DANIEL BERG, EBRD director for Serbia: Working Together for Sustainable and Faster Growth

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Serbian growth has been volatile and not as high as desired. Therefore our just completed new Country Strategy focuses on removing Serbia’s obstacles to growth. It promotes better governance of state enterprises and state administration, more inclusive policies toward youth, and women and green growth

One of the key challenges Serbia has to address is a problem known as the „middle income trap“. We spoke with Mr. Daniel Berg, EBRD director for Serbia about the newly promoted EBRD Country Strategy which hast to help Serbia to overcome this challenge and achieve higher growth. Serbia must accelerate its growth trajectory but in a sustainable way and then the country will proceed in convergence with Europe.

Are you one of those people who are eagerly waiting for Serbia to sign a new arrangement with the IMF, or do you think that the government has been pursuing a disciplined economic policy?

I believe that Serbia should remain engaged with the IMF after successfully completing the previous 3-year Stand-By Arrangement. This is not for the sake of having funds available, but more for the guidance and policy support which the IMF can provide. International markets consider the positive relationship with the IMF as an anchor for stability and promoter of reform policies. Other IFIs, such as EBRD, can work cooperatively on projects which are highlighted in the IMF programme.

One of the most discussed topics is Serbia is achieving a much faster economic growth than the current one. What would be the key steps towards accomplishing this goal?

We have just completed our new Country Strategy for Serbia which is designed to address Serbia’s transition gaps and obstacles to growth. Growth has been volatile and not as high as desired, in order to put Serbia on a convergence trajectory with the rest of Europe. Some of the measures and investments foreseen in our Country Strategy would help Serbia to achieve higher growth and to escape the so called „middle income trap“. This includes better governance of state enterprises and state administration, where EBRD is providing policy support. This also includes more inclusive policies to ensure youth, women and disadvantaged groups are fully engaged in the economy. Our women in business credit lines have proven successful in raising access to finance for women entrepreneurs. Our Strategy also focuses on green growth and making the economy more resource efficient and resilient to climate change. Last year, for example, we financed our first large scale renewable energy projects.

The EBRD Transition Report for 2017-2018, which you presented at the Kopaonik Business Forum, says that there is a huge transition gap between Serbia and other countries. What does this pole position mean in terms of convergence, which is instrumental in Serbia catching up to other EU countries?

At KBF, I was trying to stress that with strong commitment to reforms, Serbia has an opportunity to move faster with its convergence. In other words, having a gap can be seen as a disadvantage or an advantage. The country can take major steps by using new technologies, and experiences from abroad, to catch and exceed other countries.Improving governance again will be key to successful implemetnation of such a strategy.

Recently, at a gathering dedicated to the Balkans, it was said that as long as the countries, like Serbia, remained poor, they would not be able to generate enough strength to establish the rule of law and create a healthy environment for doing business. What is your opinion on poverty and underdevelopment as obstacles to the creation of a functioning market economy?

There are definitely examples of lower income countries taking the right steps and achieving above average growth and therefore convergence. Georgia is one example where the government focused on improving governance and fighting corruption and this led to improvements in growth performance. As noted above, inclusive policies – for example, ensuring youth are fully engaged with appropriate education and on the job training – can make a big impact on development.

On the back of that, you adopted a new five-year strategy for Serbia. What are the key novelties in the strategy and how do they correspond to the new economic realities in Serbia?

The Strategy is not novel, but rather presents a balanced Bank approach to the areas where we believe our involvement can be most effective and where we support investments which can make the most change and also where alternative sources of financing and support are not available. We try to leverage our funds with grants, co-financing and co-investment from other financing sources. Our policy and financing support will be focused on the three priorities noted above, governance, inclusion and green growth.

How much agility did domestic companies demonstrate in using the opportunities you had given them to increase their capacity for innovation, as well as the capacities in the field of environmental protection and, for instance, in agriculture?

EBRD investments almost always include innovative aspects. This can include better efficiency, new technologies and inclusion policies, for example. If a company is not looking to its future and to make change in the way it does business then it is likely not a target of EBRD financing. If you review the portfolio of private sector EBRD investments, many of them are amongst leaders in both corporate and technological change.

You also have been cooperating with the public sector a lot, which is often accused of being insufficiently prepared for managing large-scale projects. What is your experience?

This is a key problem which Serbia must address. Our recent diagnostics of the region indicated that Serbia has a high level of state-owned assets while the return on those assets is among the lowest. Governance of state-owned companies is greatly impacted by political influence and objectives. State-owned companies can perform effectively but need managers who are given sufficient room to act commercially.

Does it make sense to view digitalization as the key economic driver if certain tasks, like the public enterprise reform, have not been carried out as yet?

Implementing electronic governance and reforms will support any reform programme. This will improve efficiency and help eliminate subjective, non-transparent decision-making. However, digitalisation should not simply put old policies and procedures on new technology systems. It important of course to improve policies and then use technology to bring the benefits to the wider public.

What is your assessment of the young workforce pool in Serbia that is supposed to be the executor of this technological jump?

Obviously, Serbians are technically very proficient. You have some of the best programmers and mathematicians in the world – love for Tesla runs deep in the Serbian psyche. It is important to harness this talent and enthusiasm through training and by removing obstacles for youth to succeed. Government should not try to plan each step and create special programmes for every prospective. But, rather create the environment where business and education institutions find ways to cooperate and create opportunities, such as apprenticeships, mentoring and on the job training. It is also important that Serbia continue to strengthen linkages with other countries – cross border opportunities (in both directions) should be facilitated.

SERBIA – A GREAT PERSONAL EXPERIENCE

What is your personal impression about Serbia, Serbian way of doing business and “doing life”?

I have had a wonderful time in Serbia as there is a balance of work, leisure, sports and culture activities. I greatly enjoy the convergence of two rivers and telling relatives about the importance of this location as a locus of European history. Serbians are very international and welcoming of foreigners. I have never felt out of place amongst Serbs with the exception of their strange addiction to smoking. I have great memories of my three years and fully expect Serbia to continue to be a leader in the region and eventually in greater Europe.

What is your favourite Serbian dish and drink? (or favourite place in Serbia) and, is that after work lifestyle something that is typical in Belgrade, or you can find it in other places?

I definitely like life along the river. This is the first city in 15+ years which really revolves around water. Along the river – the bike and walking paths, the music, the people watching, the splavs, the boats and bridges, the beauty of nature and city being so close together. Of course Belgrade is best in Spring to Fall as Winter can get a bit gloomy and the bars get smoky. In fact, sometimes Belgrade reminds me of New York City. A multicultural city with lots of water around. The people can sometimes be direct and pessimistic but they have great pride in the beautiful city and beautiful country. I should say that I’ve visited many of the main cities and they all have special cultures and vibe. In fact my first trip to Novi Sad was for exit Festival and since then I always think about cultural opportunity around the country.

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