Serbian Business Perspectives on Challenges and Opportunities in 2012

Contributions
Dejan Šoškić, National Bank of Serbia
Nikola Stefanović, SEAF South Balkan Fund
Miodrag Kostić, MK Group
and more...
AmCham Forum
Yes to Europe, but no to the EU?
Serbian-American Business Perspective
AmCham Investment Promotion
ISSN1452-6085

#14
#30
4 Perspective December, 2011
Editor’s Corner
Contents
American Chamber
of Commerce in Serbia
Smiljanićeva 24/I
11000 Belgrade, Serbia
Tel: +381 11 30 88 132; 34 46 437
Fax: +381 11 30 88 922
www.amcham.rs
info@amcham.rs
Editor-in-Chief
Branislav Čale
cale@amcham.rs
Editorial Board
Amalija Pavić
Acting Executive Director
pavic@amcham.rs
Advertising, Member Benefit
& Network
Branislav Valent
Advertising & Promotion Coordinator
valent@amcham.rs
Production, coordination and
editorial contribution
Emina Azizi/Future Media
amchamperspective@futuremedia.rs
Graphic Layout and Prepress
Branko |uić/BlackBox
branko.zuzic@blackbox.rs
English proofreader
Charles Alverson
Director of Photography
Miroslav Petrovi'/BlackBox
mikica5@blackbox.rs
Cover Page
McCann Erickson
Printing
Rotografika, Subotica
AmCham
Patron
Members
I See in my Crystal Ball...
As the year 2012 dawns, is Serbia’s glass half full or half empty?
Though we here at Perspective pride ourselves on a spotless crystal ball,
based on the opinions expressed in this 36th
issue, it would be hard to come to
any infallible conclusions.
For instance:
Half full: Dejan Šoškić, Governor of the National Bank of Serbia, sees a
very challenging year head, requiring fiscal discipline and extension of Serbia’s
foreign markets, but predicts that inflation will be kept under control.
Half empty: Serbia faces two serious economic challenges for which it
must be prepared, says Miodrag Kostić of MK Group. The first is the predicted
‘second blow’ of the economic crisis. The second is prospective EU membership,
which will require a great deal of preparation and a serious change of mindset
Half full: AmCham officials joined US Ambassador Mary Warlick and other
Serbian and American officials in an embassy-arranged mission to Washington,
DC and Chicago to promote Serbia as a promising investments destination.
Half empty: According to SEAF’s Nikola Stefanović, with no economic re-
covery seen ‘just around the corner’, investor policies are very likely to take
a conservative direction with negative consequences for emerging nations for
years to come.
Half full: SIEPA next year will increase its efforts to promote exports of the
food, construction and furniture sectors, in which Serbian companies are known
for their experience, brands and quality.
Half empty: In our FORUM feature, the editors of three leading Serbian
political-economic magazines agree that Serbia is facing a long, winding and
rocky road to membership in the EU.
Half full: At a time when overbuilding has swamped many cities, Serbia in
general and Belgrade in particular have suffered far less from the widespread
real estate crisis, says Philip Bay of Colliers.
Half empty: Serbia is beset with a host of problems, economic, political
and demographic, Željko Pantić of the Danas Conference Center writes, that
could end its EU aspirations, cripple Serbia as a nation in transition and even
threaten its future.
Half full: Increasingly sophisticated legislation and technology, and deter-
mined efforts to implement it, are beginning to take the battle to those who
either profit from IPR piracy or utilize its illicit products.
As AmCham’s ’official arbiter’ of optimism versus pessimism, I hereby de-
clare Serbia’s glass at least half full. And wish our readers happy holidays and a
promising new year.
Branislav Čale
AmCham Communications Manager
8 Central Bank Perspective
Dejan Šoškić
Governor, National Bank of Serbia
10 Investments Fund Perspective
Nikola Stefanović
General Director, SEAF South Balkan
Fund B.V. and Member of the Board of
Governors of AmCham Serbia
14 Real Estate Perspective
Philip Bay
Founder and regional Partner, Colliers
International for Southeast Europe, and
founder of Clean Earth Capital L.L.C.
16 Businessman’s Perspective
Miodrag Kostić
General Manager and Owner, MK Group
20 IPR Committee Perspective
Vuk Pribić
Chairman of AmCham’s Intellectual
Property Rights Committee and
Government Relations Manager in Japan
Tobacco International
24 EU analysis Perspective
Srđan Bogosavljević
General Manager, Ipsos Strategic
Marketing
28 Taxation Impact Perspective
Dragan Drača
Senior Manager, Tax Services PwC Serbia
and Member of the Steering Committee
of the AmCham Serbia Tax Committee
30 AmCham Serbia 10th
Anniversary
Celebration
Gala Dinner, October 6, 2011
34 Serbian-American Business
Perspective
AmCham Investment Promotion activities
36 Media Perspective
Velimir Ćurgus Kazimir, Director
Ratko Bojović, Economics Editor,
Ebart Media Archive
44 AmCham Forum
48 Online Communication Perspective
Darko Matijašević
Managing Director, Executive Group
56 Intellectual Property Rights
Perspective
AmCham’s 9th
Annual Conference on
Intellectual Property Rights Protection
60 Advocacy Update, AmCham News,
Member Benefit Program and more...
#27
#08
#30
#16
#56 #50

Our hopes had been high, and we cannot pretend that was not disappointing
early in December when the European Council postponed a decision on Serbia’s
bid for candidate status to the European Union.
But then we began to see the decision in a different light. It seems better
to look at the situation in terms of how far we’ve come rather than how far we
have to go. It is not being boastful to note how far the Serbian government has
progressed toward accession to the European Union or to praise AmCham for
standing with the government in its efforts to achieve that status.
We have made considerable progress. Thanks to the government’s firm hand
on the tiller, we have weathered years of economic crisis. Despite all its difficul-
ties, 2011 will be remembered as the year when the problem of non-liquidity of
the economy was tackled by the government using a systemic approach. There
is a great deal of satisfaction in the fact that regulations concerning intellectual
property rights have been completed by the adoption of the Law on Optical Discs,
and that the Government by decree capped and reduced fees for mortgage regis-
tration. These may seem small steps to some, but success consists of many small
steps.
In addition, improvements in foreign investment and trade remain high on
both our agenda and the government’s. The state of economic cooperation be-
tween Serbia and the United States remains very positive. The level of inward
US investment now stands at over 2 billion dollars, while the extent of Serbian-
American trade stands at 320 million dollars. We believe that this cooperation will
be even stronger and more significant in the future.
Some hold the opinion that next year, in addition to continuing overspill from
the crisis in the euro zone, reforms will slow due to the coming election. It is
exceptionally important that the Government continues with structural regulatory
reforms and consistent implementation of already adopted measures.
At the end of a tough economic year, I welcome the challenges and oppor-
tunities we face in the next chapter in the long-term fight to do what is best for
Serbia. As before, the American Chamber of Commerce will strive to encourage
the efforts of Serbia towards further European integration and prosperity.
And I wish for all our readers a splendid holiday season and a satisfying 2012.
Challenges and Opportunities
From the President
Miloš Đurković
AmCham President

9 Perspective December, 20118 Perspective December, 2011
zone. We should not forget that most of
these countries embarked on a very costly
fiscal policy path of subsidies and govern-
ment recapitalization programs at the incep-
tion of the crises in 2007/2008. Now, with
GDP growth outcome lower than previously
expected, this new fiscal burden, combined
with the previous one, which in most cases
was significant, has proven to be more than
many countries can support and finance at
current GDP levels. Still, a solution has to be
found, even if it takes time. It is worth not-
ing, however, that with the passage of time
and lacking a viable solution, the overall cost
of the euro crisis keeps rising. Most probably,
we will have tighter fiscal rules for the euro
area as a step towards some model of a fis-
cal union and, effectively, a two-tier Europe
- the euro area and the rest of the EU.
Despite the efforts of the NBS to re-
duce euroization, people still place
more trust in the euro and prefer
saving in that currency. Can the euro
-zone crisis change that?
The preference of saving in FX is a his-
torical phenomenon in Serbia and the rest
of ex-Yugoslavia. It dates back to the six-
ties when residents were allowed to make
deposits in FX on the presumption that the
monies originated from income earned
abroad. This practice, along with decades
of high inflation in Yugoslavia, has created
a preference for saving in FX, now mostly
in Euros. This is something that cannot be
changed in a short time but will gradually
change alongside future low inflation and
overall financial stability. The euro-zone cri-
ses may be sending the message that no
currency is without its risks. But reduction of
euroization in Serbia is a mid-term process
that can bring results gradually with the full
understanding and commitment by all in-
terested parties - the NBS, the no govern-
ment, banks, corporates and households.
The euro will survive
To what extent has the economic cri-
sis shaken the euro as legal tender? Is
the euro in danger? What is your com-
ment on a tendency in current opin-
ion that the euro will not last long?
The euro as a currency is not under
threat as long as the major euro-zone coun-
tries are willing to have a common curre-
ncy. I do not see a reason for the large eu-
ro-zone countries to change their firm sup-
port for the euro in the future. Therefore,
I expect the euro to survive this challenge
and the euro area to come out of the crises
with more fiscal unity than before.
What is the least painful way for
Serbia to survive the crisis?
We should do our basic homework:
continuously improve the business climate
and provide overall financial stability. Cri-
ses can be a good reason not to avoid or
postpone the inevitable reforms that need
to be implemented. Business-climate im-
provement can take many forms, all of
which are important, but some stand out
as a conditio sine qua non. I will name
only four: fighting corruption, overhaul-
ing public sector spending with a view to
maximizing government services per unit
of tax payers’ money, improvement of the
efficiency of the legal system and educa-
tion at all levels.
In the crisis that we are facing, the
private sector will most probably be reluc-
tant to finance growth. Therefore, increas-
ing the capital expenditure side of the
budget, that is, finding real government
resources to finance investments in infra-
structure, may prove to be very important.
Serbia also needs to diversify its reliance
on foreign markets and to use to a larger
extent its potential to tap the markets of
Eastern Europe and Russia, Central Asia
and the Middle East. This is not in any way
in contrast with our EU integration process,
which should remain consistently at the
top of our national agenda.
Central Bank Perspective Dejan Šoškić
Governor, National Bank of Serbia
One of the important factors of do-
ing business in Serbia is the ex-
change rate. Do you expect any
major exchange-rate turbulence in
2012?
As you may already know, the Na-
tional Bank of Serbia conducts an inflation
targeting regime as its main policy rule.
In such a regime, the exchange rate is a
market-based outcome of implemented
policies and overall market conditions.
However, Serbia also conducts the so-
called managed float exchange rate
regime. This means that the monetary
authorities will not attempt to fight long-
term supply and demand trends, but may
act to reduce excessive daily volatility or
to preserve financial stability. In other
words, the National Bank of Serbia moni-
tors movements in the FX market not to
intervene to target a specific exchange
rate, but to track the effect of FX move-
ments on inflation (the so-called pass-
through effect) and financial stability and
to adjust its policy tool kit accordingly.
As witnessed so far, 2011 has been
a year of relative stability of the dinar
FX rate. Such stability has been most
pronounced over the last six months
as the dinar has been more stable than
other emerging market currencies run-
ning similar exchange-rate regimes
(Poland, the Czech Republic, Romania,
Hungary and Turkey). Still, the stability
of emerging market currencies does not
rely completely on the credibility and ef-
fectiveness of domestic policies, but very
much also on the stability of the interna-
tional markets and institutions exposed
to those emerging markets. 2012 is the
year during which the play out of the
euro crises may have the dominant ef-
fect on the stability of small open econo-
mies bordering on the euro area.
Tighter fiscal rules
What is your prognosis regarding
the euro zone crisis?
This is an issue of dominance of fi-
nancial stability in Europe as a whole. As
regards the debate about the viability of
the euro as a common currency, it is my
firm belief that this is not an issue un-
der question. The euro will survive, but
the main problem is finding a solution
to the sovereign debt issue in the euro
NBS Sovereign Debt Is
the Issue in the EU, not
Survival of the Euro
CentralBankPerspective
A ChallengingYear Ahead
Economic projections of basic indicators for 2012 have
drastically dropped.What do you see the financial year 2012?
We have a very challenging year ahead of us.It is very hard
to imagine that 2012 will not be a year of recession in Europe.
This is influencing and will continue to influence the growth
prospects for Serbia.In the years ahead it will be important to
be present in markets outside of the euro area,which will most
probably grow faster in the immediate future.That is the recipe
Serbia should follow without delaying for a single moment or
losing steam in its EU integration process.
In terms of financial challenges in the year ahead,I strongly
believe that meeting the new capital adequacy standards set by
the European Banking Authority (EBA) for the EU will prove to
be a process that will conflict with credit growth.As things stand
now,banks will not find it reasonable to provide the economy
with the desired level of additional corporate financing to help it
fight the recession.Therefore,if the overall financial environment
stays as it is,banks will not be a part of the solution to the
recession but,rather,part of the problem.
Regulation incentives to support credit growth in the quarters
ahead seem to be a reasonable solution as a way to shorten
the recession.The National Bank of Serbia has done its part
by introducing a new Decision on the Classification of Balance
Sheet Assets and Off-balance Sheet Items.It is our belief that this
was a step in the right direction.However,the challenge remains
as to how to undertake regulatory reform in order to promote
credit growth without jeopardizing financial stability.That is an
undisputed priority for every financial system.
Dejan Šoškic,Governor of the National Bank of
Serbia,sees a very challenging year head,
requiring fiscal discipline and extension of
Serbia’s foreign markets,but predicts that inflation
will be kept under control.

Investments Fund Perspective Nikola Stefanović
General Director of SEAF South Balkan Fund B.V. and Member of the Board of Governors of AmCham Serbia
It would be very hard to find a com-
mon denominator for all those markets, as
they are all unique in many different ways.
In general, investors look for big, stable
markets that can exhibit high growth rates.
During the last decade, many investors
around the world, skeptical about the long
term potential of Europe and the United
States, shifted their investment focuses to
Asia and Latin America. To that end, some
of the countries that fared well in the crisis
were in emerging Asia, such as China and
India, and Latin America, for instance Brazil
and Peru. During the recent crisis, all these
countries exhibited better than average
GDP growth. Today, it seems that many of
those markets are getting saturated, such
as Brazil, which could be facing a technical
recession soon. Because of that, investors
are looking for new investment regions and
opportunities to commit their capital. Before
the Arab Spring, it seemed that the MENA
region had a great potential to get a second
wind as the investment region of choice.
The South Balkan Fund (SEAF) invests
in private companies in fast-growing
markets. Which sectors have been
the least risky to invest in the past
three years?
Across the globe, SEAF has committed
more than 600 million dollars to more than
300 companies. As a global high-risk inves-
tor, SEAF intentionally exposes itself to con-
trolled, systematic risk in search of above-
average returns. In order to reduce some of
the unsystematic risk, SEAF carefully utili-
zes a portfolio approach. When construct-
ing its portfolio, SEAF takes a very close
look at the industries that have contra-
cyclical characteristics, such as factoring,
or those that fare well during economic
downturns, for instance energy and natu-
ral resources. Furthermore, the investment
management group also carefully analyzes
other industries that have high barriers to
entry, such as media, financial services,
healthcare and food and beverages.
Considering that the fund operates
in 30 countries all over the world,
can you compare them and find a
common denominator? Which coun-
tries have fared best in the crisis,
and what did this depend on?
With no economic
recovery seen „just
around the corner”,
investor policies
and processes are
very likely to take a
conservative direction
with negative
consequences for
emerging nations in
2012 and for years to
come.
Investors Beware Very
Challenging Period Ahead
AVery Challenging
Year Ahead
Will 2012 be remembered
as a year of conservative
investment policy? How
can companies be better
prepared?
This will vary from a market
to market across the world.
In our region, based on
the economic indicators of
Europe and the on-going
sovereign debt crisis, it
is likely that 2012 will be
a very challenging year,
marked by conservative
investment policy. In order
to be better prepared
for the upcoming period,
companies can reduce their
operating risks by creating
more flexible operating
structures in terms of
shifting their cost structures
from fixed to variable and,
of course, by opening new
markets. Furthermore,
companies can improve
their cash flows and reduce
some of the financial risks
by, among other things,
improving working-capital
management policies,
decreasing dividend payout
ratios, replacing short-
term loans with long-term
loans, getting closer to the
optimum capital structures
and exerting tighter
financial controls.

Investments Fund Perspective
No hope for recovery soon
Small and medium enterprises (SME)
make up 90 percent of the European
economy. However, the word is that
they have fared worst in the crisis.
Do you agree? Do you see a chance
for their recovery in 2012? How do
you think it will happen?
During the last three years, the Eu-
ropean SME sector was negatively influ-
enced by the crisis primarily in two differ-
ent ways. First, the SME sector suffered a
significant drop in demand for goods and
services, which increased the sector’s ope-
rating risk. Second, the SME sector struggled
against limited access to finance, which
adversely affected its cash flow. It is very
likely that the SME sector will face those
two challenges in years to come, as it does
not seem likely that a significant economic
recovery is around the corner. It is expected
that the European economy will continue
to stagnate during the next decade, since
the European political and financial systems
need to be restructured and confidence
needs to be restored. Furthermore, Europe
still has to deal with the sovereign debt cri-
sis, and this process will take some time.
We have just witnessed that, in an effort
to stabilize the Euro zone and impose more
strict controls of national budgets, the Euro-
pean Union had a significant fall out, with
Britain staying on the sidelines.
How much has the crisis changed in-
vestment criteria? What rules of the
game never change?
During the last several years, investors
changed their asset allocation strategies,
mainly by moving closer to the more con-
servative. This, by itself, had a major im-
pact on capital markets across the globe.
Second, at the asset-mix and tactical lev-
els, investors started using more conserva-
tive investment vehicles such as preferred,
mezzanine, or exchangeable debt vehicles.
It was also evident that some financial
institutions shifted their focus from the
cash-flow-based to the asset-based. On
an individual investment level, investors
became more prudent in completing due
diligence, and they decreased the size of
their average investment. Finally, investors
restored the emphasis on monitoring in-
vestments and keeping closer relationships
with their investees. Of course, taking into
account changes in the investment policy
and investment criteria, it is expected that
financial investors will continue to be inter-
ested in projects that can generate returns
in excess of their hurdle rates.
Four steps to profits
What does an investment process
look like?
The process can take many forms de-
pending on the type of investment. As far
as private equity is concerned, the pro-
cess usually consists of deal origination,
due diligence, structuring and negotiation,
monitoring and growth and then exiting.
The deal origination step focuses on find-
ing and analyzing deals, and it may include
steps such as the review of the business,
screening against the investment criteria
and analysis of this source and reliability.
The due diligence step focuses on a deep-
er analysis of the opportunity. During this
step, the industry, company, management
team, co-investors, and the investment
return potential could be analyzed. During
the structuring and negotiation step, the
type of security, terms, valuation, and the
objections will be taken in consideration.
The monitoring and growth step focuses on
working closely with the investees in order
to make sure they meet targets. The exit
step focuses on realizing return in one of
several ways, which can include a mana-
gement buyout, strategic sale, initial public
offering or a financial sale.
Cash is king
Is the crisis really the right time to
invest, considering that companies
can be bought at lower prices?
Well, yes and no. In this market en-
vironment, investors should proceed with
great caution. On one hand, on average,
valuations went down during the last three
years, and it seems that they will go down
even further. From that perspective, this
could be the right moment for an inves-
tor to consider buying, of course, if an in-
vestor takes the long view. In this market
economy, at this time, cash is king. On the
other hand, on average, many companies
are in worse shape than they were three
years ago, with very uncertain future pros-
pects. From that perspective, an investor
has to be extremely careful when choosing
new investments. All in all, the history of
investing shows us that, on average, the
returns from certain types of investments,
executed during the market bottoms, yield
above average returns on capital. The chal-
lenge for an investor is to properly time
the market downturn.
How big a risk are investors ready to
take?
This is a pure risk vs. return play. Many
investors are willing to take above aver-
age risks if they can expect above average
returns. Some of these investors could be
distressed debt, mezzanine, or real-asset
investment companies. Others could be
strategic or financial investors who take
the log view. Of course, the underlying
rules of the game have to be supported
by adequate political, economic, and legal
systems. If not, the risk vs. return balance
will be shifted towards risk, and investors
will not be interested in the tradeoff.
Would candidacy status for the EU
membership change investors’ atti-
tudes towards Serbia? How will ap-
proximation to the EU affect SMEs?
Candidacy status for EU membership
would be a move in a positive direction, and
investors would welcome such a move. By
getting closer to the European Union, the
real and perceived country risks will be re-
duced, which will improve the investment
climate, and, in a longer run, among other
elements, reduce the cost of capital. It is
also possible that, by drawing closer to the
European Union, the Serbian SME sector will
have improved access to finance and im-
proved demand for its goods and services.
When constructing its portfolio,SEAF takes a very close look
at the industries that have contra-cyclical characteristics,such
as factoring,or those that fare well in the economic downturns,
for instance energy and natural resources.Furthermore,the
investment management group also carefully analyzes other
industries that have high barriers to entry,such as the media,
financial services,healthcare and food and beverages.

14 Perspective December, 2011 15 Perspective December, 2011
Real Estate Perspective Philip Bay
Founder and Regional Partner of Colliers International for Southeast Europe and founder of Clean Earth Capital L.L.C.
cause values always bounce back even-
tually, and can actually increase during
times of war or civil strife, unlike stocks,
bonds and currency values. Real estate
has also become a very international
investment tool because of the internet
and the free transfer of capital and funds.
Since 1992, Serbia has experienced a
strong real estate growth pattern of for-
eign and domestic investment in residen-
tial, commercial office space and retail
shopping outlets, mainly concentrated in
and around Belgrade with the exception
of food-based retail and big box retailers.
This positive expansion has embedded
banking and equity investments into the
real estate market in Serbia in a manner
that has changed the capital city forever,
given New Belgrade a new purpose and
created new centers of entertainment
and business that will prove sustainable
for many years to come.
This growth could not continue for-
ever, of course, and a correction was and
is necessary. If we consider the amount
of new office space built just the past six
years - in excess of 450,000 square me-
ters - there is a limit to how many com-
panies actually needed or desired new
office space. Upscale apartment projects
were also being constructed as if every
Belgrader had piles of cash under the
mattress, and a few multifunctional build-
ings were built without a proper feasibil-
ity study on file. The good news is that
Belgrade - and most of Serbia - is a rather
complicated place to develop real estate,
so the product overhang or excess is
much less than in places like Sofia or Bu-
charest. Thus rents have not come down
to the silly levels in some of the capital
cities of the region and beyond.
More creativity is needed
Real estate is probably one of the
oldest businesses in the world. However,
it is ever changing, very cyclical and not
always (but, yes, sometimes) predictable.
2012 will not be a bad year for real estate
in Serbia if we take into consideration how
bad it is in other nearby countries. Retail
here is not yet saturated, unlike Zagreb
and Sofia which are headed for a train
wreck along with their banks. Although
vacancies in Belgrade are at 20 percent,
the cranes in the capital are not too busy
creating false promises, and this means
that the absorption rates should go up
in the second and third quarters of next
year. Residential will still be a good bet,
but more creativity in the middle range is
sorely needed.
The most important factor in assess-
ing when the crises will be over will be
the definition of the crisis. In all crises,
there are losers and winners; it just de-
pends when you are doing what.
In the past, buying a house in the US
or Europe would be considered an expen-
sive endeavor. Today, globalization has
turned many preconceived notions upside
down. Remember the three capital cities,
Addis Abeba, Sanaa and Vientiane? These
are not exactly well-known destinations
for most people. Nonetheless, if you
Google rental rates and sales prices for
homes in these cities, and compare them
with my hometown in Fresno California, a
fast growing city of 500,000, where will
find the lowest prices? Not in Ethiopia,
Yemen or Laos but in California.
Prices have dropped by more than 55
percent in Fresno in the past four years;
in Belgrade, the drop has been maybe
10 percent. So, as I asked to begin with,
when will the real estate crises end in
Serbia? First of all, somebody has to tell
me when the crisis in Serbia will begin?
Banks, investors, developers, po-
tential buyers and would-be sellers
worldwide are all asking the same
question: When is it going to end?
These stakeholders are, of course,
talking about the real estate crisis that
continues unabated in many markets
worldwide despite the fact that in some
markets, east and west, sales remain
strong and prices stable or moving slight-
ly upward.
Despite the slump, real estate con-
tinues to be the investment of choice for
many because of the psychological fact
that you can touch it and it isn’t going
anywhere. As the Germans and French
say, land and property together are “Im-
mobilien” and “immobilier”. Real estate
for the most part is immoveable, solid,
firm and almost permanent. In a world-
wide marketplace where most financial
instruments are impossible to understand
and share prices are increasingly deter-
mined by algorithms and hyper-speed,
computer-based trading, this fact matters
for many individuals and institutions. This
is definitely true in Serbia and throughout
the neighboring countries of the Balkans.
A worldwide phenomenon
Whether you live in Washington DC,
Belgrade, Tokyo or Addis Ababa, real es-
tate is by far the investment of choice for
most local residents. Why? It’s simple. Be-
“I Just Love Real Estate”
Everything that surrounds real
estate is real.As Mark Twain
once said:“Buy land,they’re
not making it anymore.”And
Donald Trump,of course,takes
it two steps further,saying:“It’s
tangible,it’s solid,it’s beautiful,
and real estate is artistic….I
just love real estate.”
Is Real Estate
Still Sexy?
At a time when overbuilding and overpricing have swamped many cities with
unwanted developments,Serbia in general and Belgrade in particular have suffered far
less in an era of widespread real estate crisis.
2012 will not be a bad year for real estate in Serbia,if we take into consideration how bad it is
in other countries nearby.Retail is not saturated yet,unlike Zagreb and Sofia which are headed
for a train wreck along with their banks.Although vacancies in Belgrade are at 20 percent,the
cranes in the capital are not too busy creating false promises,and this means absorption rates
should go up in the second and third quarters of next year.Residential will still be a good bet,
but more creativity in the middle range is sorely needed.

Businessman’s Perspective Miodrag Kostić
You have found your business inter-
est in the east, considering that you
invest in Romania. How come you
did not opt for EU members?
We invest where we see good busi-
ness opportunities and satisfactory con-
ditions. As leaders in high-tech agricul-
tural production and one of the greatest
exporters of Serbian know-how in ag-
riculture, we explore and invest in new
markets whether they are in the EU or
elsewhere. The idea is to do 50 percent
of our business outside Serbia, mostly in
Ukraine, Russia, Slovenia, Croatia and Su-
dan.
MK Group holds an enviable interna-
tional position. Its size, power and Euro-
pean business concept is best illustrated
by numerous, long-term business rela-
tions with partners in Germany, Austria,
Great Britain, Italy, Switzerland, Greece,
Russia, Ukraine and Belarus. The next
continent with investment potential is
Africa.
Are business conditions in Serbia
stimulating enough for a satisfac-
tory growth of business? Please
compare conditions with other coun-
tries?
Serbia needs a good business ambi-
ance, not one in which general insolven-
cy is encouraged by the state. The great-
est challenge for entrepreneurs is the
volatility of the business ambiance. Right
now, the Serbian government has a very
demanding role: to help businesses over-
come the crisis more easily by granting
subsidized loans, encouraging export and
facilitating business activities, for instance
by reducing credit interest rates. What we
need is a stronger inflow of foreign direct
investment, subsidies for the export seg-
ment of the Serbian economy and fina-
lization of infrastructure projects.
In order to increase exports we need
the same support measures enjoyed by
our competition in the region. Serbia al-
locates 2.8 percent of its total budget for
subsidies to agriculture. Just for the sake
of comparison, Croatia subsidizes sugar
beet with 540 euros per hectare, while
Serbia does not provide a single euro. Al-
though the usual excuse is that the state
has no money to subsidize agriculture,
my opinion is that it should borrow the
money because subsidizing agriculture
is a way of raising the GDP in the short
term, and even of indirectly repaying sub-
sidized loans.
Strategy for challenges
You are an entrepreneur who takes
advantage of the crisis to buy other
companies. What are your selection
criteria?
Every business activity of MK Group
is based on a thoroughly analyzed and
reviewed strategy. The relevant critie-
ria taken into consideration during in-
vestment planning include the business
activity itself, the company’s capacity,
staff competence, the financial situation,
potential for progress and development
and compatibility with the business ac-
tivities of other members of MK Group.
The constant business challenges that
entrepreneurs deal with more or less suc-
cessfully are an integral part of capital-
ism. The ups and downs that businesses
go through are natural processes that
help the market economy regulate itself.
In this regard, the current economic crisis,
which is quite a challenge for economic
entities, has two perspectives. First, it
can be seen as a chance for certain busi-
nesses and entities to grow and develop,
which is exactly how MK group sees the
new situation. Second, the weakening of
other business entities strenghtens our
competitor position. As a result, MK Group
engages in new investment ventures and
acquisitions.
Do you think that the next year will
be good for acquisition?
The economic crisis is expected to de-
liver its second blow next year. In such
circumstances, many companies that
have long been on the verge of efficiency
will be facing bankruptcy and liquidation.
This second wave of crisis will definitely
debilitate already weak businesses, in-
crease their debt, and seriously jeopar-
dize their liquidity. Stable companies, on
the other hand, will be able to solidify
their position in the market by acquiring
and restructuring the weak companies.
Companies that have readily met the
new weakening of economic systems will
be able to transfer their know-how and
resources to the weakened companies. In
this way, they will directly influence sta-
bilization of the entire economic system.
Bearing this in mind, I believe that next
year will be a good year for new invest-
ment ventures of MK Group.
Agriculture is often mentioned as
Serbia’s greatest economic oppor-
tunity. What is it lacking to become
just that, and is this possible, con-
sidering that only 2.8 percent of the
budget is allocated to agriculture?
How great do you see the potential
of agriculture?
Serbia’s greatest potential is, without
a doubt, agriculture. Agriculture is not Ser-
bia’s only potential, but it definitely is the
greatest. What is missing is the political
will and an awareness of this. As a result,
agricultural development measures do not
provide enough incentive. The current 2.8
percent of budgetary funds is absolutely
insufficient to stimulate export and bring
agricultural activities to the highest level.
In order to improve the existing situation
in agriculture, it is necessary to allocate
10 percent of budgetary funds. Besides,
privatization of such an important sector is
necessary, too, and experienced and suc-
cessful agricultural companies could trans-
fer their expertise to those that are not. In
addition to direct government subsidies,
banks should also get involved by provid-
ing export loans at reduced interest rates.
In our country, subsidies are not granted
on the basis of how much one produces
but on the size of land one owns. If a
farmer does not know how to cultivate ef-
ficiently a hectar of land, why keep him
on a false subsidy? Also, if someone does
not know how to work the land, they
have no right to hold onto such a national
resource and produce four tons of corn
instead of ten. They should do whatever
they are capable of, and the resourse
should be used by those who know how
to use it to the benefit of all.
The government is not a fit
body for salary negotiations
In your opinion, what could be rea-
listically achieved if entrepreneurs
got together in a form of political
movement, as has been recently an-
nounced?
People in our country often think
that any form of organization tends to
become a political movement. This, actu-
ally, does not have to be the only direc-
tion.
It is important that employers define
their interests through organizations, to
be equal participants in a socio-economic
dialogue and to work with trade unions
to realize their mutual interests. Any
form of political movement is of lesser
importance. It is true that the govern-
ment is not a fit body for salary nego-
tiations - workers should sit and negoti-
ate with their employers, whether they
are in the public, private or government
sector. Collective agreements, mini-
mum wages and ways of exercising la-
Serbia faces two serious economic challenges,
one unfavorable,the other promising,for which
it must be prepared.The first is the predicted
“second blow” of the economic crisis.The second
is EU membership,which will require a great deal
of preparation and a serious change of mindset.
Only the Fittest
Will Survive

bor rights should be jointly negotiated:
employers on the one hand, and trade
unions and workers’ representatives on
the other. When this becomes a ripe idea
in politicians’ minds we will no longer
have destroyed companies and deso-
late factories, and trade unions will not
be the ones to decide the price at which
companies will be sold.
How do you see the economic year
2012?
It is common knowledge that after the
first wave of crisis, a second, stronger one is
inevitable. Joseph Stiglitz, a world-renowned
economist, talked about this when he visited
Serbia in 2009, and we could hear at home
what had been known in economic circles
worldwide for a very long time. There is no
doubt that the first wave of the crisis hit Ser-
bia and weakened its economy and the en-
tire economic system. Because of the difficult
situation Serbia is in now, it has to have a
ready set of measures and a worked-out cri-
sis strategy for the future. I am afraid that this
is not the case, and that we are entering the
next period with an intolerable uncertainty.
Businessman’s Perspective Miodrag Kostić
Changes Have to be Fundamental
What sort of changes would EU membership bring to Serbia?
For Serbian businesses, membership in the European Union would mean stability of the
economy and a market of 500 million people.When Serbia joins the EU, the size of the arable
land of the EU will increase by 5,I097 million hectares, which is three percent of arable land
in this market. Candidate status will bring Serbia an inflow of experts from the EU and free
movement of our own labor force to EU member states. EU membership will boost further
growth of foreign investment, but a bigger market will also give additional incentives to ex-
porters. Increased export would have a knock-on positive effect on the growth of the stan-
dard of living. Of course, it goes without saying that only competitive products of our compa-
nies will be able to survive in the international market. In comparison to the EU, Serbia lacks
laws and regulations that are harmonized with economic and market rules.The point of the
legal frameworks of modern European industrial countries is to create favorable conditions
for economic growth. EU membership would involve setting up an appropriate legal frame-
work. On the other hand, the fact that Serbia is no stranger to failing to apply current laws.
Changes, therefore, cannot be just declaratory.We have to focus on fundamentally changing
our usual bad practices, and we should do this for our own good, not because someone else
ordered it.

IPR Committee Perspective Vuk Pribić
Chairman of AmCham’s Intellectual Property Rights Committee and Government Relations Manager in Japan Tobacco International
produced and submitted recommendations for the creation of
the 2011-2015 Intellectual Property Development Strategy.
Generally speaking, how would you describe the regula-
tions governing intellectual property protection?
These regulations are harmonized with European legisla-
tion, and the harmonization process continues. From time to
time we revise certain laws. Like all other regulations, these
are alive and subject to change. So, the issue is not so much
in the content of regulations or whether they follow IPR devel-
opments here and in other countries. Their implementation is
the issue. If we analyze the regulations, we will find that the
legal framework has been finalized, not just formally but also
essentially.
How efficient is the implementation of laws regulating
intellectual property rights?
It is not efficient enough, but it is a work in progress. How-
ever, we at AmCham’s top level consider that the implementa-
tion of the laws is a matter of political consensus. But proper
data exchange should be established at the operational level.
The first chance for that, after the IPR conference, would be, for
instance, the announced establishment of a coordinating body
as envisaged in the strategy. Efficient data exchange, primarily
in Serbia but also at the regional level, should help the state
implement all these regulations more efficiently so that regula-
tion is not just a dead letter. Some bodies already engage in the
data exchange, such as the SELEC in Bucharest, thus helping to
prevent the occurrence of criminal offenses related to intellec-
tual property rights. However, further regional liaising, especially
when it comes to consumer goods or data exchange in the area
of high-tech crime, is of crucial importance. An agency ensur-
ing a coordinated approach in law application should be estab-
lished in line with the announced strategy. We should not wait
for new IPR regulations; we should apply the ones we have.
Besides implementation, one of the key elements for combating
counterfeiting and piracy is an understanding of the consumers’
purchasing power, both by the state (reasonable taxation, etc.)
and industry.
Sentencing is crucial
What is the authorities’ penal policy? Should they intro-
duce more rigorous penalties or focus on prevention of
IPR violations?
The authorities should primarily focus on prevention, on
raising awareness and on monitoring the standard of living of
the population. They should make the original goods available.
Whenever the authorities talk about counterfeited goods, smug-
gling etc., they should first consider the local standard of living.
This is a general precondition. Solvency is the key question, and
everything else is linked to it. On the other hand, the penal pol-
icy should be stiffened concerning penalties for offenses against
intellectual property. For instance, repeat offenders should be
incarcerated rather than given probation. Nothing will be gained
by extending jail sentences for certain offenses from one to five
AmCham has been advocating the completion of the
regulatory framework in the area of intellectual prop-
erty rights - a very important element for doing business
in Serbia - through its Intellectual Property Right Com-
mittee. What has been done so far? How has AmCham
helped fight piracy and counterfeiting?
Over the past seven years and nine IPR conferences we have
organized - plus a number of meetings (internal and external)
and the proposals and recommendations submitted to the Gov-
ernment and ministries - a lot has been done. We have raised
awareness of what counterfeited goods are and why the origi-
nals should instead be purchased. And this year a legal frame-
work has been completed with the adoption of the Optical Discs
Law and the Protection of Trade Secrets Law. A special unit with-
in the Tax Administration with the task of monitoring the legality
of software used by companies has been formed. We have also
Improved Enforcement of
IPR Laws Would Save Serbia
Effective regulations to combat and
punish Intellectual Property Rights
piracy and counterfeiting are on
the books,but regional cooperation
and strict enforcement could boost
the legitimate economy by multiple
millions of dollars.

IPR Committee Perspective
years to three to ten years unless the courts impose these sen-
tences. The essence is in sentencing.
To what extent have customs procedures improved in
discovering counterfeited goods? Has there been any
progress?
Regulations prohibiting goods with a trademark from cross-
ing the border without notifying the trademark holder have
been implemented for years now. The system functions. The
Customs Administration does its job well. And it would probably
do it even better if regional cooperation were improved, as it’s
physically impossible to inspect all the goods crossing the border
without affecting the flow. You cannot inspect all one hundred
trucks waiting on the border without completely blocking traf-
fic. It would be the best if customs officers were informed in
advance about smuggled goods and also about counterfeited
goods in cross-border traffic. It’s not enough to have scanners
and other technology. It is information that counts. Being accu-
rately informed that certain goods are about to cross the border
will facilitate effectiveness immensely. This is why I think the
work of the Customs Administration would be improved by rais-
ing the level of regional cooperation.
Multi-billion dollar losses
How big are the financial losses due to violations of in-
tellectual property rights?
OEBS estimates that corporate losses due to piracy and coun-
terfeiting, mostly in the software and film industries, exceed six
hundred billion dollars a year. According to the US International
Chamber, American companies reported losses of around 48 bil-
lion dollars due to counterfeiting in China in 2009. According to
the latest data, in neighboring Romania the state has lost around
800 million euros in revenue due to illegal trade, and one sports
stadium costs 234 million.
How big a loss has Serbian economy suffered because of
violation of intellectual property rights?
Once again, I invite state institutions to produce a strategy
- it could be a joint effort with AmCham - to provide at least an
estimate of the loss. At the moment, we have only the data pro-
vided in the IPT study (2010), according to which the reduction
of piracy by ten percent would save around 30 million dollars.
What do the EU indicators show? Where does Serbia
stand relative to the EU countries when it comes to IPR?
One of the reasons the development strategy was adopted
was to harmonize Serbian with European and other international
regulations. However, although the legal framework is complete
at this moment, that doesn’t mean that it shouldn’t be improved
or that some other regulations shouldn’t be adopted. Let us say
that the average piracy rate is between 40 and 45 percent in
some EU countries, while it is estimated at 74 percent in Serbia.
When compared to the EU, the bigger problem is the solvency
of the Serbian population. Another element is that in the EU it is
just not normal to buy goods such as CDs and DVDs from street
vendors. There are both habits and responsibility at a higher level
as to where these products are bought and why people should
buy the originals, not forgeries. In terms of legislation, we have
reached a good level, but we are far below the European aver-
age when it comes to the level of awareness. There is still a lot
to be done in the application of regulations. Statistics on court
sentences for piracy and smuggling of counterfeited goods are
still lacking. This type of data remains elusive, and I’m glad that
the World Bank has announced that such a study is in prospect.
Benefits of progress
Reductions in software piracy produce widespread economic benefits. The BSA-IDC
Piracy Impact Study found in 2010 that reducing the global piracy rate for PC software by 10
percentage points - 2.5 points per year for four years - would create 142 billion dollars in
new economic activity globally by 2013 while adding nearly 500,000 new high-tech jobs and
generating 32 billion dollars in new tax revenues for governments.On average,more than
80 percent of these benefits would accrue to local economies.Clearly,concerted action to
ensure strong protection for intellectual property and to reduce software piracy should be a
priority.Indeed,the fact that many countries succeeded in lowering their piracy rates in 2010
shows the value of sustained anti-piracy efforts that build equity over time.
2010 Piracy study: Eight annual
BSA GLOBAL SOFTWARE research
The eighth study of piracy in 2010,pub-
lished by BSA GLOBAL SOFTWARE in
May 2011,provides the following piracy
data per region in 2009 and 2010:
Region 2009 2010
in % in %
Central Eastern Europe 64 64
Asia - Pacific 59 60
Middle East Africa 59 58
Global 43 42
European Union 35 35
Western Europe 34 33
North America 21 21
23 Perspective December, 2008 23 Perspective July, 2008
Smiljanićeva 24/I, 11000 Beograd
Tel: (+381 11) 30 88 132, 34 46 437
Fax: (+381 11) 30 88 922
info@amcham.rs
www.amcham.rs
AmCham Serbia monthly e-service
also available on www.amcham.rs
Business
Advocacy
Update

Serbia is moving towards the EU? These
are the questions asked in public opinion
polls. This time, we should start with the
most important one: What would be the
result of a referendum on Serbia’s acces-
sion to the European Union? Out of the
three quarters of those who would have
previously voted for the EU, we arrive
at around half who would now support
Serbia’s accession to the EU. The lowest
point was reached after the visit of the
German Chancellor and her message to
Serbia. At that moment the number of
those who were against the EU soared.
However, there are two important con-
siderations that we need to bear in mind
before we comment on these numbers.
First, even at the moment when the pro-
cess of Serbia’s integration in the EU was
at its lowest point, a significant majority
still supported Serbia’s accession to the EU.
Had a referendum been held in November,
2011, some 49 percent of the population
would have been for it and 29 percent
against. Translated into a referendum result,
62.8 percent would have voted for the ac-
cession, and 37.8 percent against.
Second, even at times when the EU
had the greatest support, this would drop
considerably at the mention of the Koso-
vo issue or recognition of Kosovo as a
precondition for Serbia’s EU membership.
With this condition included, the sup-
port for Serbia’s journey to the European
Union lingered around 50 percent. Since
September 2011, asking this hypothetical
question made no sense at all as news-
papers were full of headlines on “new
conditions” and “the necessity to recog-
nize the independence of Kosovo in one
way or another”. In such an atmosphere,
the current percentage of those who are
“for” is not even comparable with the
datum indicating over 70 percent of the
survey sample supported the EU, but with
the one indicating the percentage of sup-
porters regardless of conditions. There
are some 15 percent of those who say
they have changed their minds “lately”.
One third of the surveyed sample leans
towards the EU, two thirds are against
it. The great majority of those who are
no longer pro EU says that they have
changed their minds because of “constant
conditioning, Kosovo, etc.” But there are
also those whose given reasons are the
“bad economic situation in the EU and the
negative experiences of other countries.”
Criticism as a characteristic of
Serbian public opinion
The Serbian public is traditionally very
critical towards institutions and public of-
ficials, and their approval rate is usually
low, especially for institutions that are the
pillars of democracy. Bearing this in mind,
the number of those who would give the
EU a pass grade is reasonably high, and
the EU ranks much higher than the Serbi-
an government or the Serbian Parliament.
The view of the EU is conspicuously event
driven, and reasons for every peak and ev-
ery trough can be easily found-from posi-
tive events such as the adoption of the SAA,
the Eurovision Song Contest in Belgrade or
Serbia getting on the White Schengen List,
through the negative effects of the arrest of
the Hague indictees or, as was done by the
German Chancellor, billing Serbia directly.
Among those who have a positive view
of the EU in general and think that Serbia
should join the Union, there are those who
believe that such a future would be good
for them as individuals, too. When it comes
to the EU, it is younger and better-educated
people who are normally pro EU and who
can see the benefits of the EU member-
ship for themselves as individuals, whereas
older people and those with less education
are on the opposite side. They are the ones
who have a multitude of fears-from those
transcending personal perspective through
the fear that Serbia could lose its identity.
However, even among those who do not
believe that the EU will bring any benefits
to them personally, the dominating view is
that it would mean a better future for their
children.
Lower expectations
The first five years of the 21st century
were marked by great support for the EU.
The ratings of the pro EU and anti EU po-
Reading the intentions of the Serbian public
regarding accession to the EU is perilous due to
the many influences that cause public opinion
on this tricky and emotional subject to defy logic
and even rationality.
When it Comes to the EU,
Serbs Are Polls Apart
T
he dissolution of Yugoslavia was defi-
nitely a traumatic experience for the
majority of people in Serbia. The federa-
tion with a single legal tender and seven
central banks and seven ministries of fi-
nance was similar to Europe today or, at
least in this aspect, similar to the euro
zone. The SFRY was being dismembered.
Serbia is practically the only territory that
was not fought over - a kind of a leftover.
After such a traumatic disintegration
of the country, wars and the destruction
of the economy despite surviving sanc-
tions, Serbia entered the 21st century
with the regime of Slobodan Milošević
deposed. Its citizens entered the new
century with great expectations - from a
rising standard of living and thinking that
it was only a matter of days until Serbia
would be in Europe (again!). The reality
was different: Serbia’s political develop-
ment was volatile in every way, even
regarding the distance that Europe main-
tained towards Serbia and vice versa.
Since 2000, Ipsos Strategic Market-
ing has regularly, at least once a month
based on random survey samples, con-
ducted public opinion polls on the Euro-
pean Union and the possible integration
of Serbia in the EU.
The perception of Serbia’s European
perspective is a reflection of media infor-
mation and misinformation and political
use and misuse of the subject. In brief,
that perception is often very confused
and it sometimes appears inconsistent.
However, whenever a concept was fully
and clearly explained to people, public
opinion would often become logical and
better than that to which can be heard
from the political establishment.
Changes in public opinions
Does Serbia want to join the EU? Un-
der what conditions? What does it expect
from the EU? What are its hopes, its fears?
How well does it know the EU and the
accession process? Are Serbians satisfied
with the speed and manner in which
EU analysis Perspective Srđan Bogosavljević
General Manager, Ipsos Strategic Marketing
Out of three quarters of those who would have voted for
the EU in the past,we have come to around half who would
support Serbia’s accession to the EU.The lowest point was
reached after the visit of the German Chancellor and her
message to Serbia.At that moment the number of those who
were against the EU soared.
EUanalysisPerspective

litical parties were almost identical, but
the parties that declared themselves as
opposing the European integration pro-
cesses had a somewhat higher rating.
With the splitting of the Serbian Radical
Party and the establishment of the Ser-
bian Progressive Party clearly declaring
itself as a party that wants Serbia in the
European Union, the ratio changes. The
anti European Union parties are support-
ed by only 10 to 15 percent of surveyed
voters, while pro EU parties get nearly
80 percent support. If we add the minor-
ity parties, the support exceeds 85 per-
cent, reaching 88 percent maximum. Of
course, the number of those with clear
voting intentions between two elections
is not high. Nor do the voters necessarily
want to follow their favorite party’s’ di-
rections, but this significant change has
made Serbia’s EU perspective more cer-
tain. It should be pointed out that pub-
lic expectations are considerably lower
now and that almost no one hopes for a
speedy entry into the EU.
Compared with the early 2000s,
marked by a high percentage of citi-
zens supporting the EU and expecting
that Serbia would join the EU quickly,
and the relatively high ranking of anti
European parties, now we have a lower
percentage of those who would support
EU membership in a referendum, and
of those expecting that it will happen
overnight, but also a high ranking of the
openly pro EU parties. Now that elec-
tions are on the horizon and we cannot
see any, let alone a widely accepted,
solution to the Kosovo issue, we often
hear the statements of pro European
politicians and parties that can be inter-
preted as Euroskeptic and even opposed
to the idea of EU integration. However,
none of the likely outcomes of the par-
liamentary elections in 2012 foreshad-
ows a government that will not be
composed of parties claiming to be for
Serbia in the EU, which will create con-
ditions for a new expansion of pro-EU
ideas among Serbian citizens. However,
the process will be threatened from two
directions-even minimal progress will
have to be made regarding outstand-
ing Kosovo issues. At least a solution to
the problem of the safety of Serbs and
their property in Kosovo will have to be
found, and the euro crisis and relations
among the EU members will have to be
resolved.
If a referendum on our country’s membership in the EU were held this Sunday,
how would you vote?
Percentage of citizens with a positive attitude towards the EU
EU analysis Perspective Srđan Bogosavljević
General Manager, Ipsos Strategic Marketing

Taxation Impact Perspective Dragan Drača
Senior Manager, Tax Services PwC Serbia, and Member of the Steering Committee of the AmCham Serbia Tax Committee
T
he European Union does not have a
common tax system. However, it does
have directives binding all members and
imposing certain principles of taxation. A
draft Directive was published on 28 Sep-
tember, 2011, and proposed an EU-wide
foreign transactions tax (FTT). This would
apply to a wide range of transactions in
financial instruments (including equities,
bonds, derivatives and foreign currency)
undertaken by EU-based „financial insti-
tutions” including banks, insurance com-
panies and leasing companies.
The rate of this FTT would be fixed
by each member state, but the minimum
rate should be 0.1 percent for financial
transactions and 0.01 percent for deriva-
tives. A number of senior politicians from
individual member states have com-
mented on the proposed FTT since the
release of the draft Directive. Arguably
the most vocal of these have been Wolf-
gang Schäuble, the German Finance Min-
ister, a strong advocate of the FTT, and
George Osborne, the United Kingdom’s
Chancellor of the Exchequer, who is op-
posed to the FTT unless it is adopted at a
global level.
The recent draft EU
proposal to impose a
foreign transactions tax
on financial instruments
not only threatens to
divide the 27 members
but offers the specter
of migration of financial
services institutions
from EU countries as
well as increased costs
of doing business.
A Proposed Tax Shakes EU
Fault Lines
TaxationImpactPerspective
The FTT was also one of the items
on the agenda of the G20 Summit held
in Cannes, France on 3-4 November. The
meeting considered a report by Bill Gates
regarding innovative ways in which de-
velopment aid might be financed in the
future, which referenced an FTT as one
potential option. The FTT was also dis-
cussed by European finance ministers at
the ECOFIN meeting in Brussels on 8 No-
vember, although no consensus view was
reached on its introduction.
Concerns
In addition to these official discus-
sions, the FTT proposals continue to re-
ceive widespread coverage, and in many
cases support, from other bodies including
charities and other Non-Government Or-
ganisations (NGOs), the wider public and
even religious leaders. There are diverse
views among the 27 EU member states.
So far, nine countries have spoken in fa-
vour of an FTT (including Austria, Belgium,
France, Finland and Germany), and six op-
posed this idea (UK and Sweden among
them). Seven countries have not formally
opposed the proposals, but expressed
concerns (including the Netherlands, Italy
and Romania). Five countries have not yet
presented their views.
Given the highly charged political at-
mosphere surrounding the FTT proposals,
there is a very real risk that some funda-
mental tax policy concerns raised by the
proposals will not receive a fair hearing
and could have an adverse economic im-
pact on both the financial services indus-
try and the wider economy within the EU.
These include the question: is the financial
services industry under taxed? One of the
justifications put forward by the EU Com-
mission in support of an FTT is that the fi-
nancial services sector “is currently under
taxed by comparison with other sectors”
by virtue of the VAT exemption on finan-
cial services. Then, there is the absence of
a look-through approach and the cascad-
ing impact of an FTT by virtue of the way
in which it is currently structured. Single
transactions may result in multiple FTT
charges, with the result that the overall
level of tax cost associated with the trans-
actions may be well in excess of the 0.1
percent and 0.01 percent headline rates.
Included in ongoing discussions is also
the impact on savers and pensioners. The
definition of “financial institution” con-
tained within the draft Directive includes
investment firms, collective investment
schemes, pension funds and their man-
agers. As holders of some of the largest
pools of investable financial assets, it is
clear that these institutions would bear a
significant proportion of the cost of an FTT.
On the same list are the costs to the
real economy. Non-financial services com-
panies utilise a wide range of financial
products in order to conduct their busi-
nesses. To the extent that financial institu-
tions are subject to an FTT in respect of
these types of transaction, this is likely to
lead to an increase in the price of such
products to the end-user. This ultimately
would lead to increased cost to the fi-
nal consumer of the relevant product. Of
concern is also the Impact on risk man-
agement activities. Many financial and
non-financial institutions utilise financial
products to manage risk (i.e. through
hedging). To the extent that the price of
such products increases as a result of the
imposition of an FTT, there is a risk that
companies may choose not to hedge their
exposures, which would result in an in-
crease in the level of risk. Relocation of
financial services business is a prospect
on top of the increasing regulatory burden
being imposed on the financial services
industry within the EU. The introduction
of an FTT at EU (or narrower) level might
further increase the risk of relocation of
financial services activities out of the EU.
The EU Commission may consider this a
desirable (and indeed intended) result in
respect of certain activities, such as high
frequency trading, but it is likely that
other types of financial services business
may also migrate, which would have a
damaging effect on the wider EU financial
services industry. The inability of an FTT to
discriminate between what is considered
“good” versus “bad” types of financial
transaction is one of its more significant
flaws. In the end, there is the compliance
burden. The imposition and collection of
an FTT would impose a very significant
additional compliance burden on those
financial institutions covered by the tax.
Urgent need for clarity
The debate on an FTT must be seen in
the context of the current highly charged
political debate in Europe concerning
strengthening of economic convergence
within the EU/Euro zone, improving fiscal
discipline and deepening the economic
union, including even the possibility
of limited EU Treaty changes. EU lead-
ers met again on 9 December to discuss
these matters. The Euro Plus Pact member
states (23 of the EU 27) discussed prog-
ress on national implementation of the
Pact’s commitments, including a report
of their Finance Ministers on progress
made on coordination of tax policy issues.
There’s an urgent need for clarity among
all parties on an FTT. And in view of the
current Euro crisis, it cannot be ruled out
entirely that certain EU leaders will try to
speed up the introduction of an FTT in a
subset of EU member states.
Denmark will take over from Poland
the rotating six-month EU Presidency on
1 January, 2012. The FTT is earmarked as
a top priority initiative. The Danish presi-
dency may, therefore, be instrumental in
taking the FTT further. An important date
may be the final ECOFIN meeting under
the Danish presidency on 19 June, 2012.
Given the political nature of the de-
bate surrounding an FTT and the wider po-
litical uncertainty within the EU generally,
it is difficult to predict at this stage where
the proposals may ultimately land.
There are diverse views amongst the 27 EU Member
states in relation to the FTT proposals.So far nine
countries have spoken in favour of FTT (including
Austria,Belgium,France,Finland and Germany),six
are opposed to this idea (the UK and Sweden among
them),while seven have not formally opposed but have
expressed concerns (including the Netherlands,Italy
and Romania).Five countries have not yet presented
their views.

31 Perspective December, 201130 Perspective December, 2011
AmCham Serbia 10th
Anniversary Celebration Gala Dinner, October 6, 2011
The American Chamber of Commerce has celebrated its 10th
anniversary
in Serbia.The reception was attended by Boris Tadic,President of the
Republic of Serbia,HE MaryWarlick,US Ambassador to Serbia,Slavica
Ðukic-Dejanovic,President of the Serbian Parliament,Serbian Government
ministers and top officials,and more than 300 representatives of the business
sector and AmCham member companies.

AmCham Serbia 10th
Anniversary Celebration Gala Dinner, October 6, 2011

Serbian-American Business Perspective AmCham Investment Promotion activities
Congressman Burton’s mission is to raise
awareness on specific Serbia-related is-
sues among his fellow Congressmen.
Since one of the goals of the visit was
to open discussions on a Double Taxation
Treaty between the US and Serbia which
would facilitate tighter economic and
commercial ties between the two coun-
tries, Bojana Ristić pledged to brief Con-
gressman Burton’s staff on the outcome of
the meeting with the US Treasury planned
for later that week. Also, they agreed on
tighter cooperation going forward.
The delegation also met with Peter
Rashish, Vice-President, Europe and Eur-
asia of the US Chamber of Commerce
in Washington D.C. At that meeting,
Minister Ćirić underscored the invest-
ment opportunities in the energy and
ICT sectors in Serbia and invited rep-
resentatives and members of the US
Chamber of Commerce to visit Serbia
next year. AmCham Board President,
Miloš Đurković, who in parallel repre-
sented HP Serbia, emphasized the fact
that there are many opportunities for
American companies in the Serbian
ICT sector, including modernization of
the Broadbent infrastructure and in the
public sector. He mentioned HP’s large-
scale support systems that operate in
Slovakia and Bulgaria and employ seve-
ral thousand people as good models of
what could be replicated in Serbia.
Highlights and conclusions
During a presentation for the members
of the Business Council for International
Understanding (BCIU) a Washington D.C.-
based association of more than 150 leading
companies, the AmCham representatives
highlighted the fact that commercial and
economic cooperation will be even stron-
ger and more significant for both countries
in the future. Recent direct investments by
US companies Sitel and Copper Tires repre-
sent a positive signal for future investors, as
well as for local growth and job creation.
After the BCIU presentation, a del-
egaton comprised of US Ambassador to
Serbia Mary Warlick, Serbian Ambassador
Vladimir Petrović, Minister Ćirić, Bojana
Ristić and Silvia Savich, Serbia Desk Of-
ficier, US Department of Commerce, went
for a meeting with representatives of the
International Tax Policy Department of
the US Treasury. Specifically, Minister Ćirić
wanted to initiate talks on a Double Taxa-
tion Treaty (DTT) between Serbia and the
US.
Minister Ćirić presented a joint agen-
da in that AmCham believes that a DTT at
between Serbia and the US would have a
very positive effect on mutual economic
cooperation. In terms of next steps, the
delegation was instructed to pursue an
analysis on the extent of the double
taxation problem for US companies doing
business in Serbia, with examples of why
foreign tax credit is not enough.
US Treasury representatives com-
mented positively on the fact that the
level of inward US investment in Serbia
now exceeds two billion dollars as the
US Treasury takes a look at the countries
where there is already significant US in-
vestments. In addition, the US Treasury
invited AmCham as a collective body to
write directly to it on this issue. The final
step will also involve consulting an NFTC
study on why members think concluding
a treaty with Serbia is important.
Finally, the AmCham representatives
met with Skip Kissinger, the head of the
Market Transition Division at USAID, and
his staff and discussed the potential for
public/private partnerships in reaching de-
velopment goals for Serbia, especially in
underdeveloped regions, based on similar
examples from other transition economies.
Of the 810 million dollars the US Govern-
ment has invested in Serbia during the
past decade, 663 million dollars has been
channeled through USAID. USAID is very in-
terested in continuing to discuss with Am-
Cham members partnership opportunities,
and Ristić invited them to forward good ex-
amples of similar projects from our region.
Since AmCham strongly believes that
current investors provide the best incen-
tive for future investors, AmCham pre-
sented, alongside Minister Čirić and the
US Embassy representatives, the most
important aspects of major US invest-
ments in Serbia. Attended by member
companies of the Chicagoland Chamber of
Commerce and the Illinois Trade and In-
vestment Office, the event was organized
by SNR Denton, a Chicago-based law firm,
and held on the 78th floor of the Willis
Tower (former the Sears Tower). During
a QA session, companies in attendance
sought to understand more about political
stability in Serbia, access to Government
and key decision-makers, Serbian EU pros-
pects, and also inquired about major infra-
structure projects in the pipeline.
Flying the Serbian Flag
in America
W
ith the level of US investment in
Serbia now exceeding two billion
dollars, AmCham Serbia representatives
Miloš Đurković, AmCham Board Presi-
dent and General Manager of HP in Ser-
bia, and Bojana Ristić, executive director
in mid-December had an opportunity to
meet business people in the USA who ex-
pressed a strong interest in investing in
Serbia.
These AmCham representatives
joined an official Serbian-American dele-
gation comprised of US Ambassador to
Serbia Mary Warlick and Commercial At-
taché Bradley Harker, Serbian Minister
of Economy Nebojša Ćirić and the head
of SIEPA Božidar Laganin on a business
trip to Washington, DC and Chicago. The
visit also included a meeting with the US
Treasury International Tax Policy Depart-
ment, where the prospects of concluding
a Double Taxation Treaty between Serbia
and the US were discussed.
On the first day of the visit, the Am-
Cham representatives were joined by a
delegation from the Serbian state natu-
ral gas company Srbijagas led by General
Manger Dušan Bajatović, which presented
the company’s main projects to the mana-
gement of the Export-Import Bank of the
United States (Ex-Im Bank), the official
export credit agency of the US federal
government, as well as to the manage-
ment of General Electric, the largest US
industrial group.
Discussed topics
The delegation was informed that
Ex-Im Bank set export finance records,
including overall financing that for the
first time exceeded 32 billion dollars and
supported 41.3 billion dollars in exports
by more than 3,600 U.S. companies. Srbi-
jagas representatives presented potential
heating and thermal power plant projects
in an amount exceeding 1.5 billion Eu-
ros related to South Stream and inquired
about the contact person at Ex-Im Bank
for further discussions.
Bojana Ristić had an opportunity to
meet with Congressman Dan Burton’s
staff member, Brady Howell. Congress-
man Burton is the Chairman of the Sub-
committee on Europe and Eurasia and a
Serbia Caucus Co-Founder and Co-Chair-
man. After a brief discussion on a general
economic and political overview of Ser-
bia, the delegation learnt that a part of
AmCham officials joined US Ambassador Mary
Warlick and other Serbian and American officials
in an embassy-arranged mission to Washington,
DC and Chicago to promote Serbia as an
attractive investments destination and discuss a
wide range of other commercial and economic
matters of interest to both countries.
Disclaimer: Due to lack of official data on individual investments, data are based on AmCham research and include both finished
and planned (announced) investments. We cannot assume responsibility for any errors or omissions therein.
Advantages of
Investing in Serbia
Minister Nebojša Ciric
underscored the fact
that Serbia’s investment
regime is improving as
Serbia adopts market
reforms and meets EU
accession criteria.Ciric
highlighted some of the
advantages of investing
in Serbia:
• Favorable geographical
position and proximity
to large markets
• Free trade agreements
– potential for duty-free
access to the markets of
EU,CEFTA,the Russian
Federation,Kazakhstan,
Belarus,Turkey
• Qualified and
competitive labor force
(75.000 high school
and 27.000 university
graduates per year,11
technical faculties and
71 technical schools)
• Intensive investment
cycle in infrastructure
and energy sector
• Generally no restriction
on investments
• Attractive tax regime
• Financial incentives
• Encouraging FDIs
through PPPs
• On-going process of EU
integration andWTO
accession
• Regional cooperation -
reaching new heights of
attractiveness as an FDI
destination

T
he Serbian print media are paying significant attention to the current economic crisis,
especially in the European Union (the term “economic crisis” was used in more than
2,100 articles in 2010 and so far in more than 1,800 articles this year), its causes, the
impact on the euro and the stability of the EU. Newspapers are also addressing the con-
sequences of the economic crisis on Serbia, specifically its effect on the level of foreign
investments, exports, the dinar exchange rate, etc., and also the effect that the crisis
has on the process of European integration for Serbia.
Some articles convey negative comments regarding the economic model of the
EU, where the crisis emerged as a consequence of the poor structure of the European
system, excessive bureaucracy and regulations. But most articles on this topic are not
critical of the EU economies, but do express a measure of concern and distrust of the
EU economic system and emphasize its weaknesses. Facts related to the debts of EU
countries, fiscal deficits, the increase in unemployment and suspicions related to the
recovery of European economies as well as pessimistic statements by European officials
conveyed by the media in Serbia paint a dreary picture.
The Serbian print
media are intensely
interested in the state of
the economic crisis in
Europe with a growing
degree of skepticism as
to Serbia’s future in the
EU.
Casting a Critical Eye
on Europe
MediaPerspective
The uncertainty of the future brought
about by the crisis also contributes to this
negative tone, as do both its economic
and political consequences, which even
experts are often not able to predict.
Also, contrasting opinions and forecasts
by economic analysts have been pub-
lished, which created additional confusion
and insecurity. This is why an opinion that
is increasingly voiced in Serbian newspa-
pers is that one should rely on one’s own
resources, that solution of the crisis must
be sought at the national level.
No media interest in domestic
business abroad
On the subject of Serbian companies
operating in Europe, there are practically
no articles, and information is reduced
to the experiences of Serbian companies
in the region and possibly in Russia and
the Ukraine, where Serbians are invest-
ing. These articles mainly focus on the
obstacles and difficulties that Serbian
companies face in the region, especially
in Croatia (the latest example is the case
of Slobodan Vučićević), while the advan-
tages of foreign markets and investment
and export opportunities for Serbian com-
panies are especially reported in the case
of Russia. This year Russia is mentioned
in newspaper commentaries as an alter-
native market for Serbian exports, i.e. a
market where Serbia should refocus as a
result of the drop in demand in the EU
due to the economic crisis.
Similar reverberations followed the
statement by Kori Udovički, UNDP Direc-
tor of the Regional Bureau for Europe and
the CIS, in which she recommended turn-
ing to third markets, especially to China.
This was, she said, not only because of the
present intensity of the European crisis, but
also the suspicion that the West will not
be moving forward at a fast pace any time
soon. Even though she does question the
necessity of the process of accession to
the EU, Udovički also recommends turning
towards oneself to resolve local problems
rather than merely fulfilling the criteria for
admission to the European Union.
Hot EU topics
Serbian economic analysts expressed
special concern in connection with the fi-
nancial crisis in Greece and Italy, countries
that are our great foreign trade partners
and whose companies are among the
largest investors in Serbia. The devel-
opment of the economic crisis in these
countries and the impact on the euro and
the functioning of the EU are topics that
Serbian newspapers are interested in, not
only because of the economic aspects, but
also that of European integration. Should
Greece opt out of the euro zone or even
withdraw from the EU, the future of the
EU would be brought into question and,
consequently, the purpose of the European
integration processes for Serbia.
However, the issue is not whether the
EU will still exist by the time Serbia meets
all the conditions necessary for accession,
but rather the image of the EU that was
created - a symbol of economic prosperity,
high-quality of life and security - which is
being destroyed in the minds of Serbians
with the advance of the crisis in Europe.
Precisely this ravaging of the image of a
higher standard of living that awaits us in
the EU is presently the antagonist of fur-
ther EU integration. This is why, accord-
ing to some analyses, in addition to the
Kosovo dilemma, the deepening crisis in
The term “economic crisis” was mentioned in more
than 2,100 articles in the Serbian print media in 2010
and so far in more than 1,800 articles this year.
Media Perspective Velimir Ćurgus Kazimir, Director, Ebart Media Archive
Ratko Bojović, Economics Editor, Ebart Media Archive
“The Future of the EU”
One of the best texts on the situation in the EU and
its future, possibly an article of historic importance,
was written by Radoslaw (Radek) Sikorski, the Polish
Minister of Foreign Affairs. Entitled “Poland and the
Future of the European Union”, it is actually a speech
that he gave at a conference in Berlin on 28 November,
2011. None of the newspapers in Serbia have yet
published this exceptional article, an analysis of the
state of the European Union.Today it is available
only on the Pešcanik website (www.pescanik.net).
Perhaps this speaks most eloquently of the readiness
and professionalism of Serbian media to face what is
happening not only in Europe but also in their own
country.
Velimir Ćurgus Kazimir

the EU is a second reason for the increase
in euro-skepticism in Serbia. There is sim-
ply a decreasing number of people who
perceive European Union assistance as Ser-
bia’s route out of the economic crisis, while
arguments in favor of European integration
are often reduced to benefits from EU ac-
cession funds and greater donations that
would be available to us if Serbia’s status is
changed from potential candidate to candi-
date for EU membership.
The opinion that the Serbian public’s
perception of European integration, the
economic future and generally the direc-
tion that Serbia will be heading is chang-
ing through the prism of the economic
crisis is supported by statements by Ser-
bian officials, primarily Serbian President
Boris Tadić. Though in late 2008 a percep-
tion of the global financial crisis was that
it was a potential opportunity for Serbia’s
speedy development, today the crisis and
its impact on the Serbian economy are
commented on cautiously, emphasizing
the need to create an advantageous envi-
ronment for attracting foreign investment
and increasing employment.
According to President Tadić, regard-
less of the crisis the EU is in presently, it
would be devastating to back away from
European integration and EU membership,
this being the best system of legally regu-
lated acts, human rights norms and policy
ensuring peace. It would also be difficult
to find alternative routes of economic co-
operation with China, Brazil, African coun-
tries, as well as Russia.
Through the Greek and Italian
prism
The economic crisis in the EU is un-
doubtedly mainly presented through re-
ports and commentaries on the political
consequences of the crisis in Greece and
Italy. Marginally present is the perception
that the dominant belief of the German
and French media is that the establishment
of financial discipline will be successful.
Large and influential newspapers appear
very constructive, even when they are sid-
ing with the opposition. This is highly no-
table in Italy. Following the toppling of the
government and the founding of a new
technical cabinet headed by Mario Monti,
there existed an euphoric feeling that all
their problems will be quickly resolved. In
the Greek media there is an apparent pro-
cess of facing reality, with an attempt to
reduce anti-European sentiment among
the public. In Spain, the media mainly ad-
dress the situation in their own country,
without focusing much on the fate of the
euro zone. However, what these media
have in common is the apprehension that
the collapse of the euro would entail disas-
ter for everyone. There are forecasts that
the collapse of the euro would mean that
in the first year small countries would lose
up to 50 percent of their GDP, and large
countries up to 25 percent, with losses
continuing over the next several years and
a gradual reduction of the rate of descent.
Media Perspective Velimir Ćurgus Kazimir, Director, Ebart Media Archive
Ratko Bojović, Economics Editor, Ebart Media Archive
The issue is not whether the EU will still exist by the
time Serbia meets all the conditions necessary for
accession,but rather the endurance of the image of the
EU that was created - a symbol of economic prosperity,
high-quality of life and security - which is being
destroyed in the minds of the people of Serbia with the
advance of the crisis in Europe.Precisely this ravaging
of the image of a higher standard of living that awaits
us in the EU is presently the antagonist of further EU
integrations,which is why according to some analyses,
in addition to the Kosovo dilemma,the deepening
crisis in the EU is a second reason for the increase in
euro-skepticism in Serbia.
Ratko Bojović

The Energy sector produces debts
In addition, the misspending of the state budget on gasifica-
tion in Serbia must be stopped urgently, since thousands of citi-
zens and thousands of companies already owe huge amounts of
money for district heating, and almost everybody who could has
replaced their gas heating with electric or coal heating. Serbia
can certainly find its own interest in the gas pipelines passing
over its territory, supplying other markets that can pay the price.
There are no objections to that. However, it has already become
obvious that the artificial gasification of all Serbia has led only to
the situation that Srbija Gas has become the owner of a series of
companies undergoing bankruptcy. This means that the energy
sector not only fails to develop the economy, but on the con-
trary, produces debts for the economy and citizens so huge that
it becomes impossible to pay them.
Investments in waste-to-energy plants or wood palette fa-
ctories are allegedly too expensive, but it is considered absurd
to discuss the matter. Indeed, enormous amount of state funds
are being invested in gasification while, on the other hand,
thousands of tonnes of non-recyclable wood and community
waste are piling up in us landfills throughout Serbia instead of
being used as heating fuel during the winter months. In ad-
dition, serious investments in the electric power industry are
necessary in order to prevent the collapse of the entire system
burdened by increased electricity consumption. This is not only
during the heating season but also in the summer when hun-
dreds of thousands of air-conditioners are used.
Introducing fiscal discipline
The introduction of fiscal discipline is something that certain-
ly cannot be ignored when speaking about a change in the rules
of the game if companies operating in the market are treated so
unequally and have uneven obligations toward the state. If one
dinar of an employee’s earnings from a company costs an ad-
ditional 64 percent due to various taxes and contributions, while
another company is allowed to pay nothing to the state beyond
that one dinar for the salaries of its employees, it is evident that
the process not only undermines the pension and health system
but leads to a situation where the companies that comply with
the laws are discriminated against instead of being rewarded by
the state.
One thing that could certainly bring us something positive
in 2012 is a transparent implementation of the Law on Public-
Private Partnership. This would facilitate numerous investments
that have been blocked and pending for years. Multifunctional
stadiums and arenas, theme parks, waste-to-energy and bio-
mass-to-energy plants, communal infrastructure are just some
of the prospective huge investments with a long queue of in-
terested investors who have not been allowed for years, for
different reasons, to invest in Serbia. We should hope that the
economic crisis will prove to be an accelerating factor for the
implementation of this law. This is crucial for many reasons, and
if so, the year 2012 may still bring at least something good and
valuable.
Pre-EU Perspective Željko Pantić
General Director, Danas Conference Center
T
he euro zone crisis occurred so suddenly and unexpected-
ly that most probably not a single economic expert would
be able to foresee when this process will end and whether it
will cause serious social and security, in addition to economic,
problems. The impact of such great crises on small countries
like Serbia is perhaps best illustrated by the well-known say-
ing: „When America sneezes, Europe catches a cold, while the
rest of the world gets pneumonia”.
This saying suggests that even apparently negligible distur-
bances in large markets have a much more serious impact on
small countries, particularly on the countries like Serbia facing
a series of very specific problems. One of these problems is,
certainly, political instability related to Kosovo. Another speci-
ficity of Serbia is a very exotic energy policy consisting of an
entirely artificial increase of dependence on gas as an energy
source instead of decreasing energy dependence through in-
vestment in the electric power industry and waste-to-energy
plants. It has already become obvious that a huge number of
economic entities and individuals simply do not have resources
to pay for such heating. A third and, for many reasons, major
specificity is a factual legalisation of tax evasion, either through
the underground economy or through widespread tax evasion.
And lastly, the key problem is certainly demographic, since
census data indicates that Serbia has been losing some 42,000
inhabitants annually for nine consecutive years due to the dif-
ference between natality rate and mortality rate. Having all
the above in mind, it will not come as a surprise if Serbia finds
itself among the countries experiencing the strongest impact of
the global economic crisis.
Unsustainable system
The rules of the game must be changed quickly, since time
is scarce, and all the above problems have been accumulating
for quite a long time. The Kosovo issue is reaching its culmina-
tion, but it is pretty clear, without analysing its political or legal
aspects, that the integration of that territory into the Serbian
legal and economic system would result in at least two impor-
tant facts. By combining the demographic data from both Ser-
bia and Kosovo, we reach the projection that in a democratic
and free election in a maximum 20 years, an Albanian could be
elected as president of Serbia by majority voting.
A combination of the best and the worst demographics in
Europe could be a recipe for political unrest and tension. We
can see a similar scenario in Macedonia. The second impor-
tant fact regarding Kosovo is that a Serbian economy that has
been struggling to maintain a social benefits system in Serbia
without Kosovo would collapse very shortly upon the inclusion
of a whole army of the unemployed, pensioners and other us-
ers of social benefits from Kosovo. In such circumstances, ei-
ther public sector salaries and social benefits would have to be
drastically reduced in the whole of Serbia or someone must be
found willing to pay the same entitlements to the citizens of
Serbia living in Kosovo.
This endeavour is unsustainable even in the science-fiction
situation that all Kosovo Albanians decided to again become
loyal citizens of Serbia, without autonomy. A certain form of
sustainable economic solution for the north of Kosovo might
be possible, but it has already become clear that insisting on
the right of sovereignty over all of Kosovo, which is not eco-
nomically and demographically feasible in practice, could put
an end to all Serbia’s EU aspirations. It could also thwart any
realistically sustainable plan for the economic development of
the whole country.
Serbia is beset with a host of problems,economic,
political and demographic,that could end its EU
aspirations,cripple Serbia as a nation in transition and
even threaten its future.
A Recipe for
Disaster
“When America sneezes,Europe
catches a cold,while the rest of
the world gets pneumonia”.This
saying suggests that even apparently
negligible disturbances in large
markets have much more serious
impact on small countries,particularly
on countries like Serbia facing a series
of very specific problems.
These changes are essential
The key changes that should take place in Serbia may not necessarily be related to EU
accession.The changes are essential because without them the state of Serbia would
simply not be sustainable for a long period of time,either outside or inside the EU.Serbia
must make substantial investments into its own demographic recovery and regional
economic development instead of squandering its funds on unmaintainable political
projects that lead nowhere but to a new cycle of isolation and decay.
Pre-EUPerspective

Serbian Business Perspectives on Challenges and Opportunities in 2012

Serbian Business Perspectives on Challenges and Opportunities in 2012

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