"Business requires more efficient changes"

"Business requires more efficient changes"

As with previous editions, this one also records the situation in selected segments of regulation and the economy, reporting on progress (or lack thereof) achieved in the time since the publishing of the previous White Book, noting problems that remain and finally offering suggestions on how to deal with these remaining problems, with the singular purpose of improving the country’s business environment.

This is a team effort. The FIC creates the book through its committees, which comprise competent people from renowned companies. Serbia receives suggestions on how to follow the best practices of the home countries of these companies. Since the majority of FIC members hail from the European Union, it goes without saying that following the improvements suggested allows Serbian companies to move closer to satisfying the need to comply with the EU’s acquis communautaire.

Successive governments’ responses to these recommendations leaves something to be desired. For example, the last edition of the White Book stated that only 38% of the recommendations had been taken into consideration and that serious progress was made on some, while others (among the 38%) saw “some progress”. This is below the level of achievement in the previous year, when 47% of recommendations were taken into consideration. However, one should not only look at the quantitative side of accepting recommendations.

There are different kinds of changes, ranked according to weight and breath of impact. For instance, the last batch contained the implementation of recommendations regarding the labor law, a crucial aspect of the business environment. But the impression is that the speed of change of the business environment remains relatively slow, especially if we consider the time required from submitting a recommendation to its full implementation. There are recommendations that were made as long ago as 2008, but which only registered some progress in the last White Book.

As such, it is not surprising to find Serbia has a low ranking in leading world business surveys, compared to other countries in the world and the region. According to the latest edition of the World Bank’s “Doing business – 2015” report, Serbia is ranked 91st among 188 countries, based on a composite index. If we look at the index of the speed of acquiring a building permit, Serbia is ranked 183rd, while the tax system index ranks Serbia 165th. Looking at the composite index, Serbia is ranked behind countries like Namibia, Azerbaijan and Kosovo (75th in the world).

The last Competitiveness Report of the World Economic Forum ranks Serbia 94th out of 144 reviewed countries in the composite index category. Rated according to some specific parameters of importance to the business environment, Serbia is ranked even lower. In the category “business impact of regulation on foreign direct investment”, Serbia holds 130th position, while it is 128th in terms of the efficiency of the court system. Looking at the composite index, countries like Moldova, Montenegro and Macedonia are all ahead of Serbia.

The main message of the White Book is that quicker and more efficient change in the business environment leads to increased productivity, competitiveness, GDP growth and employment growth. We should also bear in mind that the quality of the business environment is relative. It is assessed by those who do the rankings, but also investors, in relation to other business environments. Serbia can improve its business environment, but if it fails to do so more quickly and to a greater extent, it could even fall on the list, and in the eyes of investors.

The good news is that changing the business environment is not expensive and does not require a lot of capital and labour. It requires political will to change the laws and policies, as well as making some institutional changes. It goes without saying that stricter implementation of laws is a necessary element for a better business environment.

Originally published on the CorD Magazine website