Martin Knapp, Director of the German-Serbia Chamber of Commerce (AHK Serbia): New regional instability will dissuade investors

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While investors are mostly looking to move labour-intensive production to Serbia, in ideal circumstances, more sophisticated and complex ones would complement them. Media reports suggesting that the region is in a new phase of political instability are not helping that cause.

For quite some time, Serbia and the region were in the news as newfound destinations for German and other EU companies looking to move part of their production that is dependent on a relatively strong supply of low-skilled labour with highly competitive wages. However, numerous circles of elections in the region, followed by accusations among the leading politicians in the Western Balkans, seem to be moving the region backwards. In this interview, Martin Knapp, Director of the German-Serbia Chamber of Commerce (AHK Serbia), emphasises the well-known fact that capital is shy of any imbalances and that the current stream of investments might be jeopardised by irresponsible politicians. We also spoke with Mr Knapp about AHK’s activities.

Which industrial branches in Serbia do you see as the most appealing to German investors?

At the moment, automotive component suppliers are showing the greatest interest in investment in Serbia. These are mostly investments in so-called labour-intensive productions, which can pay off only in countries where wages are still relatively low. Workers in these factories usually have a low level of formal qualifications. These workers are still very numerous in Serbia, especially in rural areas. That is why these investments in Serbia are very welcome. In the long term, however, they must be complemented by investments in more complex manufacturing, where younger people with higher qualifications can be employed. Sometimes  labour-intensive manufacturing can be transformed into production with more sophisticated technology and higher added value. This would, of course, be an ideal prospect for the future of Serbian industry.

What do AHK’s members, which operate in Serbia, expect from AHK, and how does your organisation meet their needs?

A bilateral foreign trade chamber has companies from all sectors, both small and large ones among its members. We have everything from language schools to insurance companies and steel works. Of course, they don’t all have the same needs. We will try to do everything, if our members need it, regardless of what that is. One has a problem with the authorities, another one is looking for a cooperation partner and a third needs a loan. We try to be helpful in all cases.

Which of AHK’s activities would you like to single out as being the most important for boosting mutual economic cooperation?

In the past two years, we have carried out the Westbalkan buyers initiative, together with the German Ministry for Economic Affairs and the Association for Supply Chain Management, Procurement and Logistics (BME). This is about using the industrial capacity of the Western Balkans as a supplier to German industry. German factories cannot produce everything themselves. They urgently need suppliers, which we find for them in this region, so far mainly in the metal sector. This year plastics and IT will be added. The aim of the initiative is not least to contribute to more balanced bilateral trade.

To what extent can the good experiences of investors operating here affect the interest shown by new or potential German investors?

Positive experiences gained by investors who are already active in the country, of course, help to attract others. But politics has to play along. At the moment, when reports are appearing in the media suggesting that a new phase of political instability has begun in the Balkans, it is to be feared that potential investors will stay away. Capital is known to be a very shy deer, a fact some politicians in the region do not seem to understand. This would probably change quickly if the voters punished any politician taking part in senseless arguments with the neighbours by disregarding them.

How competitive are the conditions that Serbia offers investors compared to other countries in the region, and in which areas should Serbia exert additional efforts to increase its appeal?

Investment incentives are quite comparable in all countries of the region, and so are the cost structures. There are, of course, differences rooted in geography. Serbia is, for example, on the Danube, which at the moment is used far too little as a transport route. If you stand on the banks of the Rhine, you can see a freight vessel passing every few minutes. Here on the Danube you often have to wait hours to see a ship.

How successful was the second Serbian Visions multi-conference?

We are very satisfied, as are most of our co-organisers. You know that we conduct Serbian Visions together with 60 NGOs, institutes, foundations etc. It is a festival of civil society in which each of the participating institutions invites its entire community, in order to mix the public and make the Radisson Blu Hotel a meeting place for all who volunteer to work towards realising the vision of a better future in the country, no matter in what area.

In which areas do AHK and the Chamber of Commerce & Industry of Serbia cooperate the closest?

We work closely together in many areas. The most spectacular cooperation is conducted in the field of vocational training. In Germany we have the so-called dual system, in which young people are partly trained at school and partly in companies. This system contributes significantly to the fact that there is very little youth unemployment in Germany. Like many other governments, the Serbian government is also interested in introducing this system, at least in those areas where the Serbian economy competes directly with other economies, such as in the exporting industry or in sectors where foreign direct investment can be expected. Potential investors always ask about the quality of vocational training in the country.

How would you rate the quality of the cooperation between AHK and the Serbian government?

We have the possibility to present our views to the government, either directly or via the council of bilateral chambers, which was established at the CCIS. It is important that a government speaks with stakeholders when it comes to adopting laws that can influence the economy. Economic interrelations are very complex nowadays. That’s why politicians need the assistance of those who are affected by the relevant legislation in order to understand the consequences of every initiative they are going to take. Even a well-intentioned reform can literally backfire if you don’t consider every parameter. Therefore, the economy needs an efficient self-administration in the form of powerful economic chambers, which are the voice of the entire business community. Fortunately, this is now the case in Serbia, since the new Chamber Act came into force.

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