Dear friends, partners, associates, donors,
During 2022, we advocated for the achievement of sustainable development in Serbia, and particularly for the key role that small and medium-sized enterprises (SMEs) must play in such development. We also showed that SMEs have great potential to play it – provided that politics and society lift them from a subordinate position. The past year brought political uncertainty, increased costs, and reduced European demand due to the energy crisis, the war in Ukraine, as well as the increasingly skeptical attitude of business partners towards Serbia's international positioning. In facing these challenges, SMEs show fighting spirit and resilience, as they did during the pandemic, although they are burdened by pressures and risks due to the lack of rule of law. And perhaps precisely because of that, as they live ready for unpleasant surprises. The less good news is that interest in greening and digitalization is growing among SMEs. By promoting these, we will make a small contribution not only to the growth of their productivity but also to living by European values and standards.
Our New Year's resolution is to work decisively on establishing constant and stable support for SMEs through cooperation with all interested parties and to persevere in our efforts to make Serbia a better society for all its citizens. We take this opportunity, before our New Year's wishes, to summarize our work in 2022 and announce the key activities we are planning for the year ahead.
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Favorable circumstances that we pointed out in the past enabled Serbia to accelerate economic growth. It was an opportunity to turn growth into sustainable development, which was not seized. In the current crisis, non-compliance with the principles of good governance threatens to set back not only the capacity of institutions, as the case of EPS has shown, but also the development achieved. EPS's debts have imposed a significant narrowing of the fiscal framework, as well as a greater increase in electricity prices than would have been necessary due to the European crisis itself. Despite this, non-targeted spending from the budget continues for broad groups of citizens who do not need assistance, while the position of those who need help the most will be permanently undermined. This is particularly dangerous at a time when inflation is on the rise. Also, in the long run, it is difficult to believe in the sustainability of the economic structure we are building with a high level of investments decided outside the law, far from public view and without public participation and expert assessments.
As one of the coordinators of the „Sustainable Development for All“ Platform“ , we participated in the assessment that for 2021, at the national level, despite certain progress, Serbia has not advanced in achieving the 2030 Agenda for Sustainable Development. We paid special attention to the SME sector (more in the next section) and some of the key challenges they face: missing skills in the labor market i green and digital transformation. At the local level, we continued to work on strengthening capacities for managing their own development, while in three local self-governments – Pirot, Knjaževac, and Sombor – we actively worked on identifying development opportunities and formulating local development plans.
CEVES OBSERVATORY
Although the war in Ukraine pushed business sentiment in Europe into negative territory in February 2022, encouraging indications are that this sentiment is stabilizing, and possibly recovering in recent months, especially in the countries of Central and Southeastern Europe. In Serbia, the economic sentiment is visibly improving only in the last month, November.
Source: Eurostat, consumer and business surveys
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We are particularly proud of the conference-exhibition „SMEs of Serbia 2030: MSP100 Expo„, held in June 2022, where we gathered and presented the 100 leading SMEs in Serbia. We demonstrated their potential and initiated the process of consolidating their voices to make them more impactful. The conference generated a series of initiatives for further strengthening the competitiveness and innovativeness of the SME sector, and CEVES subsequently continued to represent them publicly and advocate for them before decision-makers.
Starting in 2023, we are launching a systematic campaign IT'S TIME FOR SMES! We want tangible changes in the position of SMEs in Serbia's policies, the elimination of neglect or even discrimination that currently exists from the state, and in particular: the return of the tax credit for investments (which large companies receive and SMEs do not); raising export support to the level common in competing countries in Europe; directing the criteria for supporting FDI attraction towards the overall effects they have on the domestic economy, especially in the area of knowledge building. We are launching the campaign at the end of January with the presentation of the MSP100 exhibition at the PKS premises. In addition to a series of media activities, the campaign will include a panel discussion at the Kopaonik Business Forum on March 7 – where we will present our new SME competitiveness and innovativeness index*, as well as the second conference-exhibition „SMEs of Serbia 2030: MSP100 Expo 2023“ in September.
*With the support of USAID, through the five-year project „Big Small Business“ implemented by ACDI/VOCA , of which CEVES has been a partner since 2022.
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CEVES POSITION
From the (once key) question – when will Serbia join the EU, the question is becoming increasingly significant – will Europe enter Serbia, and when? The complex Kosovo situation, which threatens to get out of control, is once again drawing all the attention and energy of the Serbian leadership and public these days, and is eroding the image of stability, which is one of the key conditions for the country's further economic recovery. Another condition is a clear European perspective, and this is seriously undermined by both the Kosovo problem and the lack of alignment with the EU's key foreign policy stance – its attitude towards Russia. The third condition is the establishment of the rule of law and respect for European values in managing economic development. The laws are generally good but are not applied or are not the same for everyone. In this context, the adoption of the existing draft Law on Police, which legalizes the endangerment of basic human rights, would be the biggest setback in the previous two decades. And life in legal certainty, with the participation of stakeholders in policies, would bring radical improvements in the business environment and the quality of public investments, and strengthen the Serbian economy as it faces challenges. And not only that. „Europe in Serbia“ would strengthen Serbia's European perspective and trust in it, and this is a condition that depends exclusively on us.
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We are entering the new year with announcements of the ownership transformation of public enterprises (into joint-stock companies), especially EPS, in whose reorganization Norwegian advisors are also participating. However, the news that occupied the public was that „EPS is exporting electricity again“. In fact, the Serbian electricity system will not return to full production capacity for at least another year, and public finances will pay the price of last year's accident for even longer. The reorganization of public enterprises cannot turn them from political entities into well-managed systems, as long as the establishment of the rule of law does not turn the powers on paper into real ones. In the meantime, little progress could be made by adopting consistent energy and climate strategies that would answer the question of how Serbia will fulfill the emission reduction commitments it has undertaken before the world? And what when in 20-30 years there is no more coal? In any case, any real change must be preceded by serious preparation – which will prepare for the gradual reduction of employment and alternative sources of employment, for the mass surpluses of employees who are currently tied to almost every public enterprise. We hope that the Norwegian advisors will also realize this.
In the next year, we will make a significant effort to encourage SMEs and help them embark on the path of greening their business and their communities. We will show them, through a series of brochures and workshops, that greening business is not just a trend, or even a threat, imposed by the European Union, but also a moral obligation and a global process shaping future demand, which, besides costs, opens opportunities for improving business productivity and profitability.
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ACKNOWLEDGEMENT
Great gratitude to our partners from the „Sustainable Development for All” project, as well as GIZ, SDC, the World Bank, the National Convention on the European Union, USAID, the German, Swiss, and Slovenian embassies, and other donors and partners who motivate us to jointly seek solutions for the challenges of a sustainable future for the Serbian economy. We look forward to further cooperation!
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