Survey report – Key factors underlying the performance of enterprises in Serbia.

Survey report is a part of of Project “Serbia’s Real Sector Performance: Exhibited Competitiveness by Size, Industry and Region” funded by USAID Sustainable Local Development Project. The goal of this survey was to assess the key factors underlying the performance of enterprises in Serbia. It covers ten general topic areas of private sector operations in attempt to broadly identify and assess what firms do, how they are structured and run, whom they interact with and how, and what their expectations are for the future. In line with CEVES’ belief that exports must be the primary mechanism underpinning Serbia’s economic growth, the survey focuses only on tradable sectors. It also hones in relatively more on three areas CEVES considers to be particularly important determinants of company success or failure: corporate governance, financial management and access to finance, and exports.

In the realm of corporate governance, the survey revealed that company ownership and decision-making authority tend to be concentrated in few people. Around three quarters of companies only have one owner; moreover, single individuals tend to hold ownership stakes greater than 50% in businesses with multiple individuals in the ownership structure. 90% of companies are also family-owned. Owners are most often the only individuals involved in important operational decisions such as capital investments and taking on additional credit. They are also normally the only ones involved in the regular financial management of the company.

In terms of financing, most companies rely mainly on themselves and eschew financing from commercial banks, even in spite of evidence to suggest that businesses have reason for seeking credit. Most enterprises rely on only one source of financing – internal financing – which is also the most used source of financing in the vast majority of companies. Domestic bank loans were identified as one of the three most important sources of financing by 27% of companies. Even though over half of firms have used bank loans at some point, only around one third do so currently. Most indicated that they not need loans, but would reconsider if certain factors were to change. Given Serbian firms’ tendency innovate and invest (most did so even during the crisis), desire to expand operations (nearly two thirds stated a desire to develop their business in the future), and identification of financing as a problem (it was cited as the most common obstacle to expansion of operations), it would seem that there is indeed demand for increased access to finance.

Survey evidence broadly suggests that there is potential for Serbian companies to raise export performance. Nearly all of those that do not export (around three quarters of firms in tradable sector) note that they never have exported, and just under three quarters of non-exporters do not believe that they will begin doing so in the next year. It is then perhaps unsurprising that exports on average accounted for only 9% of company sales. Encouragingly, companies that do export tend to do so for continuous periods of time. Most cite the quality of their product as their main competitive edge on foreign markets, while firms most often pointed to trouble in finding appropriate buyers as the biggest obstacle to greater exports.

Survey Report

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