Foreign Investors Council in Serbia 2014

2014/15 FOREIGN INVESTORS COUNCIL IN SERBIA 1
2014/15
FOREIGN
INVESTORS
COUNCIL
inSerbia
GUIDE TO

2 FOREIGN INVESTORS COUNCIL IN SERBIA 2014/15

EDITOR
Tanja Jakobi
ART DIRECTOR
Ilija Petrović, i.petrovic@aim.rs
PUBLICATION MANAGER
Tanja Banković, t.bankovic@aim.rs
SALES DIRECTOR
Melita Andrejević, m.andrejevic@aim.rs
PROJECT MANAGERS
Biljana Dević, b.devic@aim.rs
Darko Novaković, d.novakovic@aim.rs
Ivana Krsmanović, i.krsmanovic@aim.rs
BUSINESS SECRETARY
Nataša Nešić, n.nesic@aim.rs
WITH SPECIAL THANKS TO
Ana Firtel, FIC Executive Director
Milica Ðorđević, FIC Communications Officer
Koviljka Mladenović, FIC Office Assistant
PHOTOGRAPHY
Zoran Petrović, Časlav Vukojičić
TRANSLATIONS
Mark R. Pullen
Snežana Bjelotomić
PROOFREADING
Mark R. Pullen
EXECUTIVE DIRECTOR
Ruža Ristanović, r.ristanovic@aim.rs
GENERAL MANAGER
Ivan Novčić, i.novcic@cma.rs
FINANCIAL DIRECTOR
Ana Besedić, a.besedic@aim.rs
PRINTING
Rotografika d.o.o.
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FOREIGN INVESTOR COUNCIL IN SERBIA
2014/15
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6 THAT WHICH IS TOUGH,
DON’T PUT OFF FOR
TOMORROW
DR MIHAILO CRNOBRNJA
Professor at the Faculty of
Economics, Finance and
Administration
8 IMPROVING CONFIDENCE
IN THE FUTURE
FREDERIC COIN
FIC President and Executive
Board President at Societe
Generale Bank Serbia
14 PERMITS WILL NO LONGER
BE A PROBLEM
PROF. DR ZORANA
MIHAJLOVIĆ
Deputy Prime Minister and
Minister of Construction,
Transport and Infrastructure
18 LEVELLING THE
PLAYING FIELD
OVEFREDHEIMFIC
VicePresidentandCEO
ofTelenorSerbia
22 OPEN TO THE
SUGGESTIONS OF
EMPLOYERS
ALEKSANDAR VULIN,
SerbianMinisterofLabour,
Employment,Veteransand
SocialAffairs
26 NO GOOD LAW WITHOUT
PROPER IMPLEMENTATION
SRĐAN LAZOVIĆ
VicePresidentoftheForeign
InvestorsCouncil,Corporate
andRegulatoryAffairs
DirectorfortheCEFTAregion
andBulgariaatBritish
AmericanTobaccoSEEd.o.o.
30 WE’RE AWARE OF THE
CHALLENGES
JORGOVANKA TABAKOVIĆ
Governor of the National
Bank of Serbia
34 FFISCAL CONSOLIDATION
IS MORE IMPORTANT
THAN EVER
TONY VERHEIJEN
World Bank Country
Manager for Serbia
38 BETTER LEGISLATION,
MORE INVESTORS
MIKE FALKE
Head of GIZ Legal and
Judicial Reform Programme
in Serbia
40 TOO LONG WAITING
FOR PERMITS MAKES
INVESTMENT POINTLESS
DEJAN JEREMIĆ
Executive Vice President of
Operations at Delta Holding
42 ACCOUNTABLE TO NATURE
AND SELF
VUJADIN ŠĆEKIĆ
General director of
Jugo-Impex
48 BANKING IS
FIELD WORK
SVETLANA TOLMAČEVA
DINGARAC
President of the Executive
Board of ProCredit Bank
50 HEALTH IS
OUR MISSION
ANA GOVEDARICA
CEO of Roche d.o.o. Serbia
52 WE SUPPORT THE
GOVERNMENT IN FIGHTING
THE GREY EECONOMY
GORAN PEKEZ, President of
the Anti-Illicit Trade
Committee of the Foreign
Investors Council (Japan
Tobacco International)
53 INVESTING IN FUTURE
PROGRESS
KAROLY ECKER, Managing
directorTebodinHungary
Kft.Tebodind.o.o.(Serbia)
54 NO COMPETITIVENESS
WITHOUT MORE
PREDICTABLE
ENVIRONMENT
MILICA STEFANOVIĆ
PresidentoftheFoodand
AgricultureCommitteeof
theForeignInvestorsCouncil
(Coca-ColaCompany-Barlan
SMLtd.)
56 NEW LABOUR LAW WILL
OPEN THE POSSIBILITY
FOR BETTER EMPLOYMENT
DEJAN JEČMENICA
PresidentoftheHuman
ResourcesCommitteeofthe
ForeignInvestorsCouncil
(WienerStädtischeosiguranje
a.d.o.Belgrade)
57 LAWS SHOULD NOT
CONTRADICT EACH OTHER
DARKO SPASIĆ, Managing
Partner, Partnership law
society Spasic Partners
58 LEASING COULD FUEL
AGRICULTURE GROWTH
CHRISTOPH LEITNER
President of the Leasing and
Insurance Committee of the
Foreign Investors Council
(VB Leasing d.o.o. Beograd)
59 IN CRISIS QUALITY IS
RECOGNISED
NEBOJŠA JANIĆIJEVIĆ
CEO and President of the
Executive Board of Intesa
Leasing Belgrade Beograd
60 LAWS SHOULD BE
ACCOMPANIED BY HIGH-
QUALITY BYLAWS
RASTKO MALIŠIĆ,
President of the Legal
Investors Council (Marić,
Malisić Dostanić o.a.d.)
61 RELIABLE PARTNER TO
EXPORTERS
DEJAN VUKOTIĆ, Directorof
theAgencyfortheInsuringand
FinancingofExports(AOFI)
62 BETTER A TESTED
SOLUTION THAN A HASTY
ONE
NEBOJŠA NEŠOVANOVIĆ,
President of the Real
Estate Committee of the
(Jones Lang LaSalle d.o.o.
Belgrade)
63 WE NEED TRUE
COOPERATIVES
RONAN CONROY
GeneralDirectorBPId.o.o.,
AgriBusinessPartnerd.o.o
64 ENSURING THE
PREDICTABILITY OF THE
BUSINESS ENVIRONMENT
IS NECESSARY
BILJANA BUJIĆ
Vice President and Acting
President of the Taxation
Investors Council
(KPMG d.o.o.)
65 SUCCESSFUL, DESPITE
EVERYTHING
RITALOZINSKY
CEOanddirectorgeneralof
ALUMILYUINDUSTRYAD
66 E-GOVERNMENT KEY TO
REFORMING SERBIA'S
STATE ADMINISTRATION
ZDRAVKO DRČELIĆ
President of the
Telecommunications and IT
Investors Council (Hewlett
Packard d.o.o.)
68 BETTER QUALITY
DIALOGUE MEANS BETTER
LEGAL SOLUTIONS
ANA FIRTEL
Executive Director of the
2014/15
FOREIGN
INVESTORS
COUNCIL
inSerbia
GUIDE TO

hing projects are good indications. Furthermore, the process of
harmonising legislation with that of the EU will certainly bring
some better solutions, especially for business leaders.
Also on the list is reducing the expenditure side of the
budget. That will be a crucial battle. Not only because of the
announced reductions in pensions and wages, but rather also
because of the denial of support to enterprises that will have to
be shut down, and there are many. Apart from a few exceptions,
in a market economy enterprises must be left to the whims of
the market and not the state budget. Social policy is not led by
artificially propped up companies.
On the side of curbing expenditure, it would be good to
introduce more social justice in tax abstraction and reducing
salaries and pensions. This measure would probably make the
bitter pill a little easier to swallow. On the side of stimulating
production and employment, sectors and activities where we
have, or could have, a comparative
advantage should be encouraged.
It makes no sense to encourage
employment among the econo-
mically disabled companies that
have been losers for decades and
feed off the budget.
In addition to repairing the
business and investment climate, which will encourage both
foreign and domestic investment, there will have to be a con-
tinuation of the search for potential investors in Serbia and the
promotion of comparative advantages. And that should be done
on all sides the world. BRIKS, for example, is taking all places on
that global scale and our breakthrough in this group is rela-
tively symbolic.
Serbia’sstrongestcurrentpoliticalpartywonthelastelections
with the slogan Our strength.... In order to achieve their pre-ele-
ction promises, they will really have to act decisively, quickly and
with all their strength. Otherwise the agony will continue. ■
T
he next two years will be difficult, extremely difficult.
The problems faced by the Serbian economy and the
Serbian state are complex and multiple. The big pro-
blem is that for the two main ills - unemployment on
the one hand and fiscal debt and deficit on the other – the me-
dicines are diametrically opposed! The recommended remedy
for addressing the fiscal deficit and external debt is savings
and spending cuts. The remedy for increasing employment is
increasing spending, especially investment. An example of the
connectedness between desired and undesired effects: the pro-
posed reduction in salaries and pensions, as part of fiscal con-
solidation, reduces purchasing power, thus demand for goods
which, if there is no export as compensation, reduces producti-
on and leads to redundancies. In addition to this, it also reduces
the revenue side of the budget due to lower taxes, particularly
VAT. Another example: the interest rate is among the highest in
Europe. This encourages savings,
but discourages the investments
necessary for growth, develop-
ment and employment.
In order for the list of challen-
ges to be complete, mention must
be made of the stagnation of the
European economy, which more
than half of Serbian exports head, and in the CEFTA countries,
where an important segment of our exports also go. There is
also a very tenuous situation in Ukraine and the possibility of
imposing sanctions on Serbian export or import, by either one
side or the other.
Obviously, it is not and will not be easy for economic policy
makers. That carried out to date suggests the possibility that
the mentioned problems will be solved in due course. This star-
ted with serious work to create a better business environment.
The new labour law, bankruptcy law, revised law on privatisa-
tion, reducing the procedure for opening companies and launc-
ThatWhichisTough,
Don’tPutoffforTomorrow
COMMENT VIEW TO 2014/15
DR MIHAILO CRNOBRNJA
ProfessorattheFacultyofEconomics,FinanceandAdministration
Ahead of the government is a difficult task of combining the incompatible – introducing tough
austerity measures and stimulating economic growth and employment. This first part will be a
crucial test in an area which the government has not yet ventured in to, while on the latter positive
steps have already been made in the regulation of the business environment
Serbia’s strongest current political party
won the last elections with the slogan
Our strength.... And that is the only
way to realise the results it promised

Foreign Investors Council President Frederic
Coin says the FIC fully supports these measures.
However, the council is keen to stress that the su-
ccess of any new reforms is dependent on how
the government secures their implementation
from top to bottom.
► How would you rate the investment environ-
ment in Serbia today?
- If you look at the situation as of
today, it is obvious that there is a
lot to do to improve the overall
economic environment. We at the
FIC are not the only ones to say it:
if you look at World Bank Doing
Business report, Serbia’s ranking
is still far from the level we should be expecting.
This stems from the long-term situation in Serbia
and there is much to do to improve the overall le-
W
ith the new Serbian government ha-
ving secured strong political backing
in parliament, investor expectations –
not to mention those of citizens – are
equal to the support enjoyed by the leading coali-
tion party at the election. Prime
Minister Aleksandar Vučić and
his cabinet have announced bold
reforms in line with FIC recom-
mendations. Among the measu-
res proposed are plans to cut the
budget deficit and public debt,
with the aim of bringing about macroeconomic sta-
bility and predictability, and a package of laws desi-
gned to secure a level playing field for businesses.
For years the FIC has been advocating
a number of reforms to push Serbia
in a more business-friendly direction.
With an unprecedented parliamentary
majority, the new government has
the opportunity to make good on its
earlier promises to current and would-
be investors. But above everything,
consistency of implementation is vital
Improving Confidence
in the Future
INTERVIEW
FREDERIC COIN
FICPresidentandExecutiveBoardPresidentat
SocieteGeneraleBankSerbia
For businesses and people, the day-
to-day reality of the implementation
of laws is what counts

► How much progress has been made in harmo-
nising Serbian legislation with that of the EU?
- In terms of EU harmonisation work done, for a
certain period of time we have already been mo-
ving towards convergence. Of course, there are a
certain amount of things to do, but the key here is
not only harmonisation, but more
the reality of implementation. We
often see cases in which laws are
largely harmonised but ultimately
their real implementation is far
from the spirit of the law. For busi-
nesses and people, the day-to-day
reality of the implementation of
these laws is what counts.
► The FIC has underlined macro-
economic stability as one of its
priorities. What are the prospe-
cts for maintaining such stabili-
ty in the current environment?
- Macroeconomic stability is im-
portant for investors because it
leads to predictability – and this is
a magic word in the world of busi-
ness because any kind of private
business aims to plan its activities,
revenues etc. ahead of new inves-
tments, which requires predicta-
bility. Predictability is knowing where to go, and
knowing where to go means you can anticipate and
plan correctly. So macroeconomic stability is vital.
To help ensure long-term macro stability, the
FIC has been pointing to a certain number of re-
forms for a while. Education, health, pensions, and
I would add a judicial system that is not working
properly – these are key reforms.
Of course in the short term the rising public de-
ficit and public debt is not sustainable. Unfortuna-
tely in recent years we have seen what can happen
to countries that are unsustainable on that level.
The situation in terms of debt is not so dangerous
today, but the trend is an issue – and for a country
that is relatively small, and with Serbia’s standard
of living, and let’s say the level of development, the
markets will not accept the same levels of indebted-
ness as they will in big countries.
We cannot go to that level; we need to show
gal framework, but the implementation is really the
key. Better implementation of laws means bylaws
according to the spirit of the main laws; it means in-
terpretation of all laws and bylaws being consistent
and, once again, according to the spirit of the laws;
and it means public administration that is efficient
and managed properly.
In Serbia the public sector’s
share of the economy is extremely
high compared with the rest of the
region, and this is a key point also.
For a long time now we have been
advocating a level playing field, me-
aning the same rules for everybody,
both public and private companies.
There are many other things
the FIC is advocating, but these
two are the main ones.
► It’s been four months since the
formation of the government.
What do you think of the work
the government has done so far
and the results accomplished?
- Four months is both a long and
short period when it comes to a new
government. In between we have
had the floods, which were a terri-
ble issue, of course. That said, there
is a strong political majority in the parliament, so of
course people’s and investors’ expectations are equal
to the size of that political majority – we expect a lot.
The new government and prime minister have
commented a lot on their desire for reform. Since
the election things have been going in a direction
the FIC has been advocating for. We already have
the first reform package adopted by the National
Assembly and that is a big step forward. The amen-
ded Labour Law endorses 65% of FIC White Book
recommendations and we expect it will lead to
better protection of rights for both employers and
employees, as well as bringing the Serbian labour
market closer to modern global standards and pra-
ctices. It is also very important that the government
has continued in that direction and adopted new
laws on bankruptcy and privatisation. Now, of cour-
se, we will be vigilant about the implementation,
because for us this really is key.
TheFICisadvocatingconsistent
implementationoflawsandbylaws
andthesamerulesforbothpublic
andprivatecompanies.
Wealreadyhavethefirst
reformpackageadoptedbytheNational
Assemblyandthatisabig
stepforward.
Macroeconomicstabilityisimportant
forinvestorsbecauseitleadsto
predictability,meaningbusinessescanplan
aheadofnewinvestments.
CONSISTENCY LAWS STABILITY
The debt situation is not so
dangerous today, but what
represents a problem is its
growth tendency

► How does the FIC view the progress made in
creating a responsible and efficient public ad-
ministration?
- The fact the deputy prime minister is working on
that is a good sign of the new government’s willin-
gness to address this important issue. Making these
changes is a difficult task, and the public admini-
stration, like all institutions, is trying to protect its
power. So you need to have the political willingness
and courage to address this. There are some appro-
aches used in private companies that can be applied
to public administration. To have objective targets
that are assessed and followed up are natural for
me, but difficult to apply in the public sector – and
not just in Serbia.
► Are the proposed measures to curb the grey
economy enough of a step in the right direction
and what are your recommendations to the go-
vernment in this regard?
- I think this problem is easier to address compared
to previous mentioned. The measures the govern-
ment is starting to take by redirecting some of the
Ministry of Finance workforce from one sector and
put in controls is definitely a good move. Of course,
control is not enough, because in order to have good
control, you need to apply clear rules. These two
things should work in parallel, but I think enforcing
control is a good move.
It is important for the government to work on
rules that are transparent, clear and without too
much space in terms of admini-
strative interpretation. Only then
can you have efficient controls.
► Last year the FIC praised the
progress made regarding chan-
ges to the tax laws. How do you
view these changes from to-
day’s perspective?
- In terms of the legal aspect, tax laws have been
more or less harmonised with European laws. From
our point of view it is not so much the laws them-
selves or the framework itself that is an issue, but
again the way it is interpreted and implemented. It
is not always consistent, it is not systematic and it
again opens the door to free space for the admini-
stration to interpret things, which creates uncerta-
inty for investors.
Here we are again discussing how clear things
are, how they are implemented and my second key
point: predictability. What is an issue for us is when
new rules are created and implemented immedia-
tely. What happened last year was abolishment of
tax credit for investments in fixed assets 15 days
before the end of the year and made applicable im-
that the curve will be curbed immediately. In order
to achieve that, the public deficit needs to be cut.
The government looks committed to that, including
both the prime minister and the finance minister, so
hopefully some measures will be taken there. It is
not easy but it is necessary.
► How much would resolving the issue of com-
panies undergoing restructuring and the priva-
tisation of some of the larger state-owned com-
panies contribute to creating a better economic
environment?
- By working to solve these issues
and reducing the size of the public
sector you will equalise the level
of competition in the market. For
me and the FIC, that is the target.
It is more efficient to have equal
rules for everybody because then
companies can fight to improve
their ways of working, and with no distortions of
the rules, bring value to consumers and society.
Also important is the usage of the government’s
scarce resources. If they can solve the issue of public
companies in restructuring – and restructuring is a
nice word for companies that are almost dead and
just kept alive by giving them subsidies – they could
use those subsidies for better investments, which at
the end of the day is good for all of society. Of course
there will be some short-term impact, and of course
the government will have to address the question of
how to help those who are currently working in the-
se companies during the transitional period in which
they will unfortunately lose their jobs; to help them
to survive that period and improve their skills in or-
der to find a new job. Obviously, though, it is not easy.
For a long time now we have
been advocating a level playing
field, meaning the same rules for
everybody, both public and
private companies

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www.unicreditbank.rs
Welcome tons. Welcome toLife is full of ups and downs.
We’re there for both.

and certainly in the longer term. Sometimes certain
reforms, and addressing the public deficit is one of
them, will have a negative short-term impact regar-
ding effective economic activity.
We‘ve seen this in my business at Societe Ge-
nerale Bank Serbia: when you have public compa-
nies firing people, or giving them smaller salaries,
it has a negative impact on our activities in the
short term. It’s the same for retailers and elsew-
here. But once again, as long as we are convinced
that these are good mid- and long-term measures
to finally improve the country’s competitiveness
and performance, we
know that at the end
of the day the stan-
dard of living in so-
ciety will see the be-
nefit in the long term.
I don’t think any
investor here, who de-
cided sometime ago
to invest in this coun-
try, will think after six
months, one year, a
year and a half to leave
the country because of
the short-term impa-
ct on their business.
It might unfortuna-
tely delay a few new
investments in new
fields because people
will wait a bit, but it is
certain that if the reforms go in
a good direction, are understood
and investors believe they will be
implemented properly, it will cre-
ate a positive environment and a
positive opinion about the coun-
try’s future, which will bring addi-
tional investment. And those investors that are here
already will see the light at the end of the tunnel
and, of course, will continue with their business.
► What are your main expectations for the co-
ming period?
- We think there is a need for reforms in certain
fields and to improve the business environment.
The main keywords are sustainability and predicta-
bility. But of course, as I’ve said several times alre-
ady, to be sure that will happen, implementation
and the ability of the government to demonstrate
it can implement bylaws according to the spirit of
the laws, as well as having an administration that
applies them properly, is vital. Implementation is
the keyword from my point of view. ■
mediately. It is unacceptable because it alters your
business plans, and you are affected.
► Howmuchwouldamoreflexiblelabourmarket,
which you have been advocating, increase em-
ployment, and, in this regard, what do you think
of the amendments made to the Labour Law?
- Changes to the Labour Law are something the
FIC has been advocating for around 10 years. So of
course when we see that this difficult, sensitive re-
form happened, we are happy to see a willingness
to tackle the issue and even happier to see a large
majority of prior FIC re-
commendations present in
the new Labour Law, inclu-
ding the key ones. Of cour-
se, there are still a few that
haven’t been taken up, but
generally speaking it really
is going in right direction.
With an official unem-
ployment figure of 21%,
things are not working
well as they stand. For
companies to hire more
people, they need to be
confident about the near
future in terms of their
activities. As I’ve said, this
is one area in which re-
form should all contribute
with the goal to improve
confidence in the future.
It shouldn’t be a jungle, but ha-
ving rules that allow companies
to recruit and also allow them to
fire people in those unfortuna-
te moments when they need to,
all without paying for the who-
le working history of somebody
who has already taken several severance payments,
looks logical to me and a step in the right direction.
It is not to have a system in which people are slaves.
Nobody wants that; companies only want to have a
staff that is well-trained, happy to work and able to
deliver good performance.
► If the government were to adhere to tough au-
sterity measures, it would entail a drop in the
population’s purchasing power, at least in the
short term. Which have a greater effect on fore-
ign investors – the short-term or long-term effe-
cts of austerity?
- We are advocating for reforms that will improve
the overall business environment. These reforms
will hopefully bring results in the medium term,
Education, health, pensions, and I
would add a judicial system that is
not working properly – these are
key reforms

many cases generate losses and have a surplus of employees in
administration, as well as a lack of production.
The government has made a decision on the merger of Ko-
ridora Srbije (Corridors of Serbia) and public enterprise Putevi
Srbije (Roads of Serbia), while Serbian Railways expects the
further separation of cargo and pas-
senger traffic.
► What are the most important in-
novations in the Law on Planning
and Construction, when it comes to
encouraging investment in the con-
struction industry?
- Serbia currently occupies 182nd place on the World Bank's
Doing Business list in terms of the speed of issuance of building
permits, which is unacceptable for a country where investment
needed and which wants to develop faster. I believe that we
Z
orana Mihajlović Deputy Prime Minister and Mini-
ster of Construction, Transport and Infrastructure, is
tackling three key issues that have hindered econo-
mic growth in the previous. First is the adoption of
a functional law on planning and construction, with which the
procedure for obtaining building permits will be a simplified -
which also envisages the adoption of a whole set of bylaws and
the reform of competent services, which will reduce the proce-
ss of acquiring permits from two to four years down to 28 days.
The second is accelerating work on key road transport secti-
ons in Serbia: Corridor 10, the completion of which will see the
transport system of the Republic of Serbia become compatible
with the transport system of the Eu-
ropean Union; and Corridor 11, which
represents the link between Serbia
and Montenegro, or Belgrade and the
Southern Adriatic, and in the broader
context links Romania, Serbia, Monte-
negro, and Italy. And the third is the
reform of public enterprises. As Mini-
ster of Energy I insisted on the reform of public enterprises and
I'll do that now as Deputy Prime Minister and Minister of Con-
struction, Transport and Infrastructure, says Mihajlović. Pu-
blic companies manage huge state resources and money, and in
With the adoption of the new Law on
Planning and Construction, Serbia should
eliminate one of the biggest complaints
of foreign investors - long waits and
complicated procedures for obtaining
building permits - and gain a much improved
position on the World Bank's Doing
Business list, as well as encouraging
investment in the construction industry
Permits Will No
Longer be a Problem
INTERVIEW
ZORANA MIHAJLOVIĆ
DeputyPrimeMinisterandMinisterof
Construction,TransportandInfrastructure
I believe that building permits
will no longer be one of the first
observations mentioned in every
conversation with foreign investors

over urban construction land, this has not been removed
from the new version of the law. What are the reasons for
its retention?
- In the past Serbia did the opposite of what was needed and
that was done by our neighbours in terms of conversion. In
Croatia they first addressed conversion, and only then entered
privatisation. With us it is the opposite. Now we are trying to
do what is correct and to do so in the best spirit of European
practices, but we still have certain doubts, because in the draft
law we predicted conversion with and without fees. I believe,
however, that other innovations brought by the law are more
important than conversion rights.
► Adoption of this important law followed a relatively brief
public debate. What is the main reason for this and do you
think the public debate yielded a high enough quality ran-
ge of suggestions and criticisms?
- I personally insisted that the draft
law be subjected to a public debate
and not adopted according to emer-
gency procedure. Experience has
shown that in this way you always get
some suggestions that can improve the bill, which is our goal.
In addition, for key reform broad support is also essential, and
for that you need to give a chance to the public and interested
organizations to make their own judgement. After completion
of the public hearing, the draft was sent to all ministries for
review, and after obtaining those opinions, all objections and
suggestions will be merged and the final text will be sent to the
government for consideration and adoption.
► One of our greatest shortcomings is a lack of appropriate
bylaws and procedures that accompany laws. What will
will, with the adoption of amendments to the law on planning
and construction, succeed in changing that and that building
permits will no longer be one of the first observations mentio-
ned in every conversation with foreign investors.
With amendments to the law, the field of construction will
be reformed, with simplified procedures for obtaining building
permits and fees for urban construction land abolished. Proce-
dures will be shortened from the current two to four years of
waiting to 28 days, a one-stop-shop will be introduced for per-
mitting, and from next year an electronic publication process
will begin. In the amended law location permits will no longer
be an administrative act and, of particular importance, state au-
thorities will be required to obtain documentation, instead of
investors doing that themselves.
► You have announced that building permits will be recei-
ved in 28 days. What changes in the
work of state and local government
institutions does this envisage?
- The unified procedure for issuing
permits envisages different internal
organization of all all organs that
apply that law. Bearing in mind that the role of individual or-
gans has been changed significantly, some services, especially
inspections, will be strengthened significantly, and this will be
possible to do through the reallocation of existing staff. Moreo-
ver, the introduction and implementation of an electronic trac-
king system entails the introduction of new programmes and
the provision of technical support.
► Although one of the most significant demands of both
domestic and foreign investors was the removal of the pro-
vision of the conversion of usage rights for property rights
Forkeyreformlegislationbroad
supportisessential,andthat'swhy
anopportunitymustbegiventothe
publicandinterestedorganizations
tovoicetheiropinion.
AsMinisterofEnergyIinsistedonthe
reformofpublicenterprisesandI'll
dothatnowasDeputyPrimeMinister
andMinisterofConstruction,
TransportandInfrastructure.
Wearetryingtodowhatiscorrectand
todosointhebestspiritofEuropean
practices,butwestillhavecertaindoubts,
becauseinthedraftlawwepredicted
conversionwithandwithoutfees.
PUBLIC DEBATE REFORMS CONVERSION
All bylaws that accompany the Law
on Planning and Construction will
be adopted by March 2015

your ministry undertake in its department
in order to overcome these problems and
what sort of legislative activity are you
planning for the ministry?
- In the previous Ministry of Energy we insi-
sted that regulations be prepared together
with the laws, and that's also how we will
work in the Ministry of Construction. This
shortcoming exists in other countries, not
only ours, but we will try to be faster than ot-
hers. All bylaws that accompany the Law on
Planning and Construction will be adopted by
March 2015, and those related to the issuan-
ce of building permits will be completed no
longer than a month after adoption of the law,
which should happen by the end of September.
► Your ministry is also responsible
for the construction of road infrastru-
cture, the lack of which has represen-
ted one of the biggest obstacles to in-
vestment. What kind of dynamics can
you announce in this regard?
- Viewed strategically, the most impor-
tant task is completion of Corridor 10,
which must be built by 2016. Work on
Corridor 11 has been accelerated on the
Ub-Lajkovac section and construction
has begun on the section that links that,
from Obrenovac to Ub and from Lajkovac
to Ljig. State-owned enterprises in the
transport sector are working on projects
worth about three billion euros, and it
is in our interest that these projects are
implemented faster and more efficiently,
because otherwise we will pay penalties
as a state, which was also the case in pre-
vious years. We found a situation where,
of all the projects started, practically
only one is likely to be completed on
time, and that's the Zemun-Borča bridge.
Because of that we introduced mentors
for all major projects, while ministerial te-
ams tour the works every seven to ten days.
We are also compiling black and white lists
of sub-contractors, in order for us to prevent
firms that fail to meet deadlines on existing
projects and don't respect contracts from
acquiring new jobs with the state. That's how
work was done to date and the result of that
kind of practice is that not one project was
fully completed. This has now stopped.
► What goals do you intend to achieve with
the licensing of construction companies?
- The system of licensing construction com-
panies is not new. It should ensure that the
highest quality firms gain work, according to
the classification and purpose of a facility, or
according to the type of planning document
that is produced.
► How much GDP growth could Serbia ac-
hieve in the following period from the con-
struction industry?
- It is estimated that, thanks to changes in the
law, the share of the construction industry in
GDP could increase from four to six per cent.
We must not forget that the construction in-
dustry has suffered extensive damage due to
abuse in the privatisation process, after which
came the economic crisis, with its consequen-
ces. The recovery of the construction indu-
stry will be neither easy nor quick, but it is
possible, because there are still professional
staff, knowledge and resources, and today the
state regularly meets its obligations towards
road-building companies. We will support the
formation of a consortium of road-building
and construction companies, which would
perform together on tenders for works in Ser-
bia, because not all companies can provide
the guarantees that are sought.
► When could the introduction of electronic
building permits reasonably be expected?
- The deadline set by the law is by 2016, but
we believe that job can be completed earlier,
during the course of 2015. Immediately after
the adoption of amendments to the law we
will commence with the establishment of the
system of electronic issuance of construction
permits, because the new law will create con-
ditions for that.
► When do you think it will be possible to
expect the beginning of the corporatisati-
on of public enterprises and the appoin-
tment of professional management?
- As Minister of Energy I insisted on the re-
form of public enterprises and I'll do that
now as Deputy Prime Minister and Minister
of Construction, Transport and Infrastructu-
re. Public companies manage huge state
resources and money, and in many cases
generate losses and have a surplus of
employees in administration, as well as
a lack of production. In the energy sector
some companies have already comple-
ted that process, such as Transnafta and
EMS. EPS has started that process, but
not fast enough, while Srbijagas is late in
launching any kind of reforms.
And in the Transport Department
there will also be major changes in sta-
te-owned enterprises. At the end of May
Serbian Railways completed the first pha-
se of restructuring and we are now awa-
iting further separation of cargo freight
and passenger traffic. The Government
has also decided on the merger of Korido-
ra Srbije (Corridors of Serbia) and public
enterprise Putevi Srbije (Roads of Serbia).
In this way we will get a single enterpri-
se that will be better organized and more
efficient, and we will no longer have a si-
tuation where one company provides the
terms of reference, the other appears as
an investor, and mistakes in the management
of a project means we lose a lot of money as a
country. We started to introduce order to pro-
ject design and have initiated the introduction
of project oversight. Due to poor project design,
just on jobs carried out by Corridors of Serbia,
the state spent at least €70 million paying for
additional works and compensation claims. As
a comparison, that is the same as the cost of bu-
ilding an entire section on Corridor 11, specifi-
cally the Ub-Lajkovac section. In the world it is
possible for the price of a project to deviate by
five per cent, but not by 20 or 30 per cent. That
shows either a lack of expertise, or the comple-
te absence of responsibility and conscience. ■
Thanks to changes in the law,
the share of the construction
industry in GDP could increase
from four to six per cent

generali.rs

mentation of laws is lacking. And when we talk about
implementation, we divide it into five specific areas we
want to focus on. Number one is the creation of a level
playing field. In this area we are, among other things,
pointing to privatisation and activities involving sta-
te-owned enterprises.
From a private investor’s perspective, the level of
state ownership and how things are conducted in Ser-
bia when it comes to governance models and potential
privatizations of state owned com-
panies should be more transparent.
Therefore the government should
strive to establish European-class,
perhaps world-class ownership poli-
cies for entities the state chooses to
retain, and conduct sale processes in
other companies that should not re-
main under state ownership.
Secondly, when we talk about implementation, we
talk about reforming the public sector, namely: pensi-
ons, healthcare and the education system. Generally
T
he Foreign Investors Council shares Serbian
Prime Minister Aleksandar Vučić’s impa-
tience regarding the implementation of new
laws, but understands the government's
view that it isn’t an easy task and that there are no qu-
ick fixes. However, it is important that the state moves
more quickly, given the need for a level playing field for
businesses, with clear procedures from top to bottom
in public administration.
► Which areas over the previous period have re-
corded progress when it comes to applying the rule
of law and creating a favourable
business environment? And whe-
re should the government invest
more effort to better comply with
European business standards?
- The new government is good at
establishing a new legal framework,
but the legal framework alone is not
enough. When it comes to implementation there are
significant shortcomings. At this year’s Reality Check
Conference you perhaps heard stronger language than
we’ve been using before, and that is because the imple-
The FIC Vice President is confident
that more needs to be done to allow
Serbia’s business environment to
flourish. He is calling for a level
playing field, reform of the public
sector and the making of a durable
and transparent business framework
Levelling the Playing
Field
INTERVIEW
OVE FREDHEIM
FICVicePresident
andCEOofTelenorSerbia
The government is good at
establishing a legal framework,
but that alone is not enough, the
implementation of laws is lacking

- I think we tend to forget that the White Book is well re-
cognised by all Serbian public servants whose thoughts
are key to improving how we do business in Serbia and
the interplay between the public sector and business. It is
looked upon as a manual in which the best efforts of regu-
lators, the public sector and companies come together to
point out what kind of progress has been made and what
steps should be taken next. A massive amount of know-
how and resources go into that effort that ends and conc-
ludes with the book. It is a valuable piece
of work summarised in one document.
It is a huge responsibility for the Fore-
ign Investors Council to keep the quality
level up, and I think how we work to put
it together does just that. It is a concerted
process in which we talk with public sector
representatives, regulators, everybody in-
volved, and they recognise that their feed-
back has been embraced and included in the book. The
White Book has become a strong brand in Serbia and the
government and state administration appreciate what the
Foreign Investors Council puts into the entire process.
► How can the state strike a balance between subsidy
provisions for new investors and advancing economic
environment overall?
- Subsidies are the opposite of a level playing field and
that is how we should look at them. However, they can
play an important role for a period of time as a means of
kick-starting an initiative to develop a certain sector or
geographic region of Serbia. But what we need to look at
is whether a level playing field is created by following
access to labour and work resources is on a high level, but
when it comes to having the right skills profile, we need
a reformed education system. In short, every modern so-
ciety needs those three institutions to properly work, and
there we have an issue.
The third specific area is to create a durable and tran-
sparent framework. Again, it is a broad term and revolves
around legal aspects, regulation and similar issues. Ser-
bia is now following its EU accession path and has a great
opportunity to use that process, with all
the money and funding that goes with it, to
absorb knowhow from the EU system and
implement significant reforms.
Fourth is to increase predictability.
Again, it is to do with laws the government
and parliament are now deciding upon and
adopting, and having joint alignment with
the state bureaucracy. But adopting one
law is never enough – it is about implementation and then
expert monitoring of how the entire bureaucracy is wor-
king to follow the line. Here we have a long way to go.
At the Foreign Investors Council we understand that
the government does not have an easy task. It is abo-
ut putting these monitoring systems in place, to have a
dashboard that highlights progress. We share Mr. Vučić and
the government’s impatience on this one. Fifth and finally,
we have daily examples of things that are overcomplicated
with unnecessary bureaucracy – it shouldn’t be that way.
► What makes the White Book a reference point when
it comes to assessing the progress made in implemen-
ting market reforms in Serbia?
Subsidiescanplayan
importantrolebutarethe
oppositeofalevelplaying
field,andshouldbelooked
uponassuch.
Collectingneededinformationfor
permitsofallkindsisanissue,and
thesamegoesfortheconsistencyof
thetaxationsystematbothlocal
andstatelevels.
Thepenetrationofmoderntelecommunication
servicesmirrorsGDPgrowthandthisisthemessage
theFICistryingtoconvey.Thetelecomsector
contributed4.85%totheGDPin2013,whichshows
howsignificantacontributortotheeconomyitis.
SUBSIDIES ISSUES TELECOMMUNICATIONS
We need to establish
government ownership
based on modern policies
and good governance for
conducting state ownership

cess because they won’t be coming with their machinery
and money if there is no clear picture – and we have couple
of examples from the news in which this was the case. If
there is any uncertainty, it isn’t good. So there shouldn’t be
any hidden agendas, just clear straightforward procedures.
► Last year the FIC praised the adoption of the new Law
on Public Procurement. How would you rate its imple-
mentation from today’s perspective?
- We were positive about that law and now we are going to
give a formal assessment on how it has progressed in the
next White Book. Again, the law only gives directions, and
though there are some positive signs regarding its imple-
mentation, there is still a way to go.
► The Ministry of Telecommunications and Trade has
recently underlined that, apart from digitalisation, its
key priority is to create a state telecommunications
network as a precursor to the privatisation of Telekom
Serbia. What recommendations
would you make to the govern-
ment in terms of regulating the te-
lecommunications market?
- The penetration of modern tele-
communication services mirrors
GDP, and this is the message we are
trying to convey. Telecom sector con-
tributed with 4.85% to the GDP in
2013 which shows how significant
contributor to the economy it is. Be
modern, be forward-thinking and, in
a way, be a little bit brave in regards
to how you regulate this sector. And
in that, today in Serbia we are lagging
behind when we compare ourselves
with other countries in the region.
Here at the Foreign Investors
Council we are offering concrete recom-
mendations on what should be done
with a goal to facilitate growth of telco
industry as one of pre-conditions for ra-
ising competitiveness of the country as
a whole. So our message is ‘get going,
get started’, and we’ll be sure to support
forward-thinking regulation from our side.
► How much has the implementation of e-government
processes contributed to a reduction in red tape and
moved Serbia closer to the processes investors expe-
rience in other countries?
- Here we have positive signs, and this process is actually
progressing well. Again, there is a huge agenda and we
must go forward with ambition in order to really utili-
se the technology to its maximum. But e-government is
prospering and was well utilised by the national tax au-
thorities, having a positive effect on both governments
and private individuals. ■
that subsidy framework. In general, we would say that we
want to avoid subsidies. Instead, we want the government
to establish a general economic framework in which com-
panies and business investors can engage on equal terms.
► Chapter 32, the first EU accession chapter up for ne-
gotiation, relates indirectly to supervising the work
done by public enterprises. How much will Chapter
32-related reforms help when it comes to setting equ-
al rules for all market players?
- I think it is a very important chapter and relevant to Ser-
bia because it has a long list of state-owned companies that
are now on the for-sale list. That list includes assets that
are difficult to exclude, running with negative financial per-
formances and representing sectors that work in old-fas-
hioned ways. The public sector is putting huge amounts of
money into keeping their activities going. We need to esta-
blish government ownership based on modern policies
and good governance for conducting
state ownership. There is nothing
wrong with state-owned companies
as long as it is done in a proper way.
► How easy is it today for investors
to recognise the government’s
economic policy and collect the
information required to make bu-
siness decisions?
- This is different from one sector to
the other, but in general we still have
a way to go. The bigger organisati-
ons have capacities to deal with this
issue, but for smaller foreign compa-
nies it remains difficult to recognise
the government’s economic policy
and collect the information required
to make business decisions.
If Serbia wants to progress, we need
those smaller and medium-sized compa-
nies to come here and invest. Collecting
needed information on permits of all
kinds is an issue, and the same goes for the
consistency of the taxation system at both
local and state level.
► What recommendations would you make to the go-
vernment in terms of managing large-scale infrastru-
cture projects?
- Unfortunately, Serbia was hit by flooding recently, but in a
way this is a reminder that we need a good framework for
managing infrastructure projects, because rebuilding the
areas damaged by the flooding is ongoing.
The first thing we need here is transparency. If we are
to engage both domestic and foreign – either European or
global – entrepreneurs and investors in building bigger in-
frastructure projects, it needs to be a very transparent pro-
If we are to engage investors
in building infrastructure
projects, it needs to be a very
transparent process

message we send is that it is better to work with the
state, rather than against it. We in the Ministry and em-
ployers are on the same mission and we want to help
each other. Anyone who hires a man in me an ally.
► You said that employers,
if you obey the law, you have
the allies and interlocutors.
What does it mean?
- All employers who regularly
pay their contributions, sala-
ries and tax liabilities invite you to contact me and tell
me how we can assist them, simplify procedures, in-
troduce special officers for dealing with urgent reque-
sts. A few times I've instructed employers this appeal
but did not receive adequate answers.
A
fter the Labour Law, which introduced or-
der to the sphere of labour relations, the
Ministry of Labour, Employment, Veterans
and Social Affairs has announced the conti-
nuation of live legislative activities that directly rein-
force the labour legislation. This ministry is open to
all suggestions from employers that would make their
work easier and speed up employment, says Minister
Aleksandar Vulin.
► What would your opinion of amendments to the
Labour Law enacted in terms of regulation of labor
relations?
- They have already done! Since
July recorded a significant in-
crease in official employment.
It is of course the people who
are already working, and now
the employers because of the work and incentives for
reporting workers saw them worth report .. Labor Act
showed that employers had better have registered
and satisfied workers. Of course, our inspection work
is very up to date, and is constantly on the field. The
In the next year the Ministry of Labour,
Employment, Veterans and Social Affairs
intends to adopt the codex of labour
legislation – a series of laws though which
all areas that do not belong to the sphere
of work will be governed by special laws
and consider the establishment of special
courts functioning according to the
German model
Open to the Suggestions
of Employers
INTERVIEW
ALEKSANDAR VULIN
SerbianMinisterofLabour,Employment,
VeteransandSocialAffairs
The Law on Civil Servants and the Law on
Salary Scales will be adopted quickly and
will follow the spirit of the Labuor Law

all the employers who offered us support and gave us
suggestions on how to better regulate this area.
In the next year we will adopt the codex of labour
legislation. The current Labour Law has over 200 ar-
ticles and only 60 or so relate to the regulation of rela-
tions in the workplace, while the other articles relate
to the work of trade unions, socio-economic council,
mobbing. In the the next year we want to adopt a codex
of labour legislation where all those areas that do not
directly belong to the sphere of work will be regula-
ted by a special law: on trade unions, on strike acti-
on, trade union representativenes,
the socio-economic council, social
entrepreneurship etc., all of which
should be taken from the Labour
Law. Then everyone will be able
to apply the labour law and if they
want to take care of new mothers
there will be a special law to deal
with that.
► How, in your opinion, can fo-
reign investors contribute to
strengthening the rights of em-
ployees?
- Foreign investors bring experien-
ces gained in the countries they
came from. As a rule, they have
better organized unions and prote-
ct workers' rights better than we do
here. I spoke with the unions abo-
ut that and their experience is like
this: the foreign investor is typically
a tougher negotiator in concluding
a collective agreement, but when it
is concluded they respect it, and on
that side I am very satisfied. There
are countries where unions do not
exist, then here you have a problem to organize a uni-
on, which is our constitutional category and our mini-
stry is working on it. Serious employers always seek to
respect a union, while less serious ones bypass them.
A union is useful because it allows the employer to en-
sure the terms of an agreement with it are respected
and that they have predictability in their work.
► What can your ministry do in its capacity to simpli-
fy the law on foreigners in the area of facilitating the-
ir employment (residence permit, work permit)?
► What the Government intends to take to equalize
the position of private and state-owned enterpri-
ses, and public administration in the field of labor
relations?
- The Law on Civil Servants and the Law on the salary
scale will be very quickly bring, certainly before the
end of the year. But they could not be changed befo-
re the enactment of the Labour Law, which is a fra-
mework law, and these two regulations will follow its
spirit. Of course, workers in the private and public se-
ctor can not be completely equal because the collective
agreements will be governed by the
specificity of certain tasks, but the
basis of the minimum are now cle-
arly established.
► What further actions can be
expected with regard to the har-
monization of labor legislation
Serbia and the EU?
- I think all serious business re-
presentatives extremely pleased
to changes in the employment law
and there will be more. We need to
coordinate our activities with the
European directives and it is a li-
ving process.
In this regard, I have to say this:
my mistake was that I allowed my-
self to listen to the unions and not
to speak about rental agency wor-
kers at all. But that must be done
because 60,000 people work thro-
ugh these agencies and it is not
logical for that to be unregulated.
And now there are some legal pro-
visions that deal with these issues
in part, but they have been tram-
pled by time, and in essence that is deleted space that
allows the fact that now, when you get to a petrol sta-
tion, one employee is working for 20,000 dinars, while
another, employed through an agency, earns 15,000 di-
nars. They must be equal and that’s why we will alter
this regulation at the first opportunity.
The ministry addresses very serious companies
that have grown accustomed to serious legislation in
their own countries and cannot find their way here,
where anything goes and nothing can be done. We have
changed that with the Labour Law and I want to thank
Wearecompletelyopentoallinitiativesof
employersthatwouldeasetheirwork,and
weinvitethemtosendustheirsuggestions.
AmendmentstotheLabourLawhaveintroduced
predictabilityinthedomainoflabourrelations,
whichisgoodforbothemployersandtradeunions.
Tradeunionsandemployersneed
tobolstertheirorganisationsfor
themtobereallyrepresentative.
INICIATIVE PREDICTABILITY REPRESENTATION
The cumulative effect of government
incentives, new labour legislation
and labour inspections has already
yielded results in reducing the
number of illegal workers

dialogue. I think it is necessary to reduce the work of
socio-economic councils to the regions and broaden
the dialogue. As you know, there was a lot of dissatisfa-
ction among trade unions with regard to the extended
application of collective agreements. In the end, we
adopted the German model, which is 50 plus 1 per cent
of the branch of industry, which is very logical. Foreign
employers immediately recognised the positive side of
that decision. And for this and any other law the most
important factor is predictability, for people to know
on 1st January what will happen on 31st December.
► In which ways is the Ministry
collaborating with other relevant
agencies on the retraining of em-
ployees and preparing them for
the demands of the market?
-Theministrycarriesoutshort-term
measures to encourage employment
through a variety of programmes
in cooperation with the National
Employment Service. Moreover, we
cooperate with the Ministry of Edu-
cation on the European project FRA-
ME and attempt to predict what will
be required on our market in five or
ten years, and consequently adapt
the curriculum of our higher and se-
condary education.
We have completely killed the
third level of education and now
we don’t have people for many
jobs. Give me a hunred bakers and
I will employ them, give me a tho-
usand potters and I'll employ them,
and not only in Serbia, but also in
the Emirates and Russia. The UAE
is seeking 10,000 workers from us
with third level vocational educa-
tion and we do not have them, and
we have allowed every third gra-
duate in Serbia to be a manager of
some sort. These are people with
no occupation and no address. The market is now
seeking engineers of all specialities, IT professionals,
pharmacists, but we don’t have enough of them.
If we predict well what we will need in the coming
period, we will no longer have these problems.
► Which instruments will the Ministry use to redu-
ce unemployment?
- A competition was recently announced for the jail in
Subotica. They sought a general practitioner and no
one responded. And do you know how many doctors
are waiting for national service in Subotica? Dozens.
Perhaps in cases where the state funded someone's
- We're working on that right now and by the end of
the year appropriate regulations will be adopted and I
can say that we have adopted a number of suggestions
we received regarding this.
► What measures does your ministry have availa-
ble concerning the accelerating of the settlement
of labour disputes?
- None at all, but my idea that has been forwarded to
the Ministry of Justice is to establish a court for labour
relations. In the previous law we had a measure whe-
reby all labour disputes had to be completed within
six months, but none one dispute
was resolved during that period.
We abolished it from this new law.
It would be meaningful to me if em-
ployers' associations supported the
establishment of labour courts, ac-
cording to the German model.
► Whatmeasuresfromyourdoma-
in do you intend to take in the field
of combating undeclared work?
- We estimate that about 30% of
workers are working illegally and
we are aware that this is a huge fi-
gure. A company that does not regi-
ster its workers is much more com-
petitive than those that regularly
meet their obligations and that is
an anomaly we must correct. The
Serbian government has adopted
very supportive measures for the
registration of workers and as a
ministry we will work on both san-
ctioning and preventative policies.
My instructions to the labour in-
spectorate was not to immediately
sanction enterprises with workers
employed on the black, but rather to
give them a deadline to correct that.
We will not close down businesses.
We will not leave people without
jobs, but workers must be registered. In addition to
existing measures, we will introduce some very logi-
cal measures to combat unregistered employment, for
example blocking the lease of state land to those who do
not have registered employees. We will not permit that.
► In your opinion, how can the dialogue between
employers and trade unions be strengthened?
- To date we’ve had hundreds of workers who were
not represented in the socio economic council through
their unions and that will no longer happen. The same
is true for employers. When they really are represen-
tative, then we will be able to lead much better quality
Among the 14 laws to be adopted
by year’s end is also the Law on
Compensation for harm in the
workplace, solutions for which we
will discuss with employers

► What are your expectations regarding the effects
of the reform of the pension system and what furt-
her steps do you intend to take?
- Solutions in the area of pension reform have been
completed. This will bring significant cost reductions
– in 10 years we will save 5.35% of GDP on pensions,
which are serious savings and no one will lose any ri-
ghts. We have significantly reduced the number of pri-
vileged jobs, equalised the status of women and men, as
is the case in all European countries, and with that we
have left the mechanism whereby women have certain
privileges based on each child. We
also corrected the anomalies - in
Serbia one in three workers take
early retirement. That is not nor-
mal and we had to respond to that.
► Where do you see the role of
your ministry in the compre-
hensive reform programme
announced by the Government?
- By the end of the year we will enter into the procedure
with some 14 laws, the most important of which for em-
ployersistheLawonCompensationforharminthewor-
kplace, and there I will certainly seek their opinion. This
area has not been regulated to date and it is extremely
important for the normal operations of a company. ■
education we should consider introducing a require-
ment that such students should spend a year, two or
three working where there is a need for their knowled-
ge, regardless of where they live.
You also have this kind of example: the labour in-
spectorate recently warned that employers complain
that workers do not want to be registered because
they are receiving unemployment benefits. These are
workers whose occupations are scarce and employers
have no choice but to agree to their terms.
► However, unemployment in Ser-
bia is still very high?
- Very high. However, in the last five
months we can praise ourselves for
having a continuous decline in the
unemployment level. In July and Au-
gust, which we did not expect, we
have seen increasing registration
of employees as a concrete result of
the Labour Law, the government's
incentive measures and the engagement of the labour
inspectorate.
Howeverm even all those measures for retraining
and the like, which I have already mentioned, cannot
solve unemployment. It can only be solved by new in-
vestments and we are primarily fighting for them.
By the end of the year we will
simplify the procedure of the Law
on Foreigners, which will ease the
engagement of foreign labour
Always fresh. Always close. Always MAXI.

open to cooperation and ready to listen to the views of
foreign investors regarding the business climate in the
country. However, when it comes to the implementation
of things agreed upon, success has been moderate. Not
necessarily because of a lack of will, but rather primarily
because of a failure to consider in due time the complexity
of the transition process.
Here is a specific example in practice of what mo-
derate success means. In October 2013, regulations go-
verning the labelling of non-alcoholic be-
verages were harmonised with the EU's
rules and this regulation envisages, among
other things, an 18-month transition pe-
riod. However, the Ministry of Agriculture
issued its opinion that the labels on the
existing products must be changed within
a deadline of seven days, while the transi-
tion period applies only to new products. This proved to
be problematic, due to contractual obligations and signi-
ficant costs. This kind of practice automatically brought
into question the initial positive normative change in the
T
he level of satisfaction of foreign investors who
are already in the country is the best recom-
mendation for the arrival of new investors. All
previous Serbian governments were aware of
that, as witnessed by the increasing quality of dialogue
between the government and the business
community. However, progress has been
modest when it comes to the practical im-
plementation of recommendations to im-
prove the business environment, says FIC
Vice President Srđan Lazović.
► The FIC exists a full 12 years. To what
extent has the atmosphere changed throughout this
period? Are the FIC's original recommendations still
relevant today?
- All previous governments of the Republic of Serbia were
The harmonisation of legislation
with EU regulations is often not
accompanied by proper enforcement.
The reason for this is an insufficiently
trained administration, a lack of
supporting regulations or their
non-compliance with adopted laws.
Therefore, progress evident in the
legislative field is negated in practice
No Good Law Without
Proper Implementation
INTERVIEW
SRĐAN LAZOVIĆ
VicePresidentoftheForeignInvestorsCouncil,
CorporateandRegulatoryAffairsDirector
fortheCEFTAregionandBulgariaat British
AmericanTobaccoSEEd.o.o.
The FIC has advocated for
years for the introduction of
a transparent and sustainable
system of public finances

issue is also the increasing of predictability, by which we imply the
implementation of laws that have been adopted and the monito-
ring of their implementation. Furthermore, it is necessary to con-
tinue to reduce red tape in order for the state administration to
be more efficient and accountable. The Council advocates for the
economic integration of Serbia with the European Union, because
that brings predictability and transparency in the business envi-
ronment and raises the competitiveness of the Serbian market.
► How do you rate the government's intention to reform pu-
blic finances, the pension system and education; do you see
concrete progress and, if so, where?
- Addressing key issues of Serbia's public finances, such as
managing a growing budget deficit and
public debt, are crucial to ensuring the
country's macroeconomic stability. Tax
policy should be transparent, without
the introduction of para-fiscal levies
in certain areas. When we talk about
reforms and the implementation of
systemic reforms in the areas of heal-
thcare, pensions, education and public
administration, these certainly represent the most complex
and most important steps in creating a functional and sustai-
nable business framework.
► In your opinion, will the new bankruptcy law provide
greater protection to creditors and enable acceleration of
the process of bankruptcy for companies that have been
unable to service payments for a long time?
- The FIC conducted comprehensive analysis of the Law on
Bankruptcy after its adoption by the Assembly and we plan
to present those results in the latest edition of the White
law itself, in terms of harmonisation with EU regulations.
As far as the relevance of the recommendations is con-
cerned, we are fully aware that the harmonising of legislation
with the regulations applicable in the EU is a long-term proce-
ss, so their repeated appearance in several editions of the Whi-
te Book is a result of our desire to help solve specific problems
in the long run and, more importantly, in a sustainable way.
► To what extent can we say today that the overall le-
gal framework in Serbia is coherent, and supported by
appropriate regulations?
- The creating of a legal framework that will be coherent, as well
as supported by applicable regulations and in compliance with
the EU Acquis, is one of five identified
key priorities of the Council, and one
of the basic preconditions for legal cer-
tainty in Serbia. There is currently a di-
fference between the formal framework,
which has largely been harmonised with
the EU, and reality, in terms of the ways
in which laws are enforced. The reason
this occurs is that laws are sometimes
vague, the public administration has a limited capacity to im-
plement them, as well as bureaucracy and sudden regulatory
changes. The judicial system is also too slow and cumbersome
to cater to the needs of a modern economy.
► Which segments of harmonisation with the EU would you
specifically point out to the government on the eve of ope-
ning negotiations on the chapters?
- We believe the goal should primarily be the creation of a lasting,
sustainableandtransparentframework–toadoptandimplement
regulations that comply with the EU Acquis. Closely related to this
Systemicreformsintheareasof
healthcare,pensions,educationand
publicadministrationarethemost
importantforthecreationoffunctional
andsustainablebusinessframework.
Serbiahasgreatpotentialin
agricultureandthefoodprocessing
industry,buttheessentialprecondition
foritsuseisabetterstructuredanda
predictableframework.
Thegovernmentshouldmakeeffortsto
improvethetransparencyofregulations,
strengtheninstitutionalcapacitiesandreduce
theadministrativeburden,inordertoprovide
effectiveprotectionforinvestors.
REFORMS PREDICTABILITY REGULATIONS
We expect greater appreciation
of our recommendations,
because the FIC plays an
important role in generating
Serbia's GDP

tion has once again emerged. The remaining problems in the
agri-food industry include full lack of transparency in the im-
plementation of border inspection procedures, in terms of cost,
timeframes and mechanisms, including sampling and labora-
tory analysis. The quality standards of milk are not ensured
and the National Reference Laboratory is still not operating.
It is essential to establish a transparent policy of subsidies to
support long-term agricultural development, furthermore the
registration of products for plant protection has not yet been
agreed with the European Union and does not guarantee food
safety. We have inconsistent application of the rules relating to
livestock and so on.
► Can we say that the level of acceptance of the recommen-
dations and advice given by FIC members, along with their
experience, is proportional to their
share in the Serbian GDP?
- We think there is progress, but we cer-
tainly expect a significantly higher per-
centage of our recommendations to be
accepted because, as you noticed nicely,
the Council has an important role in ge-
nerating the GDP of Serbia. It is also an
indisputable fact that the Council conti-
nues to strengthen, thanks to continued
growth and an influx of new members,
currently bringing together 130 compa-
nies that have invested a combined total
of more than $20 billion, accounting for
17.5% of GDP, and its member compa-
nies are among the country’s biggest
taxpayers and exporters, directly em-
ploying over 95,000 people in Serbia.
The main objective of the Council is to
use specific recommendations articula-
ted in the White Book to draw attention
to areas that need to be advanced with
the aim of further improving the inves-
tment climate in Serbia.
► You just mentioned the White Book. To what extent is the
White Book required reading for investors who are just
arriving in Serbia?
- The White Book is a unique brand in its own right and the
key publication of the Council, which provides a picture of
the business climate in Serbia and offers tangible suggestions
for improving the business environment. The purpose of the
White Book is to serve as a platform for an active dialogue
between the Council and the Government, and we believe that
it serves this purpose. Moreover, key players in Serbia and
beyond recognise the White Book as a sort of manual or set
of recommendations for creating simpler and better conditi-
ons for doing business. Not infrequently, especially in recent
times, we have witnessed our publication being quoted in
public and we have seen it cited by government officials and
ambassadors of foreign countries. ■
Book this autumn. At this point I can convey that the latest
amendments to the Law on Bankruptcy adopted in August of
this year introduced numerous positive changes. Namely, the
proposed amendments seem to contribute to the transparen-
cy and efficiency of bankruptcy proceedings, and we express
hope that a significant amount of problems observed in pra-
ctice should hopefully be resolved by the adoption of the la-
test amendments of the Law. However, the actual effects of the
amendments could only be evaluated after a certain period of
their implementation in practice.
► Can you give us some FIC comments regarding the new
Law on Foreign Currency Operations?
- The position of the Council is that it is necessary to make amen-
dments in order to avoid different interpretations of existing
rules on foreign currency operations, all
with the aim of further liberalisation of
financial instruments and regulations
on foreign exchange transactions. In this
regard, the Council considers it nece-
ssary to secure the implementation of
the following recommendations, which
are not included in the proposed amen-
dments to the law: enable the issuing of
guarantees on non-resident accounts in
transactions between two non-residents
in all non-credit transactions; bylaws and
practices of the National Bank of Serbia
regarding subordinated loans also need
to be changed and the providing of subor-
dinated loans should be considered as a
direct investment, as is regulated by the
Law on Foreign Currency Operations, etc.
These are just some of the specific recom-
mendations we have given to the compe-
tent institutions through official channels.
►Howdoyouassessprogressinagricul-
ture and the food industry, where there
was little progress in previous years?
- Serbia has great potential in agriculture and the food proce-
ssing industry, but a key prerequisite for the utilization of this
potential is a better structured and predictable framework. The-
re are two contradictory elements within the food industry and
agriculture in Serbia. On the one hand, important laws, such as
the Food Safety Law, are to a large extent harmonised with EU
regulations. However, in practice, many important legal decisi-
ons do not apply. For example, the functioning of the reference
laboratory was regulated back in 2009, but it still isn’t functi-
oning. In addition, sometimes the bylaws are in direct conflict
with the positions written in the law itself. For example, the
Regulation on labelling contradicted the Law on Food Safety for
four years, until it was changed last year.
Some positive changes have been noticed in the past eight
months, such as harmonisation of the regulations on labelling
with European Union rules, but the problem of implementa-
A satisfied foreign investor is
the best recommendation for the
arrival of new foreign investors

J
orgovanka Tabaković, Governor of
the National Bank of Serbia, believes
the government will be committed
in the implementation of fiscal con-
solidation and structural reforms and that
these efforts will result in the concluding of
a precautionary arrangement with the In-
ternational Monetary Fund. The NBS is re-
ady to contribute to creating conditions for
improving the market environment through
the ensuring of the stability of prices and the
financial system.
► How would you assess the macroeco-
nomic situation in Serbia and the
probability of entering into a pre-
cautionary arrangement with the
IMF this year?
- The year-on-year inflation rate in
June totalled 1.3 per cent, with which
it reached a new historic, 50-year low.
Inflationary pressures have been very low in
the last year and a half, which is a result of
monetary policy measures that also contri-
bute to the stability of the exchange rate and
inflation expectations, as well as the result
of low aggregate demand and falling prices
of primary agricultural products. We expect
that in the second half of the year inflation
will return within the limits of the target, or
four plus/minus 1.5 per cent.
On the other hand, following the floods
that primarily impacted on energy, mining
and agriculture, the growth prospects for
GDP have deteriorated. Flood damage will
almost certainly have a negative impact on
the budget, which will demand additional
fiscal policy efforts in the coming period in
order to ensure the sustainability of public
finances, while to a certain extent the trade
balance will also worsen, due to the expe-
cted higher imports of energy, as well as ma-
terials and equipment for repairing damage.
We estimate, however, that the effects of the
flooding are one-off and limited, and that the
outlook for 2015 is more favourable, prima-
rily due to the expected increase in inves-
tments to repair the damage.
We expect that the new round of negotia-
tions with the IMF will follow in the autumn
and that afterwards a precautionary arrange-
ment will be signed that will be an additional
guarantee to investors that Serbia is leading a
responsible and sustainable economic policy.
► Where do you see the NBS’s role in su-
pporting the government’s implementati-
on of comprehensive reforms?
- The Government and the NBS have a sha-
red task of ensuring policies enable the
advancement of the business environment
in the country and, as a consequence, hig-
her economic growth and employment. An
essential condition for conducting reforms
is macroeconomic stability, and in order to
achieve that it is necessary for the Go-
vernment to ensure the stability and
sustainability of public finances, while
for its part the NBS ensures the stabi-
lity of prices and the financial system.
► How much room is there for the
NBS to maintain low inflation and the
stable value of the dinar in the face of
challenges coming from the fiscal sector?
- It is correct that there are challenges in the
fiscal sphere, but the NBS believes in the deci-
siveness of the Government to deal with them,
which would contribute to reducing internal
and external imbalances, and thereby also la-
It is correct that there are challenges in the fiscal
sphere, but the National Bank of Serbia believes
in the decisiveness of the Government to deal with
them, which would contribute to reducing internal
and external imbalances, and thereby also lasting
stability of the foreign exchange market
We’re Aware of the
Challenges
INTERVIEW
JORGOVANKA TABAKOVIĆ
GovernoroftheNationalBankofSerbia
The course represents one of the
most important factors influencing
price and overall financial stability

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sting stability of the foreign exchange market.
As you know, Serbia’s regime of mana-
ging-fluctuating the exchange rate and the
NBS does not have the aim of maintaining the
exchange rate of the dinar towards the
euro at a predetermined level. Howe-
ver, the fact is that – as in other small,
exposed economies – The course re-
presents one of the most important
factors influencing price and overall
financial stability.
In addition to that, given the de-
gree of Euroization of the domestic
economy, movements in the exchan-
ge rate are also important from the
standpoint of financial stability, the mainte-
nance of which represents the second task of
the National Bank. If the NBS allowed the fo-
reign exchange market, which is very shallow
and has low traffic, to fluctuate as a result
of short-term external shocks, we would be
irresponsible with regard to the population
and the economy.
► Which solutions from the domain of the
NBS are being considered when it comes to
non-performing loans?
- There are no quick fixes in the resolving of
issues that have accumulated over the years, and
the same also applies to the issue of non-perfor-
ming loans (NPL).
In the previous period the NBS brought a
number of regulatory changes in an
effort to solve this problem, which
were aimed at relaxing provisions
relating to the transfer of receiva-
bles sought from banks by other le-
gal entities, in order to allow banks
to thereby clean their portfolios, and
the NBS is still working actively on
finding additional regulatory soluti-
ons to this problem.
One of the possible measures for
resolving the problem of NPLs is also the cre-
ation of a separate company in the form of an
investment fund that that would buy up tro-
ubled loans from banks. This would allow
Aprecautionaryarrangementwiththe
IMFwouldbeanadditionalguaranteeto
investorsthatSerbiaisleadingaresponsible
andsustainableeconomicpolicy.
Lastingresultsinresolvingtheissue
ofnon-performingloansarenot
possiblewithoutstrongereconomic
recoveryandstructuralreforms.
Thelegalframeworkmustno
longerbealimitingfactorinthe
developmentofinnovationsonthe
paymentservicesmarket.
RESPONSIBLE REFORMS LAWS
The measures that the Government
intends to implement are
essential and urgent because the
environment that citizens and
businesses should live and do
business in depends on them

banks to use the sale of troubled receivables
to other entities in order to relieve their ba-
lance sheets and utilise the resulting funds for
new lending to support healthy projects.
However, the lasting results in solving
the problem of NPLs are not possible wi-
thout a stronger economic recovery and
structural reforms, while central banks can
provide their biggest contribution by su-
pporting macroeconomic stability, in which
the NBS has visible results.
► At the beginning of this year you announ-
ced interest in a strategic investment and a
number of investors interested in in-
dividual banks in Serbia. What could
realistically be achieved from these
investments by the end of this year?
-Inmid-AugusttheExecutiveBoardofthe
National Bank of Serbia gavepreliminary
approval to the establishing of a bank to
be part of the international conglomerate
known as the Royal Group, which has its
headquarters and founder in Abu Dhabi
(UAE). The bank will operate under the
name Mirabank, joint stock company,
Beograd. With this, the first stage in the
establishment of this bank has been com-
pleted. It is the first greenfield investment
inthebankingsectorinSerbiasince2008.
The next stage is the licensing of the bank.
The NBS, in accordance with its res-
ponsibilities and on the basis of the sub-
mitted applications of potential investors
for the acquisition of direct ownership
that would enable more than 50 per cent
of the voting rights of Čačanska Bank,
passed an appropriate act that has been
forwardedtotheDepositInsuranceAgen-
cy, which is in charge of the process of le-
ading and finalising the sale of this bank.
Individual companies from China
and Turkey have also expressed interest in in-
vesting in the financial sector in Serbia, but to
date they have not submitted official requests.
► The NBS has prepared a draft law on
insurance, payment services and amen-
dment and additions to the Foreign Exc-
hange Act. What will these laws mean in
terms of regulating the economic envi-
ronment?
- The draft law on insurance should establi-
sh a regulatory framework that will enable
the further development and improvement of
the insurance business and a higher level of
protection for the users of insurance services.
The NBS, as the proponent of this law, sought
to use the introduction of a number of novel-
ties to increase the quality of dealing with
insurance and enable the further harmonisa-
tion of insurance services with the standards
of developed market economies and with the
EU acquis in the field of insurance.
The draft law on payment services will,
for the first time and in a comprehensive
and detailed manner, bring order to the
payment services market in our country.
Its adoption will improve the business en-
vironment by creating legal requirements
for new, contemporary forms of payment,
as well as for the establishing of institutions
that have not previously existed on the mar-
ket – institutions for electronic money and
payment institutions.
There are three basic principles that we
were led by during its compilation. First is that
the legal framework must no longer be a limi-
ting factor in the development of innovations
on the payment services market. Second, we
want to secure conditions for the shortest po-
ssible deadline for the execution of payment
transactions, alongside the highest possible
share of electronic payments. The third princi-
ple we followed is ensuring the safety and relia-
bility of payment transactions.
The NBS has also prepared a Draft law on
amendments and additions to the Foreign Ex-
change Act with the aim of complying with the
provisionsofthenewLawonPaymentServices,
as well as in order to eliminate confusion in the
application of certain provisions of the applica-
ble Law on Foreign Exchange Operations.
► What does the NBS intend to do in its do-
main in terms of promoting e-commerce?
- One of the main goals of the new law on
payment services is to promote e-commerce,
and to do so primarily through the legal
introduction of institutes of electronic
money and enabling electronic money
payments in dinars and foreign curren-
cy, both in the country and abroad, as
well as creating a legal framework for
the establishment and operations of do-
mestic institutions for electronic money.
We expect them to be a more favo-
urable alternative than banks when it
comes to the cost of companies wanting
to sell their products and services online
to customers in the country or to engage
in the global internet trading system.
► In which areas should the Law on
the Protection of Financial Services
improve this domain?
- The basic goals of this law are for it
to be harmonised with the new law
on payment services, improving the
ways of realising the rights and in-
terests of users of financial services,
additionally protecting those users,
as well as resolving specific practical
problems and dilemmas that arise in
its implementation.
► In your opinion, how much will the
measures taken by the Government and
the NBS impact on the creation of a more
equitable business environment for all
participants?
- This government is determined to im-
plement essential reforms, and to remove
obstacles hindering the establishment of a
favourable business environment. Those me-
asures are not always the easiest to apply but,
as they have been delayed for years, they are
now essential and urgent because the envi-
ronment that citizens and businesses should
live and do business in depends on them. ■
We estimate that the outlook
for 2015 is more favourable,
primarily due to the expected
increase in investments to repair
the flood damage

se manner because, other than notional outlines,
we do not currently know the government’s exact
reform course. The indications given by Minister
Vujović in the interview he gave to Bloomberg on
14th
July are of a gradual approach to fiscal con-
solidation, and the problem of the companies in
the process of restructuring.
Whether this is a consequen-
ce of the floods, and an effort
to cushion the double blow to
Serbia’s citizens, or the refle-
ction of an approach that was
present all along, is hard to
establish without a counterfa-
ctual. Unfortunately, the experience of other mi-
ddle income countries globally shows that gradu-
al fiscal consolidation rarely delivers the needed
effect, and this is a lesson we hope the govern-
ment will take to heart as it takes critical decisi-
ons in the coming months.
T
he floods that occurred at the time when
the government was just being formed,
took the prime minister and his cabinet a
lot of time, first on the immediate post-flo-
od efforts, and then on the Recovery Needs Asse-
ssment, at the time when implementation of the
fiscal consolidation measures
are urgently needed. However,
fiscal consolidation is probably
even more important than be-
fore, in order to free up fiscal
space to support the flood reco-
very efforts, says Tony Verhei-
jen, World Bank Country Mana-
ger for Serbia.
► You've warned the Serbian government that
the flood relief issue should not distract them
from the reform course. Was your advice heeded?
- It is difficult to answer your question in a preci-
Gradual fiscal consolidation rarely
delivers the needed effect, and this
is a lesson we hope the government
will take to heart as it takes critical
decisions in the coming months
FiscalConsolidationis
MoreImportant
thanEver
INTERVIEW
TONY VERHEIJEN
WorldBankCountryManagerforSerbia
We believe that the Labour Law
changes are a step in the right
direction that hopefully will pay off in
an improved investment climate

whether Serbia can meet its targeted deficit stabilization and
reduction objectives.
► Economy Minister has announced that the privatisati-
on of state-owned and socially-owned companies will be
completed by December 2016. Do you think this is a new
delay tactic or a realistic plan?
Is this a step towards levelling
the playing field?
- We haven’t seen the full plan
for resolving the 161 enterpri-
ses in restructuring, nor for the
other remaining enterprises in
the portfolio of the Privatisati-
on Agency. We expressed some concerns over the approach
that Minister Vujović outlined at the FIC Forum in june, as
to us it raises the risk of strong political pressures on behalf
of the (mostly defunct) SOEs, further delaying the process.
We have provided comments to this effect and the Mi-
► The Government has announced a revised budget for
this autumn, to be followed by negotiations with the IMF.
Is the timing and sequence of steps right to ensure macro-
economic stability in the coming period?
- The supplemental budget comes very late in the year, whi-
ch means that whatever measures are included will carry an
effect mostly for the 4th
quarter.
Considering the pattern we’ve
witnessed since the beginning of
the year (of an expanding fiscal
deficit), it will be hard for the
government to remain even wi-
thin the not very ambitious defi-
cit target originally set for 2014.
This means that basically Serbia will have lost another year
that it will need to make up for in the 2015-2017 period if
macro-fiscal fundamentals are to improve. In this respect,
the preparation of the 2015 budget and the 2015-2017 fiscal
strategy will become a pivotal process that will determine
We are concerned that several new
projects that were approved by the
Bank in the last 18 months have yet
to see the start of implementation
Preparationofthe2015budgetandthe
2015-2017fiscalstrategywillbecomea
pivotalprocessthatwilldeterminewhether
Serbiacanmeetitstargeteddeficit
stabilisationandreductionobjectives.
Alotremainstobedone,especially
regardingtheconsistentandpredictable
implementationoflawsandregulations,
thecreationofalevelplayingfieldand
endingunfairadvantagesenjoyedbySOEs.
ThenewLawonprivatisationitself
willnotchangethingsmuchifthereis
nodeterminedimplementationanda
strongpoliticalcommitmenttofinally
resolvethecompaniesinrestructuring.
BUDGET PREDICTABILITY DETERMINATION

of implementation. This is damaging, in parti-
cular for the Deposit Insurance Agency (DIA)
support project, which was meant to rapidly
provide resources to the government, but was
approved only in August, and the Road Reha-
bilitation project, which took 16 months to
be ratified. Frequent changes in the govern-
ment and the need for cumber-
some re-approval processes are
mostly to blame for this… The
most serious problem we are
facing remains the Bor Regional
Development Project, where the
Government signed a contract
for the construction of the Ve-
liki Krivelj collector (which is
critical to prevent a serious en-
vironmental incident in the Bor
area) in January 2013, but for
reasons unclear to us no works
have started so far.
► Has the environment for doing
business in Serbia improved?
- Judging from the tone of the FIC
president’s address to the FIC
conference in june, a lot remains
to be done, especially regarding
the consistent and predictable
implementation of laws and re-
gulations, the creation of a level
playing field and ending unfair
advantages enjoyed by SOEs.
There are some positive de-
velopments – for example, we
believe that the Labour Law
changes are a step in the right
direction that hopefully will pay
off in an improved investment
climate. Resolving the SOEs in
restructuring and the remaining
SOEs in the portfolio of the Pri-
vatisation Agency should also
help, along with the continuing
process of tax administration
reform. We also note the efforts
to harmonise and streamline in-
spections, initiated by Deputy
Prime Minister Udovicki. The
government undertook a number of moves in
the right direction, but achieving a real effect
on the economy will require adopting a coor-
dinated approach to accelerating reforms that
has so far been lagging or implemented in pie-
cemeal manner, and establishing clear accoun-
tability for delivering results. ■
nistry of Economy is considering these… The
adoption of the new Privatisation Law could be
a good opportunity to regain momentum that
was lost over the previous 18 months. Howe-
ver, a new law itself will not change things
much if there is no determined implementati-
on and a strong political commitment to finally
resolve these companies.
► You've said that the core of
the state administration - heal-
th, education and social welfare
- is too large. Do you see reform
progress in these areas?
- We have been working close-
ly with the team established by
Deputy Prime Minister Udovički
to find ways of achieving some
early fiscal gains from the public
administration reform process,
while at the same time focusing
on improving system performan-
ce. It is clear that expenditure on
wages and salaries in the Serbian
public sector is large, that perfor-
mance in service delivery is poor,
and that expenditure on wages has
increased rather than declined du-
ring the last five years, contrary to
the trend across EU member states.
I believe the phased approach being
developed by the Government
is credible and the only realistic
way forward, as it combines some
upfront savings with a clear pro-
cess of fundamental revision of
public sector employment num-
bers, while focusing on the quali-
ty and performance of the system
along with its cost.
► Is this government faster than
the previous administration
when it comes to withdrawing
credits from the World Bank?
- We have seen improvements in
project implementation over the
last 12 months, in particular on
Corridor X, which is our largest
investment in Serbia. We have also successfully
closed the Irrigation and Drainage project,
which achieved most of its objectives, as well
as the Energy Efficiency project, which also
had good results. However, we are concerned
that several new projects that were approved
in the last 18 months have yet to see the start
It is clear that expenditure
on wages and salaries in the
Serbian public sector is large
and that performance in service
delivery is poor

part in specific training programmes, focusing on major
elements and skills of law drafting.
But even if you have good laws, they might not always
be implemented by the public administration or judiciary.
One of the reasons for that is simply a lack of knowled-
ge and skills. This programme helps in overcoming the
so-called implementation gap. Furthermore, the introdu-
ction of “private” Enforcement
Agents and Public Notaries has
already increased predictability
in those areas today.
Our focus in the upcoming
period will be on the negotiati-
ons of chapters 23 and 24 of the
acquis communautaire, building
the capacities of the Serbian public administration, stren-
gthening and consolidating already initiated reforms and
ensuring efficiency in the work of newly established legal
professions, such as public notaries, enforcement agents
and insolvency administrators.
O
nly a sound and predictable legal and in-
stitutional framework will provide the
right environment to attract foreign inve-
stments: investments which are greatly
needed in Serbia. It is crucial that investors claim that
from the Serbian authorities, but also help them define
that system. The Legal and Judicial Reform Program-
me of GIZ (Deutsche Gesellschaft für Internationale
Zusammenarbeit (GIZ) GmbH), has contributed inten-
sively to improving the legislative process in Serbia,
says Mike Falke, Head of GIZ Legal and Judicial Reform
Programme in Serbia.
► What major achievements in terms of the busine-
ss environment’s legal predictability has the Ser-
bian Government made in
the previous year with the
help of GIZ, and what are the
most urgent tasks in the pe-
riod ahead?
- The Legal and Judicial Reform
Programme of GIZ has contri-
buted intensively to improving
the legislative process in Serbia. For example, public
consultations are now mandatory for every new law
– even though many laws have been adopted recently
under urgent procedures without sufficient stakehol-
der participation. A great number of civil servants took
Even though GIZ and the FIC have
very different mandates, both share
similar goals and aspire to increase
transparency and the efficiency of,
and stakeholder participation in, the
law making process
Better Legislation,
More Investors
INTERVIEW
MIKE FALKE
HeadofGIZLegalandJudicialReform
ProgrammeinSerbia
Urgent procedures without public
hearings should be the absolute
exception. Unfortunately, that has not
been the case in the last few months

Foreign Investors Council in Serbia 2014

Foreign Investors Council in Serbia 2014

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