Priming Engine of Economic Development

Serbia Turns to Economy―Responsibly together out of the Crisis Given encouragement and development of an encouraging legal and administrative environment, the ICT sector, already a prime economic mover, can do even more to grow the future Serbian economy. Milos Djurkovic, Managing Director of Hewlett Packard Serbia and AmCham President Jugoslav Piric, Country Manager of Microsoft Serbia and AmCham First-Vice President Priming Engine of Economic Development Q1: How big a role does or the ICT sector play in Serbia's total economy? Can ICT become Serbia's development driving force? How big is its potential? A1: Milos Djurkovic, Managing Director of Hewlett Packard Serbia and AmCham President - In the modern world, ICT is the driving force of economic development. Accessible information, the speed at which you get it and its accuracy are key components of competitive advantage. The role of IT in it is of great importance. If you look ten years back, you will understand that we have full globalization of business. A great quantity of information requires that it is processed in the best possible way so that tomorrow you can use it successfully in your business. If we look at the development of ICT in Serbia, we cannot say that it was treated as a key to Serbia’s development. Our ICT infrastructure is far behind that of developed countries. The fact that Serbia has solid software development and solid programmers does not make the IT sector developed. Its development is reflected in the growth of the IT infrastructure in public administration and in the private sector. IT is a key driving force of the development of a society and economy in some aspects. First, there are great possibilities in software development in Serbia, both in multinational and local firms. Second, the development potential of international support centers, such as HP and other multinational companies have in Bulgaria, the Czech Republic, Poland and other Central and East European Countries where they employ thousands of people, is huge. Their staff provide support for users all over the world, but they are based in these countries. There is room to create at least ten thousand jobs if the companies decided to invest in Serbia. And this is only the big companies we are talking about. The small and medium companies can invest a lot, too. Also, there is room for the development of the ICT sector in public administration and in the private sector. Developed information technologies will help our country to become more efficient and, eventually, more cost effective. Part of the money saved can be invested. Both our people and companies will benefit greatly because they will have a better public service, will spend less time at service windows and be able to use that time on their core business activities. In this way we also will become a more competitive country for investors. The development of IT in the private sector will result in a more efficient economy in general, which will be more competitive in the global market. A1: Jugoslav Piric, Country Manager of Microsoft Serbia and AmCham First-Vice President – The IT industry represents one of the leading opportunities for the Serbian economy. According to available data, the global IT industry grows some 60 per cent faster than the rest of the economy, while in Serbia it outgrows the rest of the local economy by nearly 200 per cent. This only goes to confirm the fast-paced developmental nature of the IT sector and its potential. It would be shame not to recognize this and leverage it to its full potential. Bearing in mind that the software industry is an integral part of the ICT sector, and that it serves as a cornerstone for investment and expansion of trade, the future will definitely be focused on software development. In Serbia’s case, for every EUR 10 million invested in the software industry, the ICT sector grows by 2.5 per cent. This might initially sound small; nevertheless, that same number will enable the software industry to expand by a remarkable 20 per cent. We can therefore say with confidence that the local ICT sector offers great potential for the Serbian economy, and if stirred in the right direction, can be used to establish a favorable investment climate in the near future. Q2: What are the main challenges for the ICT sector in Serbia? Does Serbia provide a development-friendly environment? A2: Milos Djurkovic - We are dealing with undeveloped information systems in aspects of public administration. They are not interconnected. We are currently defining the priorities of e-government with the Serbian Government. Good will is there, but the problem is that various ministries have different views regarding IT. In the end, everyone does things on their own, without fitting them into a wider system. We have to mention qualifications. We have a few thousand people with higher education, which is enough for starters. These are not just IT experts but other qualified people we need. This is why the development centers mentioned above are good – and these, young people are better paid than at the local level, but they primarily learn, develop and get qualified for new projects, very often in good domestic companies. On the other hand, there are not enough experts in other areas, which is why our education system must change, as the existing system does not produce modern professionals. A new labor act needs to be adopted that will allow for more modern forms of employment. It will have to support a source modern economy because only new investment will save both the employed and the unemployed. The current law does not protect anyone. A2: Jugoslav Piric - There are several challenges: visibility and focus, plan and structure and the protection of intellectual property rights. The overall software market in Serbia in 2011 was approximately $93 million, while an estimated $96 million was lost due to piracy. If regulated, the ICT sector, more specifically the software industry has, great potential to become one of the main driving forces of the Serbian economy. Reducing, even preventing, the manufacture and sale of pirated software, therefore, is not only a legal issue, but also a matter of competitiveness of the domestic economy in both regional and European markets. On the other hand, the local IT industry has been on a steady rise for the past decade, which is definitely a positive development. Microsoft’s office in Belgrade opened its doors in 2002; numerous small and mid-sized local software companies soon followed suit. As previously mentioned, the ICT sector has great potential in this country, and so far the government, in collaboration with companies such as Microsoft, has been making great efforts to actively encourage students and experienced IT professionals to energetically participate in making information technology a fully viable and prolific sector of the economy. Q3: What are the effects of the recent visit of Serbian officials and representatives of the IT industry to the United States of America? Are American investors prepared to invest in ICT in Serbia? A3: Milos Djurkovic - We wanted to show the Serbian Government what we could do in the development of the IT sector in Serbia. We need to learn from the experiences of other countries. For instance, we know how the central register and tax administration operated in other countries, and these are the good practices we should learn from. Serbia can get part of the funding for such big projects from pre-accession funds. We need to apply with sound project proposals. Also, we wanted to attract companies and make them think about investing in Serbia. This is definitely what the Government is interested in, too, and they have our support. AmCham organized a conference in San Francisco, symbolically called “IT believes in Serbia”, where we invited companies that are considering outsourcing part of their activities or opening centers elsewhere. Raising the public administration’s awareness of the importance of ICT was our primary goal. We wanted to demonstrate how ICT can really help the country’s development and simultaneously attract new investors because these two phenomena are tightly connected. We cannot attract investors if we are without a developed IT sector. A3: Jugoslav Piric - One of the central highlights of the ICT Mission to Redmond was presenting Serbia as a favorable location for investment, most notably in the information technology and software development sectors. The ICT sector in Serbia has gained a significant role in the Serbian economy over the past 10 years. If continued to be nurtured and guided correctly, it could pave the way for a potential economic revival and produce a ripple effect that could galvanize the rest of the economy. Although foreign investment is often seen as a lifeline for the Serbian economy – and it certainly is important in terms of kickstarting local businesses – the key focus areas that need to be attended to are education and further containment of the brain drain. By investing in education and wisely pooling existing human capital and talent, Serbia can build a strong and sustainable base to attract even more international investors in the future. It may be somewhat immodest to say, but through its Development Center, which employs both software engineers with solid industry experience and recent college graduates, Microsoft has significantly contributed towards eradicating the brain drain and bringing new jobs, currently employing 150 persons in Belgrade alone. Furthermore, our recently launched BizSpark program provides technology, support and visibility to promising startups and entrepreneurs at no charge. This will further encourage the spirit of entrepreneurship in the local IT community. Q4: How do you think the government has done in the past year? A4: Milos Djurkovic - In July 2012, AmCham recommended to the Government eight priorities for improving the business climate. There have been some positive developments, but the speed at which change happens is unsatisfactory. However, there is a reason for this because there were some political issues that required involvement of the Government. Some para-fiscal charges have been abolished, and they are working on the adoption of new laws. However, we have to urgently turn to the economy now and make it our priority. The Government can always count on the assistance of the business sector, and in this sense our dialogue could intensify and be initiated by the state more often. When broader social consensus is needed on some burning issues, such as the new labor act, the government asks for advice and suggestions, but this can be done in other situations affecting the business sector. A4: Jugoslav Piric - This past year brought certain changes in the local scene, notably on the forefront of European integration, creating of positive climate which will have a positive impact on the economy and encourage foreign investment. One of the key elements is creating and insisting on the “rule of law”. We have also witnessed a shift towards small and medium-sized businesses, as well as entrepreneurship which is a relatively new field in Serbia. The recent announcement made by the Minister of Finance concerning government funding of local ICT startups reflects the incredible potential of the start-up culture and its impact on the economy; as well as the PM`s focus on promoting IT as one of the generators of local economy. Moreover, the recent joint US-Serbia trade mission to the United States opened a new era in economic relations between our two nations. This visit presented an excellent opportunity for representatives of the Serbian ICT sector to establish cooperation with major American IT companies, showcasing Serbia’s true potential as a lucrative business and investment destination that will I hope be increasingly utilized in the near future. Perspective AmCham Perspective Magazine

Priming Engine of Economic Development

Q1: How big a role does or the ICT sector play in Serbia's total economy? Can ICT become Serbia's development driving force? How big is its potential?

A1: Miloš Đurković, Managing Director of Hewlett Packard Serbia and AmCham President - In the modern world, ICT is the driving force of economic development. Accessible information, the speed at which you get it and its accuracy are key components of competitive advantage. The role of IT in it is of great importance. If you look ten years back, you will understand that we have full globalization of business. A great quantity of information requires that it is processed in the best possible way so that tomorrow you can use it successfully in your business.

If we look at the development of ICT in Serbia, we cannot say that it was treated as a key to Serbia’s development. Our ICT infrastructure is far behind that of developed countries. The fact that Serbia has solid software development and solid programmers does not make the IT sector developed. Its development is reflected in the growth of the IT infrastructure in public administration and in the private sector.

IT is a key driving force of the development of a society and economy in some aspects. First, there are great possibilities in software development in Serbia, both in multinational and local firms. Second, the development potential of international support centers, such as HP and other multinational companies have in Bulgaria, the Czech Republic, Poland and other Central and East European Countries where they employ thousands of people, is huge. Their staff provide support for users all over the world, but they are based in these countries. There is room to create at least ten thousand jobs if the companies decided to invest in Serbia. And this is only the big companies we are talking about. The small and medium companies can invest a lot, too.

Also, there is room for the development of the ICT sector in public administration and in the private sector. Developed information technologies will help our country to become more efficient and, eventually, more cost effective. Part of the money saved can be invested. Both our people and companies will benefit greatly because they will have a better public service, will spend less time at service windows and be able to use that time on their core business activities. In this way we also will become a more competitive country for investors. The development of IT in the private sector will result in a more efficient economy in general, which will be more competitive in the global market.

A1: Jugoslav Pirić, Country Manager of Microsoft Serbia and AmCham First-Vice President –

The IT industry represents one of the leading opportunities for the Serbian economy. According to available data, the global IT industry grows some 60 per cent faster than the rest of the economy, while in Serbia it outgrows the rest of the local economy by nearly 200 per cent. This only goes to confirm the fast-paced developmental nature of the IT sector and its potential. It would be shame not to recognize this and leverage it to its full potential.

Bearing in mind that the software industry is an integral part of the ICT sector, and that it serves as a cornerstone for investment and expansion of trade, the future will definitely be focused on software development. In Serbia’s case, for every EUR 10 million invested in the software industry, the ICT sector grows by 2.5 per cent. This might initially sound small; nevertheless, that same number will enable the software industry to expand by a remarkable 20 per cent.

We can therefore say with confidence that the local ICT sector offers great potential for the Serbian economy, and if stirred in the right direction, can be used to establish a favorable investment climate in the near future.

Q2: What are the main challenges for the ICT sector in Serbia? Does Serbia provide a development-friendly environment?

A2: Miloš Đurković - We are dealing with undeveloped information systems in aspects of public administration. They are not interconnected. We are currently defining the priorities of e-government with the Serbian Government. Good will is there, but the problem is that various ministries have different views regarding IT. In the end, everyone does things on their own, without fitting them into a wider system.

We have to mention qualifications. We have a few thousand people with higher education, which is enough for starters. These are not just IT experts but other qualified people we need. This is why the development centers mentioned above are good – and these, young people are better paid than at the local level, but they primarily learn, develop and get qualified for new projects, very often in good domestic companies. On the other hand, there are not enough experts in other areas, which is why our education system must change, as the existing system does not produce modern professionals.

A new labor act needs to be adopted that will allow for more modern forms of employment. It will have to support a source modern economy because only new investment will save both the employed and the unemployed. The current law does not protect anyone.

A2: Jugoslav Pirić - There are several challenges: visibility and focus, plan and structure and the protection of intellectual property rights. The overall software market in Serbia in 2011 was approximately $93 million, while an estimated $96 million was lost due to piracy. If regulated, the ICT sector, more specifically the software industry has, great potential to become one of the main driving forces of the Serbian economy. Reducing, even preventing, the manufacture and sale of pirated software, therefore, is not only a legal issue, but also a matter of competitiveness of the domestic economy in both regional and European markets.

On the other hand, the local IT industry has been on a steady rise for the past decade, which is definitely a positive development. Microsoft’s office in Belgrade opened its doors in 2002; numerous small and mid-sized local software companies soon followed suit. As previously mentioned, the ICT sector has great potential in this country, and so far the government, in collaboration with companies such as Microsoft, has been making great efforts to actively encourage students and experienced IT professionals to energetically participate in making information technology a fully viable and prolific sector of the economy.

Q3: What are the effects of the recent visit of Serbian officials and representatives of the IT industry to the United States of America? Are American investors prepared to invest in ICT in Serbia?

A3: Miloš Đurković - We wanted to show the Serbian Government what we could do in the development of the IT sector in Serbia. We need to learn from the experiences of other countries. For instance, we know how the central register and tax administration operated in other countries, and these are the good practices we should learn from. Serbia can get part of the funding for such big projects from pre-accession funds. We need to apply with sound project proposals. Also, we wanted to attract companies and make them think about investing in Serbia. This is definitely what the Government is interested in, too, and they have our support. AmCham organized a conference in San Francisco, symbolically called “IT believes in Serbia”, where we invited companies that are considering outsourcing part of their activities or opening centers elsewhere.

Raising the public administration’s awareness of the importance of ICT was our primary goal. We wanted to demonstrate how ICT can really help the country’s development and simultaneously attract new investors because these two phenomena are tightly connected. We cannot attract investors if we are without a developed IT sector.

A3: Jugoslav Pirić - One of the central highlights of the ICT Mission to Redmond was presenting Serbia as a favorable location for investment, most notably in the information technology and software development sectors. The ICT sector in Serbia has gained a significant role in the Serbian economy over the past 10 years. If continued to be nurtured and guided correctly, it could pave the way for a potential economic revival and produce a ripple effect that could galvanize the rest of the economy.

Although foreign investment is often seen as a lifeline for the Serbian economy – and it certainly is important in terms of kickstarting local businesses – the key focus areas that need to be attended to are education and further containment of the brain drain. By investing in education and wisely pooling existing human capital and talent, Serbia can build a strong and sustainable base to attract even more international investors in the future. It may be somewhat immodest to say, but through its Development Center, which employs both software engineers with solid industry experience and recent college graduates, Microsoft has significantly contributed towards eradicating the brain drain and bringing new jobs, currently employing 150 persons in Belgrade alone. Furthermore, our recently launched BizSpark program provides technology, support and visibility to promising startups and entrepreneurs at no charge. This will further encourage the spirit of entrepreneurship in the local IT community.

Q4: How do you think the government has done in the past year?

A4: Miloš Đurković - In July 2012, AmCham recommended to the Government eight priorities for improving the business climate. There have been some positive developments, but the speed at which change happens is unsatisfactory. However, there is a reason for this because there were some political issues that required involvement of the Government. Some para-fiscal charges have been abolished, and they are working on the adoption of new laws. However, we have to urgently turn to the economy now and make it our priority.

The Government can always count on the assistance of the business sector, and in this sense our dialogue could intensify and be initiated by the state more often. When broader social consensus is needed on some burning issues, such as the new labor act, the government asks for advice and suggestions, but this can be done in other situations affecting the business sector.

A4: Jugoslav Pirić - This past year brought certain changes in the local scene, notably on the forefront of European integration, creating of positive climate which will have a positive impact on the economy and encourage foreign investment. One of the key elements is creating and insisting on the “rule of law”.

We have also witnessed a shift towards small and medium-sized businesses, as well as entrepreneurship which is a relatively new field in Serbia. The recent announcement made by the Minister of Finance concerning government funding of local ICT startups reflects the incredible potential of the start-up culture and its impact on the economy; as well as the PM`s focus on promoting IT as one of the generators of local economy.

Moreover, the recent joint US-Serbia trade mission to the United States opened a new era in economic relations between our two nations. This visit presented an excellent opportunity for representatives of the Serbian ICT sector to establish cooperation with major American IT companies, showcasing Serbia’s true potential as a lucrative business and investment destination that will I hope be increasingly utilized in the near future.