It may seem strange to write about Serbia in the Budapest Business Journal, but we believe that the Hungarian capital will have an important role to play in the region, in the same way that the Budapest office acts as the regional hub for the international law firm Gide Loyrette Nouel. As we keep a close eye on important economic and political events in the region and their impact on the legal and business climate, we take a closer look at Serbia and the general and presidential elections held in May that attracted the attention of the business community. Below is how we understand the country at this turning point.
2012 is often said to be a very important year for Serbia. It should show whether the pace along Serbia’s EU path will be stepped up or slowed down, whether the newly elected President, Tomislav Nikolic will continue reforms or decide to turn the country in a different direction, whether the Kosovo issue be settled or escalated. With such important topics on the table, some may stop to argue the merits of these dilemmas, while others are entering this market, or further investing in it, without hesitation.
In the past decade, Serbia has taken many steps towards the modernization and reform of its economic and political system. It was the last country to break loose from its ex-communist manacles and it therefore does not come as a surprise that the serious difficulties of transitory times are yet to be overcome. Questions such as judiciary and fiscal reform, administrative efficiency and corruption remain in the spotlight.
And yet, with the recovery of Serbia’s international reputation and its strong commitment to establishing economic links with its neighboring countries and the EU (Stabilization and Association Agreement signed, status of EU candidate country granted), Serbia remains a reasonable point of entry into the Balkans region.
Many successful reforms have been implemented. Those of note have taken place in the financial sector (banking, insurance and securities market), now governed by sound policies and the professionalism of the central bank, bringing stability and peace of mind to many investors. The day-to-day operation of companies in Serbia has been greatly simplified with a new set of company-related legislation properly implemented and many registries now available online (company, pledge and leasing registry etc.). The real estate cadastre, which canvasses the entire country, is being finalized and will be available online shortly. Another success story is that of debt recovery and execution of court and arbitral awards, with the recent introduction of a new set of laws in bankruptcy, liquidation and execution procedures, including the introduction of notaries and professional executors. With these changes, the timeline of debt recovery should be slashed from years to weeks, which will strengthen the position of creditors and change the system after many decades from a debtor-friendly to a creditor-friendly environment.
All these structural reforms should lead to a more stable and reliable business environment and reduce the gap between reality and the expectations of the business community. It should ultimately attract further foreign investment, which is absolutely necessary if Serbia is to preserve macroeconomic stability and its current industrial and GDP growth rate.
With this in mind, big projects and infrastructure investments are currently in the spotlight. They should bring important foreign investments into the country and modernize its outdated infrastructure: motorways connecting to Hungary, Bulgaria, and Montenegro are currently being built or tendered; the inner country road and rail map is undergoing serious change, with a metro system being built in Belgrade with the assistance of the French government; a Danube rehabilitation project is underway; and renewable energy sources are seeing a significant inflow of investment. Another asset is certainly the possibility of Serbia obtaining EU pre-accession funds, with many projects being considered with this in mind such as logistic centers, ports, energy facilities, and irrigation projects in the Vojvodina province.
It remains to be seen whether this opportunity will be seized to its full extent.
Gide Loyrette Nouel Budapest