EU accession process can help enhance the efficiency of the public sector in many ways: improving the legal and regulatory environment through the gradual adoption of EU regulations, strong incentives for further reforms, raising the attractiveness of Serbia as an investment destination and the opening of EU markets for Serbian exporters. The World Bank is supporting Serbia in creating a competitive and inclusive market economy and, through this, to achieve integration into the EU. “We have been engaged in supporting the government’s ambitious reform

programme for several years now and through a series of budget support loans have helped tackle one of the highest country’s priorities: stateowned enterprise reform, public utilities in the transport sector and electric power, and reform of public expenditures. Our 1.8 billion US dollar portfolio of 13 projects addresses a range of different needs in areas of transport, real estate management, health, early childhood education, business environment, competitiveness, financial sector, and job creation, and disaster risk management and insurance,” Mr Ndegwa says. A light at the end of the tunnel? The EBRD’s current portfolio of projects in Serbia is worth 2.2  billion euros. Since the beginning of its involvement, the bank has been engaged in 220  projects worth over 4.8  bil51

lion euros. In March, the EBRD published a new strategy for Serbia. “The EBRD country strategy for Serbia identifies priority areas where the EBRD aims to provide crucial support with its investments and engagement: private sector, financial sector and public utilities in infrastructure and energy. We have concluded several projects and have more in the pipeline and we will aim to deliver as much as possible in the coming months,” Mr Tabak says. “Serbia continues to be politically stable, focused on making progress on its path to EU accession path, and bold when strong reforms must be made. I believe this is something that helps attract investment. In the coming years, Serbia has the opportunity to be even more ambitious in its goals, bolder in its reforms, and transform into one of the most competitive economies in the region as it prepares to enter the EU,” he adds. •


OUTLOOK ON SERBIA

Serbian energy: A windy attempt to reach a renewables target Serbia needs to do much more in order for its energy market to reach the standards required by the European Union. Better use of renewables is just the beginning. Yoan Stanev

Wind them up

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ostly reliant on domestic production for its energy needs, Serbia generates 70 per cent of its electricity from coal, with the remaining 30  per  cent being provided mainly by hydropower. The national power utility EPS (Elektroprivreda Srbije – Power Industry of Serbia) dominates the country’s electricity market – it owns all the large generation capacities and supplies most consumers – 95 per cent of all electricity is supplied by EPS. In its Secretariat’s Implementation Report for 2017, the Energy Community, an international organisation which brings together the European Union and its neighbours to create an integrated

pan-European energy market, states: “Serbia is generally doing well in transposing the Energy Community acquis, but with modest progress during this reporting period. The Energy Law and the adopted secondary legislation constitute a largely compliant legal framework.” Yet, the report highlights that implementation is lagging behind, in particular with regard to the unbundling of the transmission system operators, EMS (state-owned Elektromreža Srbije; Electricity Network of Serbia) in electricity and Yugorosgas Transport and Srbijagas in natural gas, which has led to an increase in infringement cases. Furthermore, the report adds that Serbia must also facilitate the implementation of agreements it has signed with Kosovo. 52

Despite Serbia’s dependence on coal, the country is seeking to boost its renewable energy production, the bulk of which comes from wind power. According to Euractiv Serbia, 2018 will be a crucial year for the country’s energy sector as 250 megawatts from renewable sources are to be connected to the grid, followed by the same amount in 2019. As of May 2018, wind power construction has been revitalised. In its energy strategy implementation plan, Serbia has committed to bring online more than 500  MW of wind power by the end of 2020. The Čibuk wind farm is the largest not only in Serbia, but in the entire Western Balkans to date: it is a 300-million-euro project of 57  wind turbines supplied by General Electric and will cover an area of about 40 km 2 . The windfarm has a capacity of 158 MW and is expected to provide electricity to around 113,000 homes, while reducing CO2 emissions by more than 370,000  tonnes. Čibuk is developed by a consortium that includes UAE-based renewable energy company Masdar, Finnish financial group Taaleri and German development finance institution DEG, part of Kf W Group. The development of the wind farm will be funded by a 215 million-euro loan provided by the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC).


OUTLOOK ON SERBIA

Kf W, a German government-owned development bank, and the European Investment Bank (EIB) initiated the Green for Growth Fund (GGF) in 2009, which is providing direct financial support for Čibuk. GGF’s website states that the Fund’s mission is, in the form of a public private partnership, “to contribute to enhancing energy efficiency and fostering renewable energies in South-eastern Europe.” GFF has since increased the total financing it has provided to final borrowers to over 600 million euros across more than 25,000 individual projects. Mohamed Al Ramahi, CEO of Masdar, added: “At Masdar, we are proud to be able to contribute our expertise and experience to the diversification of Serbia’s energy mix, working alongside our joint-venture partners. This project highlights the attractiveness of the Serbian market for renewable energy investment and has the potential to be a hub for additional projects in the region.” The EBRD is providing a loan of 107.7  million  euros, 55  million  euros of which is syndicated to Erste Bank, GGF, UniCredit and Banca Intesa under an A/B loan structure. In parallel, the World Bank’s IFC is providing 107.7  million  euros, partially through its Managed Co-Lending Portfolio Programme and partially through syndicated B loans. Harry Boyd-Carpenter, EBRD director of power and energy utilities, stated: “The Čibuk wind farm is a breakthrough for Serbia as the country works to meet its commitment to produce 27 per cent of domestic power needs from renewable energy sources by 2020. The EBRD has worked closely with the government to develop and refine the regulatory framework for the sector and these efforts have now unlocked job-generating foreign investment and the first wave of renewable-energy projects.”

Achievable targets When it comes to renewable energGFF is also providing direct financial support for the Alibunar wind farm, as well as indirect support for the Malibunar wind farm, to assist the country in achieving the 27 per cent target. The Malibunar wind farm is the first project to be commissioned under the GGF framework. It has been operational since September 2017 and it is an 8 MW project comprised of four wind turbines. The larger 42  MW Alibunar wind farm is made up of 21  turbines and is in the final stages of construction. Earlier this year in April, German wind turbine manufacturer Senvion completed the installation of the 14th  turbine at Alibunar and the wind farm is expected to produce enough energy to power around 27,600  households on average  per  year. Senvion entered the Serbian market with the installation of Malibunar wind farm in 2017. Belgian renewable energy producer Elicio  NV, the developer of the Alibunar and Malibunar wind farm projects, has been present in Serbia since 2010, when the legal framework for the renewable energy sector was established. The Košava wind farm is yet another renewable energy project in Serbia.

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Serbian renewable energy company MK Fintel  Wind, a joint venture between MK  Group and the Italian Fintel Energia Group, started the construction of the wind farm back in June 2017 near the town of Vršac, near the border with Romania. It is estimated to be completed by the end of 2018 and cost a total of 124  million  euros. In addition, Danish wind turbine producer Vestas is to deliver 20 turbines for the 69 MW wind farm, which is expected to supply electricity to approximately 40,000 households. Only the first  half of 2018 has passed, yet Serbia has already seen increasing interest in its wind energy potential. Coal production may continue to be a vital source of energy, but Serbia is taking steps to adapt its infrastructure towards renewable energy. And the government has been broadly supportive. How quickly Serbia is doing all this is a different question. In an article written for Emerging Europe, Sir Suma Chakrabarti, President of the EBRD, states: “Today, climate change is perhaps the number one global challenge” and that, “although green finance is on the increase, we, including emerging Europe and Serbia, must do more and quicker.” •


OUTLOOK ON SERBIA

Serbian Manufacturing: Steady, solid growth Juliette Bretan

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erbia Serbia is continuing to grow its manufacturing capabilities, developing new strategies and opportunities in the sector, particularly through collaboration with other nations. Despite a decrease in manufacturing output, down to 168.7 billion  Serbian  Dinar in the first quarter of 2018 from 176.1 billion in the fourth quarter of 2017, year-on-year figures actually saw an increase of 1 per cent in April  2018 over the same month in 2017, and efforts are being made to improve output. Concerns over worker inactivity remain high, though unemployment is decreasing and many international companies, particularly in the automotive industry, are committed to continuing production in Serbia. The editor of Macroeconomic Analysis and Trends (MAT) magazine, Ivan  Nikolic, said earlier this year that the slow growth of manufacture in Serbia was offset by significant advances (of 21.6  per  cent) in the production of the electric power industry, resulting in overall industrial production growth, following slow production last year. Serbia’s strengths continue to lie in construction, with the central export being automobiles, though imports have been growing this year. Germany First Germany is the central foreign trader with Serbia, and German companies currently have plans to

build two manufacturing facilities in the country. The German company ZF, which is an international leader in driveline, chassis and safety technology, will open a factory in the industrial region of Pancevo, employing 1000 people. Michael  Hankel, a member of the ZF management board, said: “the demand for our electric motors and all-electric drives develops dynamically. Since vehicles with hybrid and all-electric drives are set to become more established in the future, we are adapting our worldwide production network to cope with the rise in demand.” Vorwerk Autotec will also construct a plant in Serbia, at Cacak. The German cable and harnessing manufacturer Leoni, which has already invested 75  million euros into Serbia, is set to open a fourth plant in the country, as well as a production unit in Nis with a workforce of 1250  employees, making it the largest employer in the country. The UK is set to see its third major investment in Serbia with the creation of a new factory in Ruma by engine components maker Albon. French car parts constructor Le Belier opened a new aluminium casting unit in Kikinda, northern Serbia, in June, investing 7.5  million  euros into the project. Their new factory will join its already-existing plant in Kikinda, which has been operating since 2003. Meanwhile, Italian firm Plastikcam East has opened a factory for thermoplastic processing in Subotica, following an investment of 54

3 million euros in the development. The June 2018 Conference on The Industry 4.0 Model for Advanced Manufacturing in Belgrade involved leading world experts who discussed innovative manufacturing techniques whilst acknowledging limitations, promoting cyber technology advancement in the region. Indeed, the IT and engineering sector in Serbia is reporting constant growth, which suggests it to be a promising area of manufacture. Around 50,000  people are employed in the field of IT in Serbia, with the average salary at 1,433  euros, with information suggesting the industry is exceeding corn export rates. Reports show employees use half of resources opposed to the average in all industries, though generate six times higher profit. Canada is deeply involved with the Serbian IT industry, as well as with agriculture, agri-food, pharmaceuticals and light manufacture. IT and technological development is bolstered by its inclusion in university curriculums, particular in Novi Sad, which is aiming to become the IT hub for the entire Western Balkans. The Ministry of Education, Science and Technological Development has also promoted technical and technological programs, encouraging industry growth. The Arab Connection Serbian-Arabic collaboration continues to be steady, with military arms and chip manufacturing being exported,


OUTLOOK ON SERBIA

and agricultural and banking investment coming into Serbia. Air Serbia, however, is facing difficulties following Etihad Airways acquisition of 49 per  cent of its shares in 2014: Etihad is considering cancelling the purchase of new aircaft, or potentially altering orders for up to 160  aircraft ordered in 2013. Boeing and Airbus are preparing for disruption as Etihad works to promote sustainable operations following recent financial difficulties. Air Serbia is continuing to perform successfully, though there are suggestions that Etihad may leave the partnership. In May, Belgrade hosted the 62nd Fair of Technology and Technical Achievement which promoted new technologies and developments, showcasing 600  exhibitors from over 30  nations. Minister without portfolio in charge of innovations Nenad Popović suggested the number of exhibitors demonstrates a growing importance of industry in Serbia, as "technological development based on innovative capacities is beginning to spark positive changes in Serbia's economy." Mr Popović also remarked that the technological capacities of Serbia’s industrial sector are advancing, along with improved digitization to strengthen manufacture, in order to move Serbia closer to the Industry 4.0 idea. Renewables Serbia is also focusing on increasing its renewable energy output, with plans to generate 27 per cent of its energy consumption from renewables by 2020. The country currently uses coal for 70  per  cent of its energy, though The Green for Growth Fund, promoting energy efficiency in Eastern

and Southern Europe, the Middle East and North Africa, said in June that it would provide 32 million euros financing for the first large-scale wind farms in the nation, to kick-start renewable development. The farms are to be constructed 50  kilometres north-east of Belgrade, and funding of 215  million  euros has already been promised from The European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC). Construction of the 57  turbines is a joint enterprise between Abu Dhabibased renewable-energy developer Masdar, and US-based wind energy developer Cibuk Wind Holding. The farm will have capacity to supply 113,000  households. Green for Growth Fund chairman Christopher Knowles said: “We are proud to support the growth of the renewable energy sector in Serbia at its inception.” Serbian state-run copper mining and smelting company RTB Bor said 55

the company's copper concentrate output expanded by 20 per  cent to 4,336  tonnes in May  2018, which is the largest monthly production figure in the last 20  years. It also explained it had increased the production of copper ore by 32 per cent every year to 3.67  million  tonnes in May. It has also been reported that Serbia’s cement industry could play a vital role in environmental protection, with co-processing methods encouraged to seek safer and more controlled strategies. Waste management currently remains poor in the nation, though efforts are being made to collaborate between institutions to attain a national system. Serbia has also recently begun drafting a new industrial policy to close Chapter 20 of pre-accession negotiations with the EU, and is promoting collaboration with universities and scientific institutes to remain a key player in the industrial market. •


OUTLOOK ON SERBIA

Serbia’s growing ICT scene Serbia has become an ICT powerhouse. Both state and private business are playing their part in driving this success. Shakhil Shah

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ilan Šolaja, CEO, Vojvodina ICT Cluster (VOICT), writes in the forward of the report ICT in Serbia – At a Glance 2018: “You journalists should pay more attention to what is going on. Everyone is writing about the Serbian export of raspberries as a huge national success, and nobody knows that we export more software than raspberries.” Mr  Šolaja said this to a journalist at the DanubeIT Conference in Novi Sad early in 2011. The ICT sector in Serbia is constantly growing and has recently seen double digit growth, and in 2017 Serbia’s  ICT exports reached 900  million euros (21.5 per cent more than in 2016). The reason for Serbia’s success in the ICT sector has to do with a strong push from the government as well as various initiatives by private companies and non-profit organisations. In recent years the country has undergone a lot of development when it comes to IT and digitisation. According to the Serbian Prime Minister Ana  Brnabić, Serbia could become a leader when in e-services. “The government is on the right track on this issue,” she says. “When it comes to e-government, the first thing that had to be done was to transfer birth, death, marriage and citizenship registers into electronic format.” Serbia’s greatest potential At a press conference in April 2018, the Ms  Brnabić announced that: ”the  IT sector represents Serbia’s greatest potential, which in the first

two months of this year recorded a 34 per cent increase.” In addition, Ms  Brnabić outlined planned spending on IT for the next three years. “Over 65 million euros shall be spent to develop IT infrastructure in Serbia, with 70  million  euros being invested in projects which will enable all schools to be connected to high speed internet.” Ana Ilić, advisor to the prime minister for digital and creative industries, confirmed the government’s plans and even welcomes foreign investors to apply for tenders. “There are heavy ongoing government investments into innovation infrastructure and educational system. We are aiming to create a world-class business environment in Serbia, especially for knowledge-based industries. Private investments are an essential part of the innovation ecosystem we are creating, and they are most welcome,” says Ms Ilić. In spite of the advancements and the planned spending, the Serbian Statistics Office’s findings in its 2017 report on Usage of Information and Communications Technology in the Republic of Serbia 2017 indicate quite a disconnect from the ambitions of the government and businesses to how individuals and households make use of ICT services. Further education needed According to the WEF Global Competitiveness Index for 2017-2018, Serbia is ranked 64 of 137 countries in ICT use, and 62nd in mobile-cellular telephone subscriptions. 56

“Although we are in the better half of global economies, we still expect that our rank will significantly improve due to government investments. There is also some interesting anecdotal data, such as Serbia having one of the highest rates of Facebook accounts per capita in the world. There is also a significant divide between those in tech industries and those who are not, but the situation is improving every day,” adds Ms Ilić. Whilst most people are discussing the fact that ICT in Serbia is developing quickly, there seem to be concerns over the Serbian population’s digital skills. At the first meeting on June  28 of the Working Group for the Creation of the Proposal of Strategy of Digital Skills Development, Tatjana Matić, state secretary in the ministry of trade, tourism, and telecommunications stated: “in Serbia, 51  per  cent of people aged  15 and higher are computer illiterate, 34.2  per  cent of people are computer literate, while


OUTLOOK ON SERBIA

Usage of Information and Communications Technology in the Republic of Serbia 2017 Key findings Over 3.12 million  people use a computer everyday (an increase of about 50,000  people compared to 2016). Over 4.9 million people use a mobile phone.

Enterprises

14.8 per cent are partially computer literate.” The future “The fact that there are not many successful, venture-backed companies can be attributed to the lack of capital more than anything else, especially a couple of years ago,” adds Ms  Ilić. “The situation is improving each year though. In addition, many foreign companies have invested in offices and research and development centres in Serbia. Their presence has improved the whole ecosystem.” According to Switzerland Global Enterprise and their market analysis on Serbia, there are 35,000 or so ICT professionals in the country. However, Ms Ilić is sceptical about the data, suggesting that the figures do not provide an accurate overview of the sector, and adds that the numbers should be much higher. “It’s really hard to tell the exact

number due to the high level of freelancing and professionals working directly for foreign clients. Most ICT experts in Serbia have a STEM background that is traditionally strong in our country. It is also one of the main reasons for our success in this area. The Serbian growth rate in export of ICT services is over 30 per cent annually, and we expect it to accelerate further,” she says. The future, however, is bright for Serbian ICT. “With continuous improvements in the business and living environment in Serbia, we expect many ICT experts to return, and this is a trend we are already seeing. There is also a significant number of foreign ICT experts that came to Serbia to accelerate their professional career - or they just love living here, since Serbia offers a much better quality of life for those on ICT salary than many other countries,” concludes Ms Ilić. • 57

According to the survey, enterprises are still slow to exchange information regarding supply chain management with clients or suppliers, only 48.7 per  cent of enterprise do, which means that over 50 per cent do not. Around 42.4  per  cent of enterprises have a broadband connection of at least 10Mbit/s and not faster than 30Mbit/s, compared to only 29.1 per cent that have a broadband speed of 30Mbit/s but less than 100Mbit/s. In 2017 only 6.3  per  cent of enterprises felt a fixed internet connection did not suffice when it comes to running their business, whilst 93.7  per  cent of the companies surveyed found that a fixed internet connection is sufficient. However, the results also showed that 81.9 per cent of enterprises do in fact use mobile broadband internet connections (3G or 4G) on portable devices. Shockingly, the number of companies that have a website has gone down in comparison to 2016, although only by a fraction of a per cent: 80.4 per cent compared to 80.9 per cent in 2016. The use of cloud services is also still low when it comes to enterprises in Serbia, only 9.3 per cent of those surveyed pay for cloud services. The question here is what is the reason behind such a low turnout? Could it be due to distrust of cloud services, could it be cost related or simply a lack of knowledge when it comes to cloud services. *(The 2018 report will be published by the Serbian Statistics Office in September 2018)


OUTLOOK ON SERBIA

Serbia's automotive industry: Increasingly attractive More than 10 per cent of Serbian exports and around 14 per cent of the value of the country’s foreign investments are accounted for by the automotive industry. The sector employs more than 40,000 people, and is a crucial part of the country’s economy. Tamara Karelidze

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he history of Serbian automotive starts in the late 1930s, when there was considerable local interest to developing this particular field of industry, and Zastava, a local manufacturer of motor vehicles, produced its first automobile under license from Fiat. Thanks to high-quality production, Serbia later became a destination for Mercedes, Opel, Ford and other producers. However, the political situation in the 1990s and the break-up of Yugoslavia reduced production and foreign capital. The has changed since 2000, and by 2009 the automotive industry consisted of six manufacturing

motor vehicles companies and around 70 component suppliers. According to research carried out by the Chamber of Commerce and Industry of Serbia, the automotive is as today as it has ever been. The ease of doing business and flexible suggestions attract international capital to invest in the country. The research shows that around 60 companies from Europe, the US and Asia have already spent around two  billion  euros and have created about 30,000  jobs. One of the largest investors in Serbian automotive is Fiat, represented by FCA (Fiat Chrysler Automobile). The company produces over 100,000 vehicles per year and exports to the US and EU markets. Among production, the most popular field for foreign investments is engine component manufacturing, brake discs and drums. Since 2005 many companies have entered the Serbian market, and their investment has rapidly changed the sector’s turnover. Alongside foreign investment, the number of domestic companies active in the sector has also risen steadily. One of the reasons for the positive development is the excellent geographical location Serbia can boast, as well as good export conditions. The country benefits from free trade agreements with the EU and CEFTA (Central European Free Trade Agreement), convenient for every investor. That is to say that automotive has two main market destinations. One of them is the EU, a large market which Serbia has the flexibility to enter without customs 58

or other fees. The other market is the former Yugoslavia and Russia, which is Serbia’s fourth largest export destination: 31 per  cent of its automotive products are exported to Russia. It is worth mentioning that half of the companies operating in Serbia’s automotive industry are large in size, with medium enterprises accounting for around 38  per  cent, and only 14 per cent of the production being carried out by small business. Two-thirds of these companies have local owners. Among international investors, Slovenian companies are the most active, followed by Germany and France. Serbia pays significant attention to education in the automotive field, and the fast-growing nature of the sector means that there is massive interest from students as well. According to official information, around one-third of new professionals are graduates from technical universities (approximately 13,000  students). Besides higher education, Serbia has about 71 professional schools, suggesting different technical training and offering a different specialisation to the young people. Interest towards Serbia’s automotive industry is increasing rapidly. Among western countries, German companies are now showing considerable interest. Moreover, the government supports the development of the sector and is making doing business as easy as possible in order to attract as many investors as it can. Automotive is likely to remain a key sector of the Serbian economy for many years to come. •


OUTLOOK ON SERBIA

Serbian talent to the fore Serbia’s wealth of talent, not least in the IT field, makes it a prime location for investors. Some gaps in the labour market, and a mismatch of education and skills, remain, however. Yoan Stanev

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he Serbian labour market is generally characterised by low employment and activity rates, especially amongst women and young people. Emerging Europe got in touch with Nikola Milosavljević, operations director at Adecco  Serbia, who stated that, on the whole, the Serbian labour market has been experiencing slow but constant growth for the past few years. In general, there has been an observable skills mismatch, which applies not only to Serbia, but the entire Western Balkan region: the educational and professional training of the workforce has changed only marginally over recent years, but not enough to respond to the skills demanded of the Serbian economy. Mr  Milosavljević added that the automotive sector has been the most prominent sector experiencing constant growth. As such, Serbian employers are demanding more manual labour, but also skilled specialists in various fields, such as engineering, machining, quality and design. “The shortage of blue collar workers is almost an everyday hustle,” precisely due to the education and skills mismatch. Youth employment in Serbia has recently been experiencing a different kind of ‘skills mismatch.’ In a 2017 report by the Social Inclusion and Poverty Reduction Unit, a government agency established in 2009, young Serbians have been taking on jobs that they are overqualified for, especially young Serbian women. According to 2015 data, one in five young workers are overqualified and the figures for young women are more striking: whilst one in seven

young men are overeducated for their job, the figure for young women is one in four. This is mainly because of the ongoing gender imbalance and inequality in the labour market: on the whole, young women continue to find it harder to find employment, therefore they accept jobs below their competences and educational qualifications. Unemployment figures, however, vary across Serbia’s regions. This is something that new market entrants are not always taking advantage of. One of the biggest issues affecting the Serbian labour market is that new market entrants are starting their businesses in the areas with really low unemployment rates, according to Mr Milosavljević, therefore not utilising the abundance of potential labour elsewhere. Workforce availability and characteristics, among other significant factors, is known to be one of the distinctive factors in choosing the right location within the country. Manpower Group, a human resources corporation, provides a useful overview of the regional characteristics of Serbia’s labour market. For example, one of the most promising regions of Serbia for foreign investors is the eastern part of central Serbia. It is located on the E75 highway that runs through the entire country from north to south, connecting the cities of Kragujevac in central Serbia and Niš, the country’s third-largest city, in southern Serbia with the capital Belgrade. With its key geographical location, the region has the high potential to source candidates for managerial roles. A high unemployment rate of 40 per cent and youth unemployment remain troublesome 59

issues, but the region offers conditions favourable to potential investors. A decade after the global financial crisis, the unemployment rate stands at 14.8 per cent for the first quarter of 2018, according to the Statistical Office of the Republic of Serbia. The country can thus boast one of the lowest rates of unemployment in the Western Balkan region: Croatia’s unemployment rate stands at 9.6 per cent, Montenegro’s – 18.42, Macedonia’s at 21.6, Kosovo’s – 26.5 and Bosnia’s – 35.93. The country’s Labour, Employment, Veteran and Social Policy Minister Zoran Đorđević stated recently that: “Serbia is on the right path to keep the unemployment rate below 10 per cent.” •


OUTLOOK ON SERBIA

Treat claims about Russia’s influence in Serbia with caution James Ker-Lindsay

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ver the past couple of years, Russia’s role in the Western Balkans has been gaining ever more attention. While we know that Moscow is trying to extend its influence into a region that is prone to conflict and instability, it is also important to put these moves into their proper context. Truth be told, Russia’s influence is more limited than many suppose. Croatia, Albania and Montenegro are all NATO members. Macedonia has just received an invitation to join, subject to the recent name deal with Greece having been finalised. Kosovo is pro-Western to its core. In truth, the main areas of concern are Serbia, and Republika Srpska, the Bosnian Serb entity, which is in a position to shape Bosnian national policy on NATO. Many outsiders believe that Serbia is innately Russophile. In truth, much of Moscow’s influence really comes down to just one factor: Kosovo. In 2008, the former Serbian province unilaterally declared independence. Serbia relies on Moscow’s veto in the Security Council to prevent Kosovo from gaining UN membership, and thus general international acceptance and recognition. However, this support has come at a high price. It has given Russia a degree of influence over Serbia. It has used it to good effect to gain control over the energy sector. This has in turn caused a degree of resentment amongst Serbia’s political elite. Many believe that the Russians are exploiting the country. Unfortunately, there is little Belgrade can do. As long as Serbia opposes Kosovo’s independence, it will need Russia’s support.

Moscow has also been very clever at spotting other opportunities to extend its influence over the country. For example, in 2015, a resolution was presented to the Security Council to commemorate the genocide in the Bosnian town of Srebrenica. However, it was terribly drafted. Rather than focus on trying to prevent further atrocities, it concentrated on condemning Serbia. Belgrade therefore sought Moscow’s support to block the resolution. Russia duly obliged. Serbia now owed Russia another favour. As a result of all this, there is no doubt that many Serbs feel that Russia is now their closest ally. Indeed, surveys suggest that Serbs believe that Russia is the largest foreign aid donor to the country, when of course the EU holds that honour. But while many Serbs may feel an instinctive sympathy for Russia, it is not as ingrained as many might suspect. Few Serbs speak Russian or have ever been there. More importantly, most also know that Russia is not the future. In a much-publicised opinion poll in 2016, Serbs were roughly split on support for Russia and the EU. However, on the question of where they would like their children to live, the results were overwhelming: 70 per cent said the EU, versus just 17 per cent for Russia. This caution not to over-emphasise Russia’s influence in Serbia can also be illustrated in other ways. A personal favourite story concerns the opening of a cafe named after Vladimir  Putin in Novi  Sad, Serbia’s second city, in 2014. This received widespread media coverage, regionally and internationally. And yet it was a tiny place. 60

Interestingly, and wholly unreported in the media, was the fact that there was an upmarket restaurant just 100 metres away that was named after the great British statesman, Winston Churchill. Even better, two years later the Putin café was gone. In its place was a new café named after a character from Only Fools and Horses, a British comedy show that was extremely popular in Serbia. It is a small example that says a lot. The one area where there is perhaps greater cause for concern is Bosnia. In recent years, Milorad  Dodik, the president of Republika Srpska has been courting Russia as he makes worrying noises about pursuing independence. However, while Moscow may be happy to see some instability, it seems highly doubtful that it would want to provoke a full-scale crisis, let alone a unilateral declaration of independence. There is no doubt that Russia is trying to expand its presence in the Western  Balkans, especially over Serbia and in Bosnia. And in many ways, it has successfully managed to lever its advantages as best it can. However, it is also important to put this in its proper context. Most people in Serbia understand that the European Union is still their future. •

James Ker-Lindsay is Senior Visiting Fellow at LSEE-Research on South East Europe, London School of Economics and Political Science, and Research Associate at the Centre for International Studies, Oxford University. He is on Twitter @JamesKerLindsay


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OUTLOOK ON SERBIA

How to end the Serbia-Kosovo impasse? Jelena Milić

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he current format of negotiations on the normalisation of relations between Serbia and Kosovo under the auspices of the EU has come to a complete standstill. Additionally, Kosovo’s internal affairs are becoming increasingly complicated. This impasse is creating a series of political, security and political threats for Serbia, Kosovo and the Western Balkans, but also the EU and NATO and their member states. Five and a half years after the adoption of the Brussels Agreement on the principles governing the normalisation of relations between Serbia and Kosovo, five EU countries, of which are four are NATO members, still do not recognise Kosovo's independence. This stalemate impedes EU polices towards the region, which was painfully obvious during EU-Western Balkans summit in Sofia earlier this year. Unfortunately, almost 20 years after the war in Kosovo, almost no trials have been brought related to the more than 1500 Serbian civilian casualties. Serbia on the other hand has at least completed its obligations towards the International Criminal Tribunal for the former Yugoslavia (ICTY), although it also has a huge responsibility to continue prosecutions in domestic courts for remaining unpunished crimes. Oddly enough, Kosovo’s Prime Minister  Ramush Haradinaj has said that Serbia should recognise Kosovo and that Kosovo would then push for reconciliation, implying no further trials are necessary. The threats caused by this impasse, and Russia exploiting it for its goals of impeding the region’s consolidation and integration into the political struc-

tures of the West, include a decline in democratic standards, increased corruption and poor regional cooperation on security and defense. These are, however, considered far less than other options that would lead towards the formalisation of relations, including the adjustment of the administrative border which would allegedly cause a domino effect and trigger violence. But these arguments are not valid, as it is 2018, EUFOR is in Bosnia, KFOR is in Kosovo, and all the countries of the region are in the process of EU integration. Croatia, Albania and Montenegro are all NATO members, and Macedonia hopefully will be soon. It is a very good news that Admiral James Foggo, commander of US  Naval  Forces Europe, said during his recent visit to north Kosovo that KFOR is capable of providing security in case of any political agreement that may or may not cause some turmoil. None of this was the case ten years ago. International commentators and decision makers fail to understand that while the Serb authorities command strong political support in general, this is not necessarily extended to a solution that would immediately satisfy Kosovo and the West. Negotiations should be organised on the correction of the administrative border between Serbia and Kosovo, which would be traced more or less along the present four municipalities in the north of Kosovo (Northern Mitrovica, Leposavić, Zvečan and Zubin Potok), inhabited mainly by the Serbian population. This correction would immediately be followed by a comprehensive agreement on the normalisation of relations. Ideally, this should be agreed in a wider format that would include Albania, Macedonia, Montenegro, 62

Bosnia and Herzegovina, and Croatia, where Serbia’s border disputes with Bosnia and Herzegovina and Croatia would also be settled. This is not a proposal for the ethnic division of Kosovo because the majority of the Serbs live south of the line. Additionally, the municipalities of inner Serbia populated by Albanians should not be part of the deal. The current administrative line can be corrected – exchanged – to accommodate some strategic demands in locations that can be of political interest in the West. Those who formally oppose a correction of the administrative border, among them Kosovo’s Foreign Minister Behgjet Pacolli, claim that this would affect the status of Serbs south of the river Ibar. With this move the West would, with little risk and the possibility for huge gains, in effect put President  Aleksandar Vučić and the Serbian Government in a position where they can effectively show a genuine readiness to take Serbia along the path of European integration. This is all relevant to the strengthening of the rule of law and reducing the space for malign Russian influence. Progress in the normalisation of relations between Serbia and Kosovo would advance the cooperation among countries of the Western Balkans in the areas of security and defense, which is especially important in the light of new regional and global challenges and threats, from a potential new wave of refugees and migrants to the growing malign influence of Russia in the region. Any improvement in regional cooperation in these areas would lessen the effect of their eventual spillover to EU and NATO. • Jelena Milić is the director of the Centre for Euro-Atlantic Studies in Belgrade.


OUTLOOK ON SERBIA

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After Hours


Sand dunes on the Curonian Spit, Lithuania. Fabulously beaches, often deserted, as wellEuropean as ice coldcities waters Anonymous street art in downtown Bucharest, Romania.sandy An increasing number of emerging areawait now the intrepid bather on the Baltic Riviera. Klaipeda is the perfect base from which to explore the area, see pages 134-135. encouraging street art as a way of redefining urban landscapes. We report on the phenomenon on pages 70-71.


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ART

MUSICS Emerging Europe loses three of its finest musicians Yoan Stanev

Oliver Dragojević. Photo: Official Facebook page

Croatia’s musical legend Oliver Dragojević, whose career lasted 50 years, passed away at the age of 70, one year after his lung cancer was diagnosed. Dragojevic gained a huge following in the former Yugoslavia with his romantic hits sung in a specific Dalmatian dialect. Although highly popular in Serbia, he refused to stage concerts there after the bloodshed of the 1991-95  Croatian war for independence against the Serb-led Yugoslav army. His style blends traditional klapa melodies of Dalmatia, a coastal region in his native Croatia, with jazz motifs wrapped up in a modern production. He is one of the few Croatian musicians who has performed at major locations such as Carnegie Hall, Royal Albert Hall, L'Olympia and Sydney Opera House. When Oliver was five, his father Marko bought each of his sons a har-

Tomasz Stańko. Photo: Official website, author: Andrzej Tyszko

monica. Oliver mastered the instrument quickly, and entertained other kids on his street, as well as passengers on board of ships on the busy route from Vela Luka to Split. As Oliver showed a strong passion for music, his parents decided to enrol him in a music school in Split. There he learned to play the piano, clarinet and bass guitar. His first performance at the 14-year-old Split Festival with the song Baloni, and two years later he began to work professionally as a singer and keyboardist of the Split group Batali. Polish trumpeter and composer Tomasz Stańko passed away at the age of 76. Stańko was a key figure of Polish jazz in the 1960s and one of Europe's most original jazz musicians. Throughout his career he came to occupy a unique place on the world stage with his combinations of modern American jazz, a certain Slavic melancholy folk and contemporary-classical music, which has 66

developed into a characteristic sound. He has recorded around forty albums and composed music for several dozen films and the theatre. In recent years, Stańko often played in jazz clubs in New York, where he had a Manhattan apartment, and recorded with a band called New York Quartet. Stańko’s trumpet sound was characteristically deep, slowly exhaled and had a sometimes gruffly sombre, but readily punctured by sudden flaring ascents and explosive swing. His music hinted at early influences from Miles  Davies, Don  Cherry and even Chet Baker, but he had distilled those approaches into an initially fragile but expressive personal identity in his 20s and strengthened it steadily thereafter. He seemed simultaneously to be in command and at the mercy of the improvisational elements he had unleashed – the instincts of a bandleader raised in 1950s totalitarian Poland who once described his first contact with


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jazz to the New York  Times with the words: “The message was freedom.” Polish artist and singer Olga  Kora  Jackowska, died at the age of 67. Kora was the vocalist and the main songwriter of Manaam, one of the major rock bands to emerge in the 1980s and 1990s in Poland. She first became recognizable in late 1960s when she earned the unofficial title of ‘Queen of Kraków’s hippies’ – her distinctive personality made her stand out in the male-dominated hippy society. She married guitarist and leader of Manaam  Marek  Jackowski. Many Maanam songs became legendary in Poland, being enjoyed by generations of fans, leading Kora and the band to receive many major music awards in the country. Kora was a social activist and feminist, advocating for the legalisation of marijuana and the liberalisation of abortion law. She was involved in the Solidarity trade union and criticised the Catholic Church for its paedophilia issues, inter alia, recording Zabawa W Chowanego (Hide and Seek), based on her own experiences in the past. Kora Jackowska. Photo: Official Facebook page

FILM I Do Not Care If We Go Down in History as Barbarians Craig Turp

Radu Jude. Photo: Quantum Photos

Romanian director Radu Jude took the Crystal Globe for best film at this year’s Karlovy Vary Film Festival with his story of a fictional Romanian director who refuses to compromise with Holocaust deniers, Îmi este indiferent daca în istorie vom intra ca barbari (I Do Not Care If We Go Down in History as Barbarians). Ioana  Iacob plays Mariana, an idealistic theatre director who has landed a city-funded project to stage a re-enactment of the Romanian army’s efforts on the Eastern front during the Second World War. The film is the onset account of her own efforts to bring the project together while attempting to convince the man responsible for her getting the grant, a stooge named Movilã played by Alexandru  Dabija (a Jude regular), that the soldiers’ bravery should not be the centerpiece of the re-enactment, but rather the Odessa massacre, in which at least 30,000  Jews were killed by the regular Romanian army over a three day period in October  1941. (The film’s title is quoted from a speech apparently given just before the atrocities took place). 67

Jude has a history of making films which touch on the more sensitive parts of Romanian history and society. In 2016 he directed Inimi Cicatrizate (Scarred Hearts) a loose interpretation of a synonymous novel by Max  Blecher, who died at the tragically young age of  28 shortly after the book's publication. Set in a sanatorium in 1937, the film is a series of not always intertwined vignettes which are by turns tragic, funny, surreal and provoking, with more than the occasional moment of slapstick. Perhaps Jude’s best-known work however, and certainly most controversial, is 2015's Aferim! (for which Jude won best director at the Berlin Film Festival), a somewhat violent yet necessary and worthy film which dealt with the still taboo subject of slavery in 19th century Romania. Slavery was not abolished in Romania until 1856 a decade before the US did the same, I would add - yet there is no formal mention of it on the school curriculum. Much compared to 12  Years a Slave we are probably not giving too much away by telling you that there is no 12  Years a Slave-style happy ending: far from it, in fact.


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ARTIST Q&A

The Georgian MP who plays the guitar down the pub Tamara Karelidze

Photo: Tamar Mirianashvili

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he Tbilisi nightlife scene is currently one of the most talked about in all of Europe. It offers everything from huge mega-clubs to smaller live music venues, and is home to a number of good local rock bands, such as Vakis Park, which has been a fixture on the scene for some time. Nothing unusual there, until you learn that the band’s guitarist and songwriter, Zaza  Khutsishvili, has been a member of Georgia’s parliament since 2016. Despite his new status, he has not stopped playing music, and anyone can attend his live performances at the city’s various pubs.

Zaza Khutsishvili’s musical career started from the middle of the 1980s when rock and underground music began developing in Georgia, with students and young people forming bands and trying to recreate the music of Pink  Floyd, Led  Zeppelin, The  Doors and other rock giants. Access to western music, until then limited in the Soviet Union, gave many young people new motivation to change things. “As a child, I didn’t like music school and playing classical pieces, which were boring for me,” Zaza Khutsishvili tells Emerging Europe. “Later, I discovered The Beatles and Led Zeppelin and everything changed. At that time, 68

several rock-bands in Tbilisi played the songs from the 1970s, and I decided to join in. Then in 1996, I created Vakis Park, which became very popular, and during the 22 years of its existence, the band has released six albums. Alas, it was impossible to live simply by playing music in Georgia. But the band has survived, and we still play in pubs and have a significant audience.” Zaza  Khutsishvili remembers that his decision to become an MP was somewhat spontaneous. In 2016, when Vakis  Park was celebrating its 20th anniversary with a tour around the country, the then prime minister Giorgi  Kvirikashvili suggested he might


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Photos: Tamar Mirianashvili

want to take part in the upcoming general election. After two days’ consideration, he accepted. “I am over 50 now so I thought that it was time to take responsibility,” he says. “Being a member of parliament is a tremendous honour. However, I was ready for the criticism I knew I would face. People know me as a musician, and they had no idea that I was also running small businesses, or that I had several political shows on the radio. There is still plenty of criticism, but I always listen and take it into account. If it is constructive.” Khutsishvili feel that being an MP is a responsibility which needs real life experience and the ability to create something important for the country. For him, the primary issue for being an MP is to have a high sense of responsibility, and to pay attention to criticism. During the negotiation process that preceded Khutsishvili agreeing to candidate to become a member of the parliament, one of the essential conditions he put in place was that he be allowed to continue his work as a musician. According to him, there was significant support from the prime minister and other members of the ruling Georgian Dream party. They often attend his concerts. Khutsishvili also says that the members of the band were supportive of his decision. Being an MP without a politician’s background has its pros and cons. There are always more critics than supporters, who consider that an individual without political experience cannot change a lot in politics. Moreover, parliament has different protocols on how to communicate with the media, delegations, the public or civil sector and so on. “Being a politician is not comfortable. We have a lot of duties and are under significant pressure from society.

Meeting with people, attending sessions and different events, working on different pieces of legislation is part of the daily routine of an MP. The main thing is to believe in what you do,” Khutsishvili says. Today, the songwriter is a deputy head of the environmental protection and natural resources committee in the Georgian  Parliament. He loves hunting and works a lot to improve legislation in that particular area, which is not currently compatible with EU policies and regulations. He has been criticised for his love of hunting, but feels that being a hunter means following all the rules and not acting as a poacher. “We have to change a lot in Georgian legislation to meet the requirements the EU has set down as part of the association agreement,” he says. “I am currently working on hunting regulations because they need to improve a lot. The situation in our forests is terrible because during the 1990s poachers were not controlled, and they could kill animals and birds without any fear of punishment. We are working to change this now and improve the situation in our forests. I would like to stress the environmental impact assessment, which we already adopted, and we are now working on the Forest  Code, which is crucial to preserve and care for the country’s natural resources.” As to whether or not his new status as an  MP has reflected on the popularity of Vakis Park, Zaza Khutsishvili believes that the impact has not been significant, because the band was always a favourite and commanded a big audience. “However, there are a lot of  MPs who attend our shows. Not everyone knows that I am still playing with my band because I have noticed the surprised look on the faces of some people in pubs when they see me on stage.” • 69


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Transforming cultural memory through art Juliette Bretan looks at how art is being increasingly cleverly used across emerging Europe in order to provide new a new series of cultural reference points Juliette Bretan

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ollowing years of political and economic turmoil, the countries in emerging Europe are discovering new ways of stamping their mark on contemporary culture through artistic production and development. Theirs is an art which often utilises tradition in modern contexts, enabling a new defi nition of art to be created – one where boundaries can be pushed, time can be broken down, and the public can be involved. Alongside the present tensions between artistic involvement with Western Europe and a more independent creation, this new art touches on issues of politics, social cohesion and accessibility; bringing art to the fore of what it means to be Central and Eastern European. It is in the spontaneity of street art that such relations are most evident; with the crumbling walls of old towns across the region now screaming in a colour and vibrancy which stretches its influence into almost all national fields. In Warsaw’s stereotypically decrepit Praga district, a new vitality is creeping down every capillary, with side-streets culminating in explosions of street art which sprawl across 19th century tenement housing. Praga was the largest area of Warsaw to escape catastrophic damage in World War II, and despite a reputation for downtrodden living, it is now seen as the heart of Warsaw’s new cosmopolitan feel, where ancient and modern interact on its very walls. Mińska 12 used to be home to

Castle, an overflowing, Kafk aesque mural of a monochrome palace by Sheffield-based artist Phlegm. The windows of the building were encased within the intricate picture, and the art was a favourite of visitors until the building was demolished last year. But its origins came from the Street Art Doping Festival, an annual opportunity which has run for the last five  years and encourages street artists to revitalise traditional and bland areas of Warsaw. Another famed result of this Festival, still on the city’s walls, is Dziura on Mackiewicza 1; an optical illusion of a gaping hole, created by German artist 1010. At the time, he explained that: "For as long as I remember, I was attracted by holes; for me it is a synonym of carefree childhood and a permanent discovery of everything… The hole gave me the opportunity to leave the periphery and get in.” For Budapest, street art echoes political developments and cultural history, with celebrations of Polish-Hungarian friendship meeting references to recent cataclysmic social events. Notable here are the pieces dedicated to the memory of the Revolution of 1956 during which residents of Budapest resisted Soviet domination. In 1957, Time  Magazine named the universal Hungarian  Freedom  Fighter as their Man of the Year – which was why, for the 60th  Anniversary in 2017, a copy of the magazine’s cover sprung up on Wesselényi Street. A Banksy-like mural of Prime Minister Viktor Orbán riding 70

a Thomas the  Tank  Engine train also appeared in Budapest recently, evoking consideration of international responses to the politician’s increasingly rightwing, traditionalist agenda. In Sibiu, Romania, however, the focus is on the future – with the Sibiu International  Street  Art  Festival aiming to rejuvenate the grey concrete of the city. Under this year’s hashtag, #canyoufeel?, the Festival inspired both art installations and performance, encouraging a modern take on city life. But, as seen in Poland, street art is most noted for its ephemerality - it is this revelation of the transience of cultural norm which seems most prevalent in Central and Eastern European art. The Bucharest International Street Theatre Festival is preparing for its tenth anniversary, with over 400  international artists expected to attend. Also performed will be a reimagination of one of Romania’s best-known fairy tales, Harap Alp, in the fi rst large-scale Romanian reinterpretation of the story. In Ljubljana, Slovenia, meanwhile, The Ana Desetnica International Street Theatre Festival aims to showcase trends on contemporary theatre whilst opening up public space. Like with street art, the city is the stage – though fragile and fluctuating, the Festival unites tradition and contemporary with residents and visitors to advertise a new approach to Slovenian life. The Festival has now permeated to more than 200  venues throughout Slovenia with nearly 1,000 staged performances, and at least


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Photo: Street art in Plovdiv Old Town

5,000 street artists from 40 countries of the world. Like in Poland, the emphasis is on what international and home artists can bring to the transformation of a nation is paramount. Yet in Ukraine a palpable art meets society – blacksmith Viktor Mikhalev aims to use the shards of ammunition from Russian separatist and Ukrainian government forces to create sculptures, whilst Izolyatsia, a non-profit and non-governmental platform for modern culture, raises questions of identity and nationality. Though countries across Central and Eastern  Europe face such concerns, it is in war-torn Ukraine that issues of belongings are felt most violently – Izolyatsia relocated from the besieged Donetsk to Kiev, and now promotes education alongside cultural projects, with an urge to explore all facets of identity. Head Curator Kateryna Filyuk explained that: “Due to its background Izolyatsia as an art institution focuses on social problems facing modern society and strives to lead significant change and take action.” She added that they were “interested in multidisciplinary projects by Ukrainian and international artists tackling questions of identity, politics

of memory, hybrid wars, crawling borders and migration.” “With that being said this year our exhibition program, for instance, covered environmental issue, there is a project being realized together with the KyivPride on the LGBTI community visibility in Ukraine. Long-term projects like Donbass Studies and Soviet Mosaics in Ukraine, run by Izolyatsia, contribute to the research of effects of current war in eastern Ukraine and recent Soviet past respectively. “In this respect it could be said that the institution relates to general trends practicing both introspection and local-oriented approach as well as zooming out and looking at the problems on the global scale. Th is allows for collaboration and productive dialogue with other actors be it art institutions, NGOs or individuals contributing to the development of democracy in Ukraine.” Filyuk also pointed out that, despite some general trends in artistic production in the region, “the connections and networks between the cultural actors in the region still remain very weak and situational.” This is especially the case in Ukraine, where the move towards celebrating 71

Ukrainian artists instead of Russian, and employing modern takes on traditional Ukrainian culture, reflects wider attempts to rebuild a new national character – with the renowned Dakh Theatre the epitome. Formed 25  years ago, the Dakh  Theatre has now taken on issues impacting modern Ukrainians, with a focus on the new theatrical generation. Bulgaria is also transforming cultural memory through art – the stout mausoleum in Sofia which once held the body of the country’s fi rst Communist leader is set to be transformed into an underground contemporary art museum, to continue the expansion of the collection held by the National Art Gallery opposite. A design competition is to be held to determine the new gallery’s look – reflecting other instances of Central and Eastern  European cultural diversity and accessibility, including the transformation of the walls of quiet Bulgarian village Staro Zhelezare by Polish artists, to encourage tourism and vigour in a country which has consistently been determined the poorest EU member. As in Warsaw, and across the region, a crumbling vibrant shell hides transformation underneath, too. •


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Croatia’s World Cup success masks trouble at home

With the remarkable sight of rain-soaked Croatian President Kolinda Grabar-Kitarović consoling her team after the World Cup final in Moscow still fresh in the memory, it comes as something of a surprise to discover that all is far from well with Croatian football. Craig Turp

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he current predicament of Luka Modrić, Croatia‘s team’s captain and catalyst, one of the World Cup‘s star performers and a player whose reserves of energy appear boundless, highlights the problems Croatian football is currently facing. Back in March, Modrić was charged by the Croatian authorities with perjury. Prosecutors say Mr  Modrić, now 32, made a false statement in June 2017 over details of his transfer from Dinamo  Zagreb to English club Tottenham  Hotspur in 2008. A focal point of the Real Madrid team which has now won three successive Champions  League trophies, Modrić may well avoid prison if found guilty, but a suspended sentence is a real possibility.

The team the war destroyed Amid the carnage of Sarajevo, the siege of Dubrovnik or the genocide at Srebrenica, it is no surprise that the story of Yugoslav football in the early 1990s should have been all but forgotten. And yet as war broke out in the early summer of 1992, Yugoslav football was about to reach its peak. Featuring the bulk of the stylish Crvena Zvezda (Red  Star) Belgrade side that had won the European Cup the previous year, Yugoslavia were expected to do very well in in Sweden. Many pundits tipped them to win. And yet with Serb shells falling on Zagreb the Yugoslav team – made up almost exclusively of Serbs and Croats – was at the last moment forced to pull out. Denmark took Yugoslavia’s place, and won the tournament. 72

As Yugoslavia broke up into separate entities, it was Croatian football which recovered first. The country’s national team qualified for the 1996 European Championships and performed well, reaching the quarter-finals. At the World Cup in France two years later Croatia finished third, the best performance of any post-Yugoslav team until this summer. There then followed a period of far more modest outings: knocked out in the group stages of both the 2002 and 2006 World Cups, Croatia failed to even qualify for the 2010 tournament. They returned in 2014, but were again one of the first teams to be eliminated. Croatia made the headlines at the 2016 European Championship, although not as they would have wished. During a group game against the Czech Republic in Saint-Etienne, fans protesting against the Croatian football association threw flares onto the pitch which landed just a few metres away from Czech goalkeeper Petr Cech. At least 15 were thrown in total before a small group of Croatia fans ran on to the pitch and attacked their own players. Unloveable Such scenes were absent in Russia. But as Aleksandar  Holiga, editor of Telesport  Croatia tells Emerging Europe, that was not because the team was doing well. “Being arrested in Russia is a much worse experience than in France,” he says. “Also, the momentum for such protests may not have been the same this summer — not because the team was doing well, but because some small changes have started happening


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in the domestic game, or at least that’s the impression most people have.” “The World Cup success is an interesting thing in a lot of ways,” says John  Bills, a journalist and author of The Illustrated Guide to Slavic Misery. “It masks the mess but it has also brought plenty of mess to the fore: the team singing with Thompson, for example.” Marko  Perkovic, known by the stage name Thompson, is a nationalist who has sung for war crimes defendants. He partied with the Croatian team on their homecoming bus and was invited to sing during celebrations of their World Cup success. His repertoire includes songs about Jasenovac and Gradiska Stara, two concentration camps run by Croatia‘s fascist Ustasa regime during the second world war. It left a nasty taste in the mouth, and is a long way from Mrs  Grabar-Kitarović’s innocent, soaked antics, but does rather highlight what Mr  Bills says: the Croatian domestic game is a mess, and unloveable. “The first round of league games of the new season took place at the end of July, and the lowest attendance was a paltry 360 at Lokomotiva,“ Mr Bills tells Emerging Europe. “You'll get big crowds for Hajduk  Split against Dinamo, but many other games are likely to drag in a couple of hundred at best. Fairly normal for the region, unfortunately.” Again, he is right: all over emerging Europe the lure of higher salaries elsewhere (often in far-flung places, not least China) has left domestic leagues bereft of talent, with games played in front of small crowds. Only television money, and transfer fees, keep the game alive. It is those transfer fees which have created problems for Luka Modrić.

Windfall Croatia, meantime, is enjoying its World Cup windfall. Wasim Ahmed, assistant professor in digital business at the Northumbria University, Newcastle, has taken a look at how social media users tweet about Croatia, as well as the fact that web searches are what he terms: “through the roof.” “Towards the end of final against France, more than a million tweets had been sent out that included the word Croatia, says Mr  Ahmed. “A country would usually have to spend millions if they wanted to gain this type of interest. This itself is a very rewarding aspect of progression in the tournament as it equates to massive free exposure for a nation,” adds Mr Ahmed. The economy has also seen a boost. The Croatian  Chamber of Commerce announced shortly after the tournament that local economic activity increased by 9  billion  kunas (1.2  billion euros) year-on-year, with expenditure on snacks and alcoholic beverages jumping by 10 per cent year on year. The biggest winner, however, has probably been Mrs  Grabar-Kitarović, a former Fulbright scholar, Croatian ambassador to the US, and assistant 73

secretary to NATO. Though largely a figurehead president, she is keen to be re-elected next year and her apperances at the World Cup would have done little to harm her chances. “Consoling a losing soccer team is it the most challenging part of Grabar-Kitarović’s job,” said Corinne  Purtill at the World  Economic  Forum. “But projecting a sense of unity and unwavering commitment is a necessary and important part of the job.” It remains to be seen if Mrs Grabar-Kitarović will console Luka Modrić quite so publicly should he be convicted of perjury. We also need to wait and see if Croatian football will reap its own World Cup dividend. “In the long run, I don’t think this success will mean that much,” says Aleksandar Toliga. “What it has done is stir things up a bit and attract more interest in domestic football, including among the political elites. Unfortunately, very few things in Croatia can be done without the involvement of politics — and politics has been involved in running football since forever. The mess can’t stay hidden anymore though. I’m not optimistic enough to say things will get better soon, but I don’t think they can get much worse than they already are.” •


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The Accidental Chef

Hisa Franko

Ana Ros

Multi-award winning chef Ana Ros is one of the best-known Slovenians in the world, particularly since her appearance on Netflix’s Chef’s Table series. And yet as she tells Craig Turp, prior to taking over in the kitchen of the Hiša Franko, she trained for, and pursued, a career in diplomacy.

“I never dreamed of being a chef,” she tells Emerging Europe. “I studied International science and diplomacy and began a career as a diplomat. I quit because I fell in love with Valter.” Valter is Ana’s husband, Hiša Franko’s sommelier. They took over running the restaurant two decades ago when Valter’s father died. Last year, Ros was named the World’s Best Female Chef. “I started cooking because someone needed to take over the kitchen: it needed somebody with a vision. Valter was totally concentrated on the wine business - Slovenia is a motherland of organic wines. His work with Slovenian wines has the same importance as mine. We complement each other.” Part of the vision Ros has brought to Hiša  Franko was inspired by the legendary Osteria  La  Subida, not too far away on the other side of the Slo-

Craig Turp

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lovenia’s best restaurant – and indeed, one of the finest restaurants in all of emerging Europe – is not found in the country’s capital Ljubljana. In fact, it’s almost not in Slovenia at all, sitting as it does high in the hills above the small town of Kobarid, just a few kilometres from the Italian border. Food, you might say, on the cusp. Hiša Franko has been many things over the years. A roadside inn, a village mill, a country pile, a hospital during the First World War, a huge agricultural estate and finally the sublime restau-

rant and hotel it is today. Ernest Hemingway is said to have been treated here for a wound he received on the Isonzo  Front. A Farewell to Arms is set in these parts. There is no doubt that the modern Hiša  Franko would certainly be a Hemingway favourite, earthy luxury which attracts a crowd of the well-travelled and the well-fed. With such a past and such a present – the place has won numerous awards – it is somewhat surprising to learn that the architect of Hiša  Franko’s current success, Chef Ana Ros, came to cooking by accident. 74


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vene/Italian border. Valter would take Ana there whenever he felt the need to apologise. “Joško Sirk, the owner of La Subida, is one of the wisest persons I have ever met,” says Ros. “He has always followed our work and has given us a lot of advice as we have taken our steps along the road.” The Soča valley in which Hiša Franko sits is a paradise destination: turquoise wild waters , green natural pools of a warm Nadiža river , almost tropical forests and flowering pastures. Behind the restaurant, there is a huge herb, flower and vegetable garden, and beside it you can hear a lively creek, home to a small family of trout. Does the house, and the setting, influence the creative process? “I never really thought about it,” says Ros. “I do not believe the building has anything to do with our food but it probably influences somehow the mood of guests and people who work in it.” Committed to using local produce, Ros tells us that when she first

began cooking at Hiša Franko, she had little choice. “I actually had a problem to source the produce because suppliers were not interested in coming to Kobarid,” she says. “So we needed to create a chain of producers around us to be able to cook at all. Today there are more than 100 people who garden, forage, farm or fish for us. They all come from our environment. I think that Hiša Franko could be an example for the sustainable food chain.” Hiša  Franko is one of a number of Slovenian restaurants which have done a great deal over the past few years to change attitudes towards food in the country, always maintaining, however, a link with countryside. “Slovenians, traditionally, are not a nation of foodies. We are simple diners with our life deep rooted in the countryside. Our traditional food is good but very heavy. This is why the evolution today seems so quick. New generations are very aware of the importance of the product and they are more and more interested in gastronomy.” •

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48 hours in Banja Luka Despite being the second largest city in Bosnia & Herzegovina (BiH) and the largest in the Republika Srpska entity, tourism is still something of a new concept in Banja Luka. That is bound to change sooner rather than later, and this most charming of cities will be more than ready. John Bills

Why visit now? More than 20 years have passed since the end of the Bosnian War, and the fledgling state is fast becoming a regional power when it comes to tourism. Visitors flock in vast numbers to Sarajevo, Mostar, Međugorje and others, but the many towns and att ractions in the Republika  Srpska entity remain somewhat undiscovered. A city of nearly 200,000  people, Banja  Luka is a delightful blend of the old and new, with a litt le bit of that Balkan chaos mixed in for good measure. Get your bearings Banja  Luka International Airport is some 18km north of the city itself, but it is hardly a hub of activity. Immensely cheap fl ights to Belgrade can be found, but the list of direct routes

begins and ends with the Serbian capital. Both the bus and train stations are 2km southeast of the city centre, with the former seeing considerably more traffic than the latter. Taxis usually congregate outside the stations, and generally provide an efficient and affordable service. The centre itself is very pedestrian friendly, with many of the main att ractions congregated close to each other. Sleep Befitt ing a city of its regional and historical importance, Banja Luka has plenty of options when it comes to accommodation. The usual socialist relics can be found, but an impressive roster of modern apartments provide great value for money. Vila Kobilj offers a stunning location along the Vrbas river, with comfortable rooms and convivial service. 76

DAY 1: A most magnificent cathedral Religions is impossible to avoid in Bosnia & Herzegovina, and the grand constructions of the Serbian Orthodox Church take the top spots when it comes to aesthetics in Banja Luka. The majestically named Cathedral of Christ the Saviour is the city’s centrepiece, a monolithic gold and brown piece of Byzantine architecture completed at the end of the 1920s. It was destroyed during World War II before being resurrected in 1993, regaining its spot as the spiritual heart of Banja Luka. A weakened fortress There are more ruins – the Byzantine People have lived in these parts since ancient times, with proof found of a Roman civilisation in the form of a fortress on the Vrbas called Kastel. The Kastel Fortress is still an integral


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part of life in Banja Luka, but the well-preserved fortifications found today were built on the site of the ancient ones. Th at doesn’t make the fortress any less impressive however, and the walls provide some pleasant views of the river below. Heaven for carnivores The Ottoman legacy in these parts is questioned in many ways, but the delicious grilled meat dishes that the Islamic Empire left behind remain the dominant gastronomical force in BiH and the rest of the area. The riverside location of Kazemat makes it an obvious choice for the evening, an exquisite vista complimenting the pljeskavica, ćevapi and more. Be sure to try some kajmak too, a special kind of cream cheese that is ubiquitous throughout the country. DAY 2: Islamic remnants in an Orthodox city Banja  Luka’s population today is overwhelmingly of the Serbian Orthodox faith (90 per cent, to give a fig-

ure), but three centuries of Ottoman rule didn’t just disappear overnight. The Ferhad Pasha  Mosque is the fi nest example of this, one of the most impressive pieces of Ottoman Islamic architecture in the entire continent. The mosque was destroyed during the Bosnian  War, but was subsequently rebuilt in its original location in 2016. Art, culture, history As one can expect from the biggest city of its kind, most of the fi nest museums and galleries in Republika Srpska are found in Banja  Luka. The Museum of Republika Srpska is a must, a refreshingly subtle collection of exhibitions and artefacts from the history of the region. That subtlety goes out of the window in the museum’s coverage of Jasenovac, the largest World War II

concentration camp in the Balkans. It makes for difficult viewing, but its importance in shaping the 20th century in what was once Yugoslavia can’t be disputed. The best night out in BiH It is an extremely big thing to say, but we’re not afraid to stick our necks out there — Banja  Luka is the best night out in Bosnia & Herzegovina. The Serbian element certainly has something to do with it, and Banja Luka comes close to echoing the famous nights enjoyed in Belgrade and beyond. Gospodska is the main pedestrian drag, a short thoroughfare lined with cafes, bars and more. Head on further for Mac Tire Pub, arguably the best bet in town for beer lovers. •

BANJA LUKA

IN ONE PARAGRAPH It isn’t always wise to delve into hackneyed metaphors, but Banja Luka is undoubtedly a city maturing after a very difficult and troublesome adolescence. A beautiful creature is emerging, one that is home to some of the state’s best food and undoubtedly its best night out, not to mention a fine patchwork of historical buildings and museums. Eat plenty, drink more, enjoy it all.

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48 hours in Debrecen The largest city in eastern Hungary, Debrecen is an elegant place long-famed, like many towns in this part of the country, for its healing thermal waters, here set in majestic forested surroundings. Home to one of the best aquaparks in Europe, it is also a cultural centre of some renown. Its university is Hungary’s largest, and during term-time the city is a lively student centre with a flourishing music scene. Craig Turp

Why visit now? For a start, it has never been easier to get here. Since Wizz Air began operating flights to Debrecen from a number of European cities in 2012, as well as from Tel Aviv in Israel, record numbers of tourists have been visiting the city. Boutique hotels and pensions galore have opened up to accommodate them, offering a more relaxed alternative to the high-rise hotels of the communist era. Get your bearings Debrecen’s recently modernised airport is close to the city centre. Bus number 1 stops outside the terminal building and runs to the main train station in the city centre. The journey takes no more than 15  minutes. From the train station, at the far end of the city’s main street, Piac  utca. A tram from run the full length of the street before looping around the city’s park and enormous thermal bath complex. Unless you are heading out

into the Pannonian Steppe (puszta, or Great  Plain) it is unlikely you will need any other form of transport: the city is incredibly pedestrian-friendly. Sleep The faded grandeur of the Secession-era masterpiece that is the Aranybika Grand  Hotel on central Kossuth  tér will appeal to some, but far better value is offered by the many pensions on Debrecen’s side streets. The  Malom, a short walk to the west of the city centre and set inside an old mill, has bags of character, charming rooms and a decent restaurant. DAY 1: A Piacful walk Piac  utca, Debrecen’s main street, leads all the way from the city’s railway station to its central square, Kossuth tér. A walk along here is the perfect introduction to the city, not least as its northern section is partially pedestrianised: only trams are allowed. During the summer and early autumn 78

there are craft markets, street food fairs and live music most weekends – and often during the week too. (Piac utca in fact translates as Market Street, reference to the important horse markets held here in the past. The Neo-Classical building on the corner of Piac utca and Kossuth  utca is the city’s rather fine Debrecen  Town  Hall, built in 1842-3 to designs by local architect Ferenc Povolny. Reformation & Independence Probably Debrecen’s defining landmark, the modest yet elegant Great  Reformed  Church (Nagytemplom) stands at the head of Piac utca and is the most important protestant church in Hungary (Debrecen was the heart and soul of the Hungarian Reformation). In 1849, Lajos Kossuth proclaimed the country’s independence from the Habsburg  Empire here. The chair he sat in while he read his declaration has been preserved for posterity. There are great views of the city from the top of the western tower.


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Behind the church is the Calvinist College, dating from 1538. It is home to a fascinating interesting museum telling the story of the church and the college, and you can also visit the Oratory, where Hungary’s provisional parliament met in 1944, while Budapest was still under siege. Cattle fodder Cattle played a huge role in the economy of Debrecen in the past, and beef remains the staple of cuisine in these parts. At the Csokonai restaurant on Kossuth utca you can feast on enormous portions of Hungarian classics with a modern twist – from roasted marrow bone to goulash, pork knuckles to pumpkin soup – at more than decent prices. The place is hugely popular at weekends and can get very busy: make a reservation. IKON  (Piac  utca  23) is another good choice for contemporary takes on the very best Hungarian food. The steaks are tremendous and everything is done with a bit more flair than the norm. Boasts a superb wine list.

DAY 2: Taking the waters Debrecen has long been famed for its extensive thermal bath complex (since Roman times, in fact), and there is a huge range of large outdoor pools and baths, as well as an indoor pool and a vast aqua-therapy treatment centre offering cures for all sorts of ailments. Aquaticum, a modern, indoor thermal bath complex and waterpark is found next door, and caters to a younger generation and families, and offers a mesmerising selection of waterslides – some of which are rather scary – as well as children’s pools and even Thai massage. The ticketing system is Byzantine in its complexity, depending on how long you stay and which services you use. Chances are you will want to spend the whole day here. Exploring the Great Plain Hortobágy is an enormous national park which remains the largest in Hungary. It stretches for over 82,000 hectares from Debrecen to Lake Tisza and was made a UNESCO World Heritage Site in 1999. The vast plain is hugely popular with nature lovers and bird-

watchers, and is the nesting site of as many as 152 species of bird, including great bustards, herons, storks and spoonbills. Besides birds; grey cattle, horses, buffalo and the bizarre Hungarian racka (a long-haired sheep) continue to be herded by farmers. The 300year old Máta Stud Farm riding centre inside the park is Hungary’s best, and organises spectacular riding displays: the horses were traditionally trained to crawl through the grass in order to avoid being seen by enemy forces. There are trains to the village of Hortobágy from Debrecen, from where the stud farm is a 30 minute walk. It’s well worth the effort. Last supper Hortobágy csarda in the village offers great local food in a sublime countryside setting, all sourced from the plain, and puts on rather touristy but no less enjoyable shows of local song and dance. Back in Debrecen, Roncsbar is a great place to try Hungarian beer (including a few locally-made craft ales) in somewhat crazy surroundings: the entire ceiling is covered with cymbals. Live music some nights. •

DEBRECEN

IN ONE PARAGRAPH A great chance to explore a quieter, more peaceful and yet still vibrant Hungary. Debrecen can feel a little provincial compared with Budapest, but it is all the better for it. A buzzing nightlife scene (especially during university term-time) will keep party animals happy, while nature lovers should head out into the Great Plain. Do not miss the chance to enjoy one of the many wellpriced treatments at the thermal baths, and climb to the top of the Great  Reformed Church for a photo opportunity unlike almost any other in Hungary.

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Kosovo: Life in the land of popstars Stefan van Dijk

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hen people think of Kosovo, they probably remember the war-torn country in the late 1990s. What they probably don’t think of is the fact that there is no place in Europe that can boast as many popstars pe capita as Kosovo. Before telling you who those popstars are, let me emphasise that this was not the case when I first visited this country, back in 2004. Everything was different. It was five years after the war, most roads were broken or non-existent, UN-trucks and NATO-vehicles were ubiquitous, and Kosovo wasn’t even a state yet. Which western company would invest in a place like that? Which tourist would be so careless as to enter this area? No one. It didn’t help that Serbia – with a large country like Russia having its back – tried to block everything that would bring Kosovo further into the public eye. Serbia was actively lobbying against the participation of Kosovo in UEFA, FIFA, the Olympics, United Nations, and so on. Trying to frame Kosovo as a land full of criminals and Muslim extremists was easy, since no one could really see the real picture. Well, some could of course. Like me for example. In 2004, I found myself in a fascinating place with long summer nights, extremely safe streets, unbelievably hospitable people, beautiful mountains, beers for just one euro, and many charming and beautiful ladies (I was 20 years old back then, and single!) Aside from that, I experienced a very moderate religious climate. Although most people are Muslim by faith, everyone cherishes the Catholic nun that received her spiritual calling in Kosovo: Mother Teresa.

To put it simply, I found this country enchanting. After my first trip, I went back several times, and decided to migrate there in 2012, together with my wife who works in healthcare. A lot had happened in this time: Kosovo became a republic, highways were being built, international companies were exploring the country, and NATO and the UN weren’t visible anymore in most places. The thing that stayed the same was the hospitable attitude of the people, combined with a pro-Western spirit. No country in the Balkans is as proEU as Kosovo, and probably no people in the world is as pro-American as the Kosovars. Realising that this place has the youngest average age in Europe, you can understand a little bit better how unique this country is. And maybe why it produces so many popstars. Currently, in the Netherlands (where I’m from), Dua Lipa has been at number one in the pop charts for more than 10 weeks. She is a perfect example of the positive vibe of the Kosovan capital Pristina, combined with a western attitude (she grew up partly in the UK). Another singer, also originally from Pristina, is the female with the most number 10 hits in her country: Rita Ora. And because Will Smith sings the official World Cup song with Kosovan singer Era  Istrefi, currently three ladies from this place are in the pop charts. Not bad for a country with only 1.8 million inhabitants, right? Because I want to spread the word on how sweet this country is, I manage three international websites about Kosovo. I provide information about the economy, tourism, travel tips, and stories about sports and singers. And with my local company, I advise foreigners about doing business in Kosovo. Currently, Kosovo is number 40 in 80

Stefan van Dijk

the global World Bank Doing Business Index. This makes them the second best of the Balkans. Just six years ago, they were number 119. Imagine that! If you want to live and work in Kosovo, it is important to see all the small and big developments. From new city busses with air conditioning to new highways. From the first ever gold medal at the Olympics, to Lonely Planet naming you one of the top destinations of 2018. There are always things to worry about, like the extremely high unemployment rate. But it’s a great pleasure to live in a place like this, and even a bigger joy to see this country growing. • Stefan van Dijk is an entrepreneur and digital communication specialist


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Lublin, the capital city of the Lubelskie Region, is a driving force of Eastern Poland and a growing BPO/SSC/IT hub, boasting more than 60 R&D centres

Lublin has one of the highest office-space growth dynamics in eastern Poland, with a current office stock of 180,000 m2, planned to rise to 300,000 m2 by 2020. Costs are competitive: 8-12 euro per m2

Lublin Airport is only 8 miles form the city centre with flights to many cities including London and Munich

Over 50% of Lublin’s residents are under 40, and almost two-thirds of the 350,000 population is of working age. One in five of Lublin’s population is a student

Lublin was named the “Emerging City of the Year in Poland 2018” at the CEE Shared Services and Outsourcing Awards

Marshal Office of the Lubelskie Region Department of Economy and International Cooperation Trade and Investment Promotion Section Artura Grottgera 4 St., 20-029 Lublin Investors and Exporters Assistance Centre +48 81 537 16 15 / +48 81 537 16 21 coie@lubelskie.pl Find81us on: invest.lubelskie.pl/en


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Emerging Europe must do more for its disabled

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t the end of July, thousands of people took to the streets of Bulgaria’s capital Sofia to protest at the government’s inadequate response to the demands of mothers of children with disabilities. The march took place under the slogan The  System  is  Killing  Us – All, and is part of a months-long campaign for a better, more personalised social support system for people with disabilities and their families. In May, the Bulgarian parliament failed to respond to requests from various organisations representing people with disabilities to introduce a bill fulfi lling these demands. The adoption of such a law has now been postponed until the beginning of the autumn parliamentary session, at the earliest. It is

likely that it will once again be fi led under water and quietly forgotten. Bulgaria is not the only country in emerging Europe which has consistently failed to make good on its promises to better the lives of its disabled citizens. If you live in any country in the region, think about it for two minutes: How accessible is your city to somebody in a wheelchair? How accessible is public transport to the physically impaired? When was the last time you saw a disabled person on television, in any capacity? Indeed, you might even want to think about the last time you saw a disabled person on the street. In many of our cities they are invisible, forgotten and their needs ignored. For more than two decades before her death earlier this year my mother 82

suffered with Parkinson’s Disease. Living for much of the time on her own, the UK’s  much-criticised (and costly) social care system nevertheless ensured that she could live as full a life as possible. She was given a subsidised ground floor apartment with step-free access from the street, and she could use most forms of public transport for free, including London’s expensive black cabs, for which she received a monthly allowance. What help is given to the disabled in emerging Europe? In my experience, very litt le. The onus is placed on family to offer support, and while traditionalists will argue that family members should be the primary carers of the disabled, many of those families simply do not have the means to do so. As for disabled people in the workplace, some emerging European countries have belatedly begun to offer incentives for companies to hire disabled workers. Th is is all well and good, but if the infrastructure does not exist to allow these people to get to their place of work, then such incentives are useless. The physically disabled can be a resource: that a person’s legs may not respond on command does not mean that they do not have outstanding brains packed with innovative ideas. Much as emerging Europe needs to do with its elderly, it should stop viewing the disabled as a burden and start seeing them as a valuable sector of society who can have a key role in creating better, more inclusive societies. • Craig Turp


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