Switzerland, which has been a reliable partner of Serbia for over a century, is committed to foster Serbia’s growth, says H.E. Philippe Guex, Ambassador of Switzerland to Serbia.
As an economist by training how do you assess current macroeconomic environment in Serbia?
― The macroeconomic environment in Serbia has been steadily improving. This is also the conclusion of the IMF’s eighth review of Serbia’s economy since the adoption of its economic program supported by the Stand-By Agreement. As an economist, I am particularly impressed by Serbia’s ability to substantially decrease its fiscal deficit. Not a single euro zone country would be able to achieve what Serbia did: to reduce the public deficit by 5% of GDP within two years. The strong monetary policy of the Serbian National Bank has also proven essential in maintaining the inflation at low level. Switzerland has been supporting Serbia to adopt and implement its public financial reform plan as well as to reduce banks’ non-performing loans which have now decreased from 23% to 16% in one year only. Whilst Serbia ought to be praised for its macroeconomic policy, the implementation of structural reforms has been rather slow and somewhat complicated. For instance the process of privatization and of restructuring of state-own enterprises continues to hinder the Serbian economy and prospect of more significant growth. The economy remains also overburdened by a large and inefficient public sector, with too little reliance on the productive private sector.
What do you see as the next most important steps to secure current stability and spur somewhat lagging GDP growth?
― Economic growth in Serbia is primarily driven by exports and investments, which have been on the rise in the past years. This is also the case in relations to Switzerland which was actually the second largest foreign investor in Serbia in 2016. Whilst this is very encouraging, attracting foreign investors in the long term will require further improvement of the business environment and stronger exports capacities. In this respect and whilst there is certainly space for improvement, the fact that Serbia’s exports to Switzerland increased by 27% in 2016 (an upward trend which prevails this year as well) is very encouraging. Switzerland, which has been a reliable partner of Serbia for over a century, is committed to foster Serbia’s growth and knowledge-based economy. My country has notably supported the Science and Technology Park of Belgrade to create high-tech products which are competitive in export markets. By doing so Switzerland also wants to contribute to preventing brain drain of the well-educated Serbian youth. Swiss companies contributed so far to the creation of 11.000 jobs in Serbia. It will also continue to foster youth employment in Serbia based on its experience in dual education.
Speaking of prerequisites of growth, do you consider that process of reforms adequately tackled the business environment for small and medium companies which are, for example the backbone of the Swiss economy?
― Since the adoption of its fiscal consolidation programme, Serbia’s ranking in business surveys has actually risen markedly. Future growth will however require further improvement of the business regulatory environment. A survey conducted by the Swiss-Serbian Chamber of Commerce revealed on the one hand that most of their members, including some large multinationals but also many SMEs, did not regret having invested in Serbia and many are actually considering expanding their operations. At the same time, companies continue to stress the need for Serbia to simplify the tax system further, to increase legal security, to ensure the availability of qualified workers and to lower social costs of employment.
One of the initiatives you support is named “Through Education to employment”. Are you satisfied with how is this project implemented, and what are your expectations when it comes to sustainability of the results achieved?
― We are satisfied how this program started, especially how the private sector reacted to this initiative. For us, the involvement of the private sector is a crucial element which was often neglected in similar initiatives in the past. The Program From Education to Employment (E2E) supports evidence-based development of youth employment policies in Serbia. Therefore, we were extremely pleased to see that 60 companies (mainly Serbian SMEs) got engaged in the E2E, offering work-based learning of skills required on the labor market for young people. This will help young people to increase their qualifications and to faster find a decent job. Currently, E2E is working with 460 young people, of whom 110 are from vulnerable groups, as to learn skills required at the labor market.
One of the well-recognized problems in Serbia are a lot of unskilled workforce either among young people and among those older than 45. What experiences from Switzerland you may share, that would be useful for addressing these challenges?
― The approach of life-long learning is relatively new in Serbia. There is an existing legal framework but more is required so that this concept lives to full extent. Serbia cannot be compared with Switzerland in terms of the labour market situation. However, what we have in common is the mutual understanding that reforms are needed in this field. Switzerland has been approached to support Serbia in the process of bringing closer the world of education and the labour market. The idea is not to replicate the Swiss system, but to encourage the country to find its own approach. It also took Switzerland a very long time to elaborate the most adequate model of dual education, and we are steadily revising the system along with the changes in the economy.
You once said that the macroeconomic reforms are the biggest success in the process of the Serbian Euro integration process. What has to be done in other fields that advanced less, not just in terms of the accession process but in terms of Serbia becoming a well-developed democracy?
― Elections are not democracy, they are just a tiny part of it. Weak democratic institutions are the door open to the dictatorship of the majority. In my view, a well-developed democracy is characterized by a high degree of respect of citizens’ rights which also translate into their well-being. Whilst a strong, prosperous economy helps, the pre-requisite to any democratic system should be the existence of checks and balances. In Serbia, the further “depolitization” of the administration and the judiciary as well as the professionalization of the parliament will be essential. Also, the civil society, including in particular the media, and regulatory bodies such as the Ombudsperson, the Commissioner for Access to Information of Public importance and the Commissioner for gender equality should be given more space to effectively protect citizens’ rights.
Catalonia at one point and that the verdicts of the Hague Tribunal recently have brought historically fraught issues in Serbia and Western Balkan in the focus. How much is the past still haunting the region?
― The past is the biggest uncertainty for the future of the Western Balkan countries. One cannot build a regional future by denying the past. The strategy aiming at “agreeing to disagree” on the past will not lead to reconciliation. An ever lasting peace in the region and long term prosperity can only be granted with reconciliation. But reconciliation might happen only once the political elites throughout the Western Balkans will decide to deal seriously with the past. So far, it is not the case. Official statements to recent convictions by the ICTY are a good illustration of this situation.
What do you see as the most optimistic results of the opposite process and that is of cooperation between the WB countries and how do you assess the role of Serbia in these processes?
― A measure which speaks in favor of regional reconciliation is the full support given by the Serbian government to the Chamber of Commerce and Industry to increase trade and investment between Serbia and its neighbors from the former Yugoslavia. Through trade and investment a “silent” reconciliation process can take place in the Western Balkans in order to rebuild the intense economic relations which prevailed before the nineties. It has to be remembered that economic integration was the cornerstone of the reconciliation between France and Germany after World War II and is still at the very heart of the construction of the European Union. As Serbia was the economic hub of former Yugoslavia, it has today a key role to play in this regard.
After being for more than one year in this post how do you assess bilateral relations between our two countries?
― Our bilateral relations rely on four solid pillars. First, we have excellent political relations at the highest governmental level. An example is the recent meeting in Zurich between Prime Minister Brnabic and President Doris Leuthard. Second, the backbone of our relations is the people-to-people ones with a Serbian diaspora approaching 200’000 persons who contribute to the prosperity and the social life of my country. Over 5% percent of the Swiss population mother tongue is Serbian. More than 5000 Serbian citizen receive the Swiss citizenship each year. The remittances coming from the Serbian diaspora in Switzerland is estimated to 500 million euros. The third pillar is the economic relations which are still modest as our bilateral trade does not exceed 1% of the global trade of Switzerland. But our economic ties have a strong potential as Serbia little by little is improving rule of law and enforcing EU economic standards. Finally the Swiss development cooperation in Serbia is a key element of our bilateral ties. Switzerland is among the top four main bilateral donors, with the US, Germany and Sweden. It is 22 million euros which are yearly earmarked for Serbia until 2021. Our cooperation priorities are governance, economic development and employment as well as energy efficiency, all focused on the less developed regions of the country.