In small and medium-sized enterprises (SMEs), approximately 65 percent of employees in Serbia's non-financial sector work, suggesting that they should represent one of the pillars of the domestic economy, even when circumstances at the local or global level are questionable and turbulent. However, the reality is that they can be shaken by the first gust of the storm.
„In the current global context, characterized by increasingly fierce competition, growing uncertainties, and accelerated processes of digital and green transformation, it is clear that SMEs face challenges that exceed their capacities. These challenges not only threaten their survival but also limit their potential to contribute to economic growth and job creation„," he tells Bloomberg Adria Lazar, Ivanović.
, CEVES economist.
„Data show that the SME sector in Serbia has about 430,000 companies, and among them are about 320,000 entrepreneurs, which is practically the entire business sector in Serbia (99.8 percent of all companies). Although there are initiatives and programs to support these companies, they still lack stronger systemic support. "SMEs are the backbone of every economy because they employ the most people and because their entrepreneurship fosters progress. In Serbia, these companies employ about a million workers, which is almost 65 percent of total employment in the business sector, and they generate more than 60 percent of the total added value., They are particularly important for Serbia because they have preserved and are renewing some industrial knowledge that we had, and largely lost with the collapse of large socialist systems. In addition,„SMEs are widespread throughout the country and significantly contribute to the development of the regions in which they are located.
“,” explains Ivanović, while also pointing out the more difficult business conditions that these firms and entrepreneurs endure compared to large companies or foreign investors.”, "It is clear that the priority of this, as well as previous governments, is not strengthening the domestic economy – and this should change if we want to achieve long-term and sustainable economic growth and development".
, says Ivanović. This is also the stance of, Nemanja.
„Šormaz , CEVES director. He says that the low level of domestic private investment is a consequence of two key factors: one concerns the state, and the other concerns the SME sector itself. "This is already a well-known story about„unequal treatment by the state towards the domestic SME sector and large foreign investors, primarily on an institutional level. All the obstacles that burden the SME sector, such as inefficient administration or long waits for permits, are not a problem for large foreign companies. The rules of the game are very simple and clear for them, interests are easily represented and defended, which is actually good news, but it is bad that this is not the case with the domestic small and medium-sized economy.
Then, on the tax front, Serbia is the only country in Europe that has a tax credit for large companies, but not for small and medium-sized enterprises, which effectively discriminates against them
," says Šormaz, emphasizing that Serbia lacks development institutions, such as a development bank and development financing.
„Where, then, do the smaller firms get a boost‘ When it comes to international financial institutions such as the EIB and EBRD, they have been financing the development of the SME sector in Serbia for years, and their programs are diverse: from intermediary lending at favorable interest rates to advisory support.“ "These institutions have publicly available 'impact'.
„studies that objectively show the impact of their programs on key company performance indicators, such as employment and investment levels. Based on these studies, it is clear that the impact of the programs they implement is very positive, but again, it is not enough to rely solely on them for the development of the SME sector. Several key reforms need to be implemented," adds Ivanović, listing specific 'policy', solutions. "First and foremost, reintroducing the tax credit for investments in fixed assets for small and medium-sized enterprises. According to our research,.the effect of reintroducing the tax credit for SMEs would signify a growth in private investment of as much as 40 percent in the next five years.“
This amounts to one and a half billion euros at today's value, and annually it would generate about 20,000 jobs. The challenges faced by SMEs not only threaten their survival but also limit their potential to contribute to economic growth and job creation, and relying solely on commercial banks or international financial institutions is not enough. It is necessary to intensify support measures for the SME sector, consolidate existing programs, and significantly increase the funds allocated to them.".
Source: Bloomberg Adria
