DRAGAN PENEZIĆ, Head of Legal and External Affairs BAT: Highly Focused on DEVELOPING INNOVATIONS

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BAT marked 15 years since the takeover of Tobacco industry Vranje last year. So far, through taxes and excises, the company has paid more than EUR 2 billion to the budget of the Republic of Serbia. Dragan Penezić, Head of Legal and External Affairs BAT, talks about further plans, gray economy and studies in America.

How satisfied are you with business in Serbia? What are your plans for our market?

— I am very pleased to say that our business operations on the Serbian market are expending each year. Over the last 15 years, BAT has directly invested more than 270 million euros, out of which more than 250 million has been invested in the acquisition and modernization of the factory in Vranje. Since 2003 over two billion euros have been paid through taxes and excises to the budget of the Republic of Serbia and 300 million euros in the previous year alone, making BAT one of the largest taxpayers in Serbia. Today, British American Tobacco is the largest British investor in Serbia and one of the leading foreign investors in the country. Along with good business results and advanced production processes, our company is highly focused on developing innovations that will have an undeniably positive impact, both for our consumers and for the complete environment. We created a new, innovative product – Glo – which heats, rather than burn tobacco, making it potentially less harmful than smoking. More than 2.5 billion dollars have been invested in the evolving of new products, aiming that by 2050 half of all smokers will use these or similar products.

What business results has BAT recorded in Serbia?

— We are truly satisfied with the achieved results we have In Serbia. Since the privatization of the factory, we have recorded a constant growth due to significant investments in new production plants and modernization of the work process with the help of new technologies. The annual production increased four times compared to the initial volumes, along with export-oriented production that amounts almost 30 percent, while BAT reached 30 percent of market share in Serbia. Nowadays, our production plant in Vranje became a production hub for CEFTA region which represents a positive impact not only on company’s results, but also on the foreign trade balance of the Republic of Serbia and its position in the region. We are very proud that our efforts have been recognized and that Vranje factory is considered to be one of the best within the BAT group.

You have hired new employees in Serbia who have become part of the global team for technologically innovative tobacco products of the new generation. You’ve planned a technological innovation of GLO, which heats tobacco without burning. Innovation is today the key to success, can you tell us what else BAT is doing in this field?

— We are very proud that our business results contribute to the development of the Serbian economy, local community, as well as the creation of new jobs. We currently engage more than 500 people and we will continue to expand that number in the future, mainly boosted by the development and innovation plans we are introducing, both globally and locally. Serbia is among the first countries in the world where Glo has been launched, as well as the first country in Europe where capsulised sticks for heated tobacco with different aromas were presented. This is one more confirmation of the excellent results achieved so far in the market.

The company has also marked five consecutive years of operations without injury and professional illnesses, and the factory in Vranje has become the only company within the company’s plant in its part of Europe with that result. What is the secret of such success?

— Care for our employees is among the basic principles of our company which is strategically committed to achieving and maintaining a safe and healthy working environment. Moreover, corporate social responsibility has always been one of the core pillars of our company’s business operation in every country in which we operate and especially in Serbia. Since our arrival on the Serbian market, we have invested more than one million euros in socially responsible projects. Last year we donated valuable IT equipment to the Ministry of Education and City of Vranje. With great help and devotion of our employees and local partners in Vranje we completely renovated and equipped the city swimming pool which was out of function for many years. Besides that, we implemented a project of youth tobacco access prevention, supported by National Consumer Organization. Furthermore, we are devoted to dual education and helping young people in acquiring their first business experiences and jobs.

Tobacco industry is one of the most prevalent grey economies. On behalf of BAT, you are a President of the Anti -Illicit Trade Committee in Foreign Investors Council, and member of NALED and AmCham teams for fighting grey economy. As someone who has been dealing with the protection of competition and this problem for many years, what do you think can solve this problem?

— The grey economy has a negative impact on all economy actors. Companies that are struggling with unfair competition are not able to achieve targeted revenues, nor to invest into development, employment or researches in order to offer new and high-quality products to their consumers. At the same time, the grey economy has a great impact to the state budget, making it difficult for the state to achieve its social and development plans and needs. This problem cannot be eradicated by ad hoc measures or individual activities but must be approached systematically. This implies a strategy that will include coordinated work of government institutions, as well as cooperation with relevant business entities that have resources, knowledge and experience from other markets. Education of consumers is also very important, since raising awareness of the importance of suppressing the gray economy increases the “tax morale” and produces a positive effect.

You have several years of experience in the state administration, as Assistant Minister in the Ministry of International Economic Relations, then in the Ministry of Trade and Services as Assistant Minister in the Trade and Consumer Protection sector and later as Secretary General of the Commission for Protection of Competition. What are the issues or problems in cooperation between private and public sector?

— Mainly it is misunderstanding, different approach, as well as the difficulties to incorporate the undeniable advantages of the private sector into the work of public sector. In order to develop successful Public Private Partnership projects, it is necessary to have an open dialogue regarding regulatory framework, acceptance and distribution of a reasonable level of risk. But most importantly, exclusion of any political context and influence is condition number one. I consider with certainty that, through PPP projects, state and local governments could significantly improve their capacities and satisfy the needs of citizens at a far higher level.

In the end, you are known to have studied in America. Can you tell us what you think we need to learn from Americans that we can use in Serbia?

— I had the fantastic opportunity and honor to specialize and improve my knowledge through the prestigious IVLP Program in USA, funded by the Department of State. Spending time there, touring various states in this fantastic country and working with colleagues from different state entities and universities, had greatly influenced my professional development and further career. Among the biggest differences of our two countries, I would particularly emphasize a well-organized system in USA, transparency in all segments, as well as exceptional strength of state institutions. Debates are an integral part of any change, from regulatory to political framework, and this gives opportunity for everyone to express their opinion.

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