Conference “State Aid—A Friend or a Foe? EU Rules can help tell them apart”

May 27th, 2019 Belgrade 

On May 27th, 2019, CEVES organized a conference entitled “State Aid—A Friend or a Foe? EU Rules can help tell them apart”. The Conference served to analyze the effects of state aid on development in Serbia, as well as the means by which the existing approach can be enhanced, led by experiences of other European countries– Croatia, Slovenia and the “Celtic Tiger” – Ireland, in particular. The first step towards this thought-out approach is full alignment with the EU rules. These rules, in addition to protecting unfettered markets and competition, also contribute to higher development effects of taxpayers’ resources.

This conference was financially supported by The Royal Norwegian Embassy in Belgrade and Balkan Trust for Democracy of the German Marshall Fund of the United States, in scope of project ‘’Alignment with EU Competition policy – raising awareness on potential benefits and strengthening capacity of key stakeholders in the area of state aid’’.

The conference was opened by CEVES Director Mr. Nemanja Šormaz, and addressed by H.E. Mr. Arne Sannes Bjørnstad, Ambassador of the Kingdom of Norway to Serbia, and Mrs. Gordana Delić, Director of the Balkan Trust for Democracy of the German Marshall Fund of the United States. Mr. Šormaz highlighted the importance of a well thought-out and enhanced approach in state aid policy design, as well as the interconnection between the essence and regulatory framework of the EU. His Excellency Mr. Bjørnstad stressed that the state aid, as development policy instrument is important, but prone to misuse. If state aid is to help lead to an efficient economy and regional convergence, it has to be subject to clear and strict rules, and it also must not be conducted at the expense of other market participants. Mrs. Delić expressed her satisfaction with the organization of this event, emphasizing the importance of further harmonization of the countries of the region with the EU regulations.

Mr. Međak, Vice President of the European Movement in Serbia and moderator of the first panel discussion, spoke about the complexity of resolving the case of state aid as part of Negotiating Chapter 8 (Competition policy). Mr. Antonijević, President of the Commission for State Aid Control, described both the current process of harmonization with the EU regulations, as well as the next steps that Serbia has to make. Mrs. Liszt, former Head of the Working Group for Chapter 8 in Croatia’s EU accession negotiation team, described challenges that Croatia had faced in this domain, that also resemble those that Serbia faces today. Mr. Nenadić, Program Director of Transparency Serbia, pointed out that transparency of state aid in Serbia had slightly changed for the better since 2015, but that new, more comprehensive information, as well as systematical evaluation of the effects was still needed. Panelists agreed that transparency enhances and facilitates building of trust of public towards government’s policies, and also leaves room for analytical assessments.

The second panel discussion, called “Investment promotion and SME support to accelerate development—the experience of Ireland” included CEVES Chairwoman Mrs. Kori Udovički and Chairman of IDA Ireland Mr. Frank Ryan. Mrs. Udovički underscored that EU regulation does not limit the space for development-oriented policies, but limits unsuited spending. She added that the policy on foreign direct investment promotion in the past led to a significant increase in employment in enterprises with mediocre effects on development, the trend which is currently changing for the better. However, linkages between domestic and foreign companies are still weak. Mr. Ryan stressed that Irish economic growth take-off came as a consequence of consistent development program, lasting for some 50 years, largely based on education, social dialogue and long-term cooperation of all relevant state institutions. He added that beside the education system overhaul and FDI attraction policies, great effort was made to build capable domestic SMEs.   

Moderator of the third panel discussion, Mr. Šormaz, indicated that Serbia was at the crossroads, given that the topic of restructuring was largely closed, with high costs, and that the problem of high post-crisis unemployment was resolved by attracting labor-intensive FDIs. Director of Serbia’s Development Agency, Mr. Gazdić, said that there was indeed a shift in type of the attracted FDIs lately, towards more sophisticated projects, creating higher value-added jobs. The next step is to support development of local suppliers, so that they can become part of the newly created value chains. Mr. Ryan sad that Ireland had wandered a lot until it systematically assessed its advantages and disadvantages. The key was in selecting the right sectors that were to be supported, and setting measurable goals. Member of the Fiscal Council of Serbia, Mr. Vučković, stressed that the policy of subsidizing investments was generally wrong, and that state influence on the economy should be very little or none; but that it was in a way extorted, given that many European countries also heavily rely on it. Better results could be obtained if business environment and rule of law were improved, Mr. Vučković concluded.

The last panel was moderated by independent expert for public administration reform, Mrs. Pavlović Križanić. Former Chairman of Competition Protection Office in Slovenia, Mr. Plahutnik, emphasized that Slovenia made many mistakes during the early years of its State aid policy, but learned a lot from them. The prevalent stand on State aid in Slovenia that its sole purpose was in protecting enterprises in difficulty from bankruptcy was given up through alignment with the EU regulation. Implementation of development policies requires both the efficient public administration and trained public servants, where Serbia notably lags behind, as Mr. Maravić, Director of the National Academy of Public Administration indicated. Serbia also lacks a strategic planning document that would offer civil servants a vision to follow and signal to the National Academy of Public Administration what type of capacity needs to be built. Mr. Pejović, President of the State Audit Institution (DRI), pointed out that the vision of the DRI was to help the state manage its resources wisely, led by reliable information. Mr. Pejović further noted that DRI’s strategic plan had been moderated to turn more to public funds users, their needs and requirements, in order to enhance more effective and efficient use of public funds.

Mr. Šormaz closed the conference by highlighting the importance of alignment with the EU rules and the need for broader context in which development policy should be built, with State aid being just a small piece of the puzzle. This conference, although it cannot solve the problem of this vision lacking, certainly makes one step forward in its formulation.

 


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