The revenues of the top 100 most successful small and medium-sized enterprises exceeded one billion euros, of which 700 million were earned through exports, and unlike large foreign direct investments, they reach even the most peripheral corners of Serbia.
Small and medium-sized enterprises are the backbone of every economy, including Serbia's. They dominantly or significantly contribute to key macro-aggregates – accounting for 67 percent of employment in the business sector, 63 percent of business revenues of the economy, and 55 percent of value added; they pay 61 percent of total profit and wage taxes, and participate with 43 percent in Serbia's total goods exports – almost 50 percent of companies with more than 10 employees export. In the last 10 years, their share in value added has grown faster than in employment, signaling that their technological structure and productivity are improving, compared to large and foreign companies.
The SME sector has become a serious breeding ground for hidden champions, family companies, initially micro and small, which place most of their production on foreign markets and are considered leaders in their niches. Among other things, SME champions export sensors that detect if chickens are healthy by the sound of their voice, equip the Moscow Philharmonic and a large number of famous world hotels, reach markets as far as Japan with freeze-dried fruit, produce and market unique machines for printing sausage casings, as well as the lightest one-liter packaging in the world. At the recently held SME100 Expo in Niš, CEVES gathered and presented the development stories of the 100 most successful champions. SME champions generated nearly one billion euros in revenue in the previous year, of which over 700 million through exports, employing close to 15,000 people. In addition, the SME sector, as well as its champions, play another significant role in the economy – they reach the most peripheral corners of Serbia, unlike foreign direct investments (FDI), absorbing available labor of various profiles and developing local communities.
However, the SME sector, as well as its champions, do not enjoy a sufficiently stimulating and equal business environment in their home country. Although recognized as a necessity for the accelerated development of the domestic economy, there is no development bank – nor is one planned. There is also no development agency whose priorities and activities would be directly focused on the SME sector; the current one, although professionally performing its duties, focuses on FDI. The SME Development Strategy was adopted in mid-November, after more than three years of delay. As SMEs themselves state, they are already used to functioning without it. However, its three-year absence illustrates the state's attitude towards the SME sector.
Frequent administrative and legal discrimination compared to larger companies is already something they find difficult to overcome – Serbia is the only country in Europe that de facto allows tax credits for investments to large, but not to small and medium-sized enterprises. As the companies themselves state, including at the SME100 Expo in Niš – this represents a major blow to their investment capacities and decisions.
According to the founder of Mikroelektronika, it was precisely the tax credit, shortly before it was abolished for SMEs, that enabled him to build his business building and production capacities. Ten years later, Mikroelektronika is one of the hidden champions in the field of electronics and a global leader in the development and sale of microcontrollers.
The lack of adequate support through development institutions, as well as the discrimination of the SME sector – illustrated by the absence of tax credits, are the key reasons for the insufficient level of investment in the SME sector. Measured by their share in GDP, SME sector investments in Serbia are half as much as in the EU. If we go down to the company level, data from CEVES's „SME Compass,“ a new tool that provides data and analysis of the sector's business, indicate that only one in six companies has invested more seriously in expanding its capacities in the last three years. This consequently affects the serious lag in investments in innovation, green transition, digitalization, and all other transformation processes that are becoming a (pre)condition for competitiveness in the value chains in which SMEs operate.
The SME sector has produced numerous champions in previous years. With a stimulating environment and purposeful support policies for the SME sector – existing champions would be even more competitive and present abroad, while the doors would be wide open for emerging champions. The pre-election campaign was a good opportunity to recognize and address the „sins“ towards the domestic SME sector; however, none of the options have (yet) found it appropriate to do so, although they would thereby reach over 300,000 owners and over a million employees in the domestic SME sector.
Nemanja Šormaz, Director of the Center for Advanced Economic Studies (CEVES)
Source: NIN, 11/30/2023.
