John Kyritsis, Vice President of Foreign Investors Council and COO of Delhaize Serbia – Serbia needs cooperation between foreign investors and local small and medium enterprises
In order for Serbia to achieve sustainable growth, it needs to have a continuity in reforms, as well as to make constant efforts towards improving the implementation of the law, says John Kyritsis, Vice President of the Foreign Investors Council (FIC) and COO of Delhaize Serbia, in his interview for eKapija.
In his interview for our portal, John Kyritsis talks about the recommendations made in the latest White Book, the Law on Bankruptcy Procedure, the progress made in the area of construction and real estate, the difficulties related to parafiscal charges, legal security in Serbia, but also about cooperation between local and foreign companies, which is necessary for the economic growth of our country.
Our interviewee points out that the government has considerably improved the business climate and that the Council hopes that reforms will continue and accelerate and reminds of the guidelines provided by the FIC to that end.
– The White Book is the key product of the Council, representing the all-encompassing view of the business climate in Serbia. The publication is prepared through an active dialogue of the FIC members and the final version acts as a promotion of standpoints and recommendations which are the common denominator of the views of the majority of the Council members. This is the key value of the White Book – our interviewee reminds.
eKapija: Which recommendations from the White Book 2015 have been addressed and which ones haven't been?
– The overview of the realization from the White Book contains the recommendations made in 2015 and tracks the progress made in implementing them. Our results show the following: progress was made in 4 areas of the general legal framework, such as protection of competition and consumers, state aid and public notarization, as well as in areas of real estate and construction, sectors of telecommunications, oil and gas and private insurance. In areas of taxation and labor regulations, as well as in 3 areas of the general legal framework, such as laws pertaining to foreign exchange operations, bankruptcy proceedings and protection of whistleblowers and in sectors of food and agriculture, insurance and house cleaning and cosmetic products, more work needs to be done in order to make progress.
eKapija: Generally speaking, what are the main characteristics of the business environment in Serbia?
– The government has considerably improved the business climate, through fiscal consolidation and amendments to the part of the general legal framework, especially in the area of real estate and construction. The FIC believes that reforms will continue and even accelerate. Our White Book offers a range of recommendations to the government regarding the ways Serbia can become more attractive for new investments.
From the presentation of White Book 2016
The three main ones are to step up important structural reforms, especially the privatization and corporatization of public enterprises, to improve the implementation of laws and continue the efficient harmonization of Serbia's legal system with the EU acquis. Regarding the latter, we believe that special attention should be paid to: food safety, improving the regulations in the areas of foreign exchange operations, bankruptcy proceedings, conversion of exploitation rights into land ownership rights, as well as to areas of parafiscal charges and workforce renting.
When it comes to the implementation of laws, the Government of Serbia should increase the administrative capacities of ministries and other state institutions, as well as efficiency and transparency by switching to digital technologies. Special attention should be paid to the Tax Administration and inspections services.
eKapija: Regarding the improvement of the investment and business climate, in which areas has the progress been the most noticeable this year?
– The biggest progress has been made in areas of real estate and construction and 4 areas of general legal framework, such as protection of competition and consumers, state aid and public notarization.
In the sector of real estate and construction, we see the start of implementation of the conversion procedure, the new Law on Land Registry and the improvement of permit issuance procedure – a solid implementation of a unified procedure and electronic issuance of permits – as positive things.
In the area of protection of competition, continued improvements of the legal framework, an increase in administrative capacities and strong advocacy activities, carried out by the Commission for Protection of Competition, are positive trends.
Furthermore, in the area of consumer protection, it's good that the remaining by-laws have been adopted and that consumer protection associations have become actively involved in the matter.
In the areas of state aid, it's positive that impartial members of the Commission for State Aid Control have been appointed (in line with the EU requirements), as are the activities of the relevant ministry and the Commission for State Aid Control in raising awareness through workshops, the new web page etc. Thanks to the amendments to the Law on Public Notaries implemented in 2015, the authority of public notaries has been extended and the stopping of activities forbidden by law from being carried out has been regulated.
eKapija: The Council has praised reforms carried out in Serbia so far, but what is necessary for the initiated growth to be made sustainable?
– In order for Serbia to achieve sustainable growth, the key word is continuity. By this, we mean the continuity of reforms, as well as constant efforts towards improving the implementation of laws, that is, securing a consistent and efficient implementation. This can be achieved in the following manner: by establishing the missing institutions, by introducing clear procedures and guidelines, by abolishing unnecessary bureaucratic procedures, as well as by training employees. Attention should be directed to bodies in charge of market supervision – the Tax Administration and inspections.
eKapija: On the level of sectors, what would You highlight as examples of good laws and practice providing stimulation to successful companies and attracting new investments?
– We believe that positive trends in areas of real estate and construction, together with the 2014 amendments to the Labor Law are the best stimulating factors for new direct foreign investments.
Quicker issuing of building permits, which makes the planning process in real estate and construction predictable, isn't just important for current investors. It's also a very positive signal to potential investors, who need to be encouraged to invest in Serbia in the coming period.
A more flexible labor legislature is crucial to stimulating and attracting those investors who are in the phase of considering their interest in investing in Serbia. However, although certain important positive changes were introduced with the amended law, the job is not fully completed, as the past two years have seen stagnation in reforms. Although we fully understand how delicate this regulatory area is, at the same time, we believe that Serbia should continue the labor market reforms in order to increase the number of new jobs and its competitiveness in the global market. Regulating the area of renting workforce would contribute to the process.
eKapija: The latest issue of the White book emphasizes the need for reindustrialization as one of the necessary items. Nevertheless, experts often weigh foreign investments against local production in this field. What kind of balance, in Your opinion, does Serbia need to achieve regarding this issue?
– Foreign investors play a positive role in the Serbian economy in many ways, as they bring new investments and employment, introduce modern technologies and facilitate innovations, promote ethical business conduct and operate in line with the postulates of responsible corporate management. Furthermore they involve local small and medium enterprises in their chains and integrate them in the global market. The balance, then is in cooperation between foreign investors and local SMEs.
eKapija: In what ways are foreign companies which are already operating in this market helping the Serbian economy to increase productivity and efficiency and implement the latest technological achievements?
– The Council members are true promoters of knowledge-based economy, as they base their business models on modern practice and innovations. They invest not just in facilities but in people as well, which is a huge comparative advantage. Furthermore, the Council members are exemplary companies, operating not just in line with the national framework, but going beyond it. Corporate Social Responsibility (CSR) is an important part of their strategies.
Through CSR, the Council members provide support to local communities and work with them on solving local problems and meeting the needs of the most vulnerable groups.
eKapija: The FIC also placed focus on reforming the legal framework in the White Book 2016. What are the key steps Serbia must make towards achieving this?
– The strengthening of the rule of law is crucial. We welcome the adoption of the new Law on Enforcement and Security. It is, however, important to emphasize that there's a lot more work to be done. We hope that the recently started EU accession negotiations within Chapter 23 (Judiciary and Fundamental Rights, author's comment) will contribute to solving all challenges, primarily to the end of the further strengthening of judicial independence and efficiency.
eKapija: What do foreign investors expect from the announced amendments to the Law on Bankruptcy Procedure?
– It's good that the government had accepted the Council's previous recommendations and initiated the amendments to the Law on Bankruptcy Procedure in October 2016. We are monitoring the process carefully and we hope that we will have an opportunity to help the government reach the best solution for the economy. This is an important question, which deserves the attention of all participants in the market. The Council's recommendations are clear and have been presented in the 2016 White Book.
eKapija: The situation regarding parafiscal charges seems to have further deteriorated since last year. Where do You see the solution to this problem?
– This is a question of predictability of the environment and basic expectations each investor has from the government, whether central or local, that the rules won't change nor new encumbrances introduced unexpectedly. We need a law on fees which would provide security from new parafiscal charges and precise rules about when and how new parafiscal encumbrances may be implemented. The fact that the Ministry of Finance has formed a work group for the preparation of the new law on fees early in 2016 is a positive sign and we hope to see their bill before the end of the year.
eKapija: One of the items highlighted in the latest issue of the White Book pertains to the fact that there are still numerous obstacles to public-private partnership projects in Serbia. What is it that hampers efforts in this area, where big announcement are constantly made without visible progress in practice?
– Even with the recent amendments to the Law on Public-Private Partnership, there are still certain challenges in the realization of PPP projects in Serbia. Keeping in mind the financial limitations of public sources, it's necessary to consider the removal of regulatory obstacles in order to utilize the potential of private investors.
The Council sees the amendments to the Law on PPP adopted in February 2016 and the strengthening of the role of the Ministry of Finance in fiscal risk control as positive trends. The register of public contracts is fully functional. It is, however, necessary to bring the Law on PPP in line with other laws (public procurement, foreign exchange operations, public property, utility services).
eKapija: The European Commission assessed in its recently published annual report that Serbia has made relatively good progress in creating an efficient market economy and reforming the public administration, that progress has been made in the judiciary, even though political meddling is still a factor, whereas corruption remains a serious problem. To what extent do these topics, although predominantly political, influence the economy? We all know that favorable investment climate cannot be created without legal security.
– Legal security is certainly one of the most important elements of the quality and predictability of the business climate. It remains one of the deciding factors in deciding whether to invest in a country or not and, as such, plays a key role in influencing that country's economy and its development. During 2015 and 2016, positive changes in the practice were noticed, as already mentioned – the initiation of amendments to the Law on Bankruptcy Procedure in October 2016.
The Council will keep on monitoring the process carefully and remain prepared to give its contribution.
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