Marko Čadež, President of the Serbian Chamber of Commerce: The Highest Level of Cooperation

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The economic and political cooperation with Germany has reached its highest level in the last decade and a half.

Germany tops the list of the biggest investors in Serbia, it is one of our biggest foreign trade partners, and the biggest bilateral donor which, all together, translates into a strong support to the Serbian economy in boosting its regional connections, and increasing its capacity for the implementation of the European integration process.

How would you rate the overall quality of the Serbian-German economic cooperation?

Germany has invested over 3.5 billion EUR in Serbia so far and donated funds in support of various development projects in an effort to boost the capacity of the Serbian economy. The foreign trade between the two countries, aided by investments and export activities of German companies operating in Serbia, as well as by the heightened demand for Serbian products in Germany, has reached its highest level in the last ten years, and has increased severalfold compared to the decade earlier which is very important for the relatively small Serbian economy.

The value of the trade between the two countries last year was almost 4 billion US dollars (or 3.98 billion EUR). Our exporters, which number has been growing year-on-year to now over 2,200, exported 1.75 billion EUR worth of goods and services to Germany, which is a 16.4% hike compared to 2015. Also, German export to Serbia grew, albeit slower than last year, by 10% to 2.23 billion EUR.

The growing export of Serbian services has added to the quality of the trade between the two countries in the last few years. The export amounted to the value of 420 million EUR, while the two countries exported 663 million EUR worth of services to each other. Serbia recorded a 177-million-EUR-surplus here.

Records show that there are close to 350 German companies operating in Serbia. What can be done to increase this number?

Only in the last month and a half, four factories have either begun to be built or have been opened – IGB Automotive has opened a production facility in Inđija, Leoni opened the one in Subotica, and Knott Autoflex (a mixed German-Hungarian-Serbian company) has opened a factory in Bečej. Lidl is already building its first supermarkets in Serbia, Kromberg&Schubert has started preliminary works on the construction of a factory in Kruševac, Tönnies is getting ready to implement a huge investment in 20 modern pig farms, while Hydroweb is going to build a production facility in Jagodina.

The German companies that are already operating here are extending their existing capacities, the new ones are arriving, and the number of German companies in Serbia has grown to now over 350. When a German company decides to invest, that is usually long-term. In the last survey conducted by the German-Serbian Chamber of Commerce, over 90% of the surveyed companies said that they would invest in Serbia again. Their satisfaction with their existing operations here is also growing, as are positive expectations and the number of those companies which have already prepared new investment projects in Serbia.

It is very important for the reforms to continue, for our public administration to become more efficient, for legal security to be higher, for the tax system to provide more incentives, and for the tax administration to be more in tune with the needs of businesses in order for shadow economy to further decline and for the transparency of public acquistions to increase.

How much do German manufacturers contribute to re-industrialization of Serbia?

Most of the 1.8 billion EUR of German investments here and the majority of the high-value projects have ended up in production – mainly in automobile, electronic, food, pharmaceutical and chemical industry. These investments are very important for the Serbian economy, not only for the capital they bring and better export results of Serbia, but also because of the new projects that involve our companies, for creation of new jobs, for the transfer of know-how and technology, and for the implementation of modern business standards and business formats that can serve as a role model for Serbian companies. Serbian economy has been traditionally leaning on German technology for years – 75% of the machinery and equipment in our factories is of German origin. It is in the best interest of Serbian companies to cooperate with their German counterparts, to become a part of their supply chains, as well as a part of their production and investment plans and projects.

German investments hold an even bigger importance in regard to the future especially when we bear in mind that Germany is the creator of the concept behind the fourth industrial revolution where digital technologies are closely connected to industrial processes and logistics.

How important are German investments for lesser developed areas in Serbia?

In regard to regional distribution of German investments in Serbia, German investors operate in the entire country, from its north to its south. As it is true for most investments, German ones are also mostly located along the main transport arteries, on the key transport corridors, but there is an increasing number of German investments made in undeveloped areas in Serbia, i.e. in municipalities and towns which development level is below the country average. For instance, Leoni has invested in Prokuplje and Malošište near Doljevac, Grammer has invested in Aleksinac, Knauf in Surdulica, Gruner in Vlasotince, Magna in Odžaci, E. A. Systems in Priboj, and the list goes on. They have not only created jobs for people who otherwise would probably not be able to find jobs in their respective towns and areas, but also improved the economies in these parts of the country. Although, the state incentives for investments in lesser developed areas are higher than those for developed areas, and the state is directing more and more funds and resources towards development of infrastructure, there is still a lot of work to be done especially on the local level in order for us to boost the investment appeal of these areas to Germany and other countries.

How much will the implementation of dual education increase Serbia’s investment appeal to Germany and other countries?

There are two issues that potential investors consider when analyzing a certain business or investment destination – number one is infrastructure, and number two is the quality of the workforce. The inclusion of dual education in our regular schooling system as of this autumn is in the best interests of domestic and foreign companies because the schooling system will now produce worker profiles that are in line with the economy’s needs while employers will have more of better trained workforce at their disposal. It was German companies which have initially suggested the implementation of dual education because they were aware of the benefits they had from such education in their own country. In creating our own dual education format, we mostly looked up to the German model and experiences while combining it with the Austrian and Swiss ones. Through the German Society for International Cooperation (GIZ), German government is implementing a project titled “Reform Vocational Education” in Serbia and thus provides a strong support to the implementation of dual education in our country. German companies were the first to get involved in the project, and to take students to their production facilities who are now being trained in line with the dual model. Some companies, like Robert Bosch which operates in Pećinci, have also hired the students to work with them permanently following the completion of their education.

As of last autumn, the Serbian Chamber of Commerce has been issuing the so-called detachments, i.e. a form of German working permits, for the employees of Serbian companies which had signed relevant contracts with their German partners. How popular are these working permits?

For the first time in 13 years, at the initiative of various businesses, the Chamber has started issuing Serbian companies, which have contracted projects with German companies, with the so-called detachments (or approvals for hiring workers). The government’s decision for the Ministry of Labour to commission the Serbian Chamber of Commerce to do this job has proven to be the most efficient solution for businesses. As of 1st October 2016, when the detachment year officially started, the Chamber has issued over 300 detachments in the shortest possible time, namely in two days after it had received such request from a company. The criteria for allocation of detachment quotas are clear, the application procedure has been simplified, and the applications are processed rather quickly. In order to further improve the process of issuing detachments and reduce costs for businesses, we are going to create e-application in the following period which is going to be available via the Chamber’s e-services website. Also, the support that the Chamber provides to companies in obtaining detachments and monitoring of how many of them have been used on a monthly level have already resulted in a higher utilization of the detachment contingents. The quota that Serbia has been assigned for the current detachment year, which lasts until 30th September, is 2,770 workers a month. By supporting our companies, our goal is to make sure that available quotas are fully used, and for as many of our companies to conclude business deals in Germany. The implementation of the detachment project and the additional support for our companies will be one of the topics of the meeting between the Chamber and the German Federal Employment Agency scheduled for late March.

Which of the Chamber’s projects, implemented together with German organizations and institutions, would you like to single out?

Apart from conducting the reforms and improving the chamber system to better represent businesses and provide more efficient services to them, and working on dual education which is one of the Chamber’s top priorities that is also high up on the Serbian government’s agenda, we have been working together on including Serbian industry in the euro-environmental integrations, i.e. on creating conditions for implementation of circular economy. We are also discussing the opportunities for expanding our cooperation to include metal processing industry, organic food production and ICT. We have been educating export managers to reflect the similar education and certification process in Germany, as well as organizing supplier days for German companies which is especially important for small and medium enterprises in Serbia. After organizing business forums in several German states, and the Day of Suppliers from the Western Balkans in Munich and Dortmund several years ago, we also have 20 German companies coming to Belgrade in late March to talk to our companies from metal processing and plastics processing / production sector under the umbrella of the initiative called “Buyers Initiative of German Companies from the North Rhine-Westphalia State”.  Furthermore, we are currently testing the capacity for creating a guarantee scheme that would provide funding both from Serbia and abroad for entrepreneurial projects. We believe that, come September, we are going to continue our cooperation on the DIHK-CEFTA project under the auspices of the Western Balkan Chamber Investment Forum on Development of SME Sector.

The Chamber Investment Forum, which was formed following the initiative of the chambers of commerce from Serbia and Kosovo under the Berlin Process and which assembles eight chambers of commerce from the region, proved to be a strong cohesive platform that contributes to removing the obstacles to doing business and investing, establishes connections between business communities, and facilitates political normalization in the region.

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