Serbia had a faster growth than the average of all transition countries and even five times faster than the EU. Citizens, however, are unhappy, because, as shown by the results of numerous surveys, quality of life is not sufficiently improved after the year 2000. The attempt to bridge the gap of the gray reality and the bright future through the vision of Serbia by 2020, was received with skepticism among experts, as well as the local public. The project for better business conditions, financially supported by the U.S. Agency for Development – USAID, should help the Government to increase the competitiveness of the local economy and the private sector. Serbia’s major challenge is to achieve the necessary coordination of monetary and fiscal policies, and reassure citizens and investors that the lasting macroeconomic stability is a goal that has no alternative. As stated by Dusan Vujovic, one of the main experts of the World Bank, it means more dynamic attraction of efficient investments, financed largely from domestic sources of savings, including public investments that attract and stimulate private investments. The essential challenge, in fact, is how to ensure conditions for such a dynamic business environment in the current maze of laws and procedures.
Most economists agree, that the state presence should be reduced in the decision-making process, especially the reduction of subsidies as a form of business. The support of specific sectors and generally, keeping active industrial policy can be successful only if it is directed towards achieving solutions that are consistent with a longer-term market outcome. An alternative to this policy is certainly increased competitiveness and improved business environment, being the main parameters in attracting direct foreign investment, said Professor Boris Begovic. The state has taken concrete steps, thus, for instance, approving subsidies for foreign investors in the amount of 2 to 10,000 euros for each new job created. The measure, however, gave limited results, because the impression is that investors did not find it crucial whether one will get incentives or not, but whether they will be able to have stable and successful businesses in Serbia in the long run.
The policy of a strong dinar against the euro is certainly not what the local economy supports, because it is not the result of increased economic activity, which is why the export results were not better, economists say. Serbia, like other countries in the region, has a problem with the deficit of the state, too. However, if the fiscal rules are followed, there should be no funding problems, and that means reducing the tax burden on wages and increasing spending.
This is perhaps the biggest challenge in the Serbian conditions, which means major changes in thinking and behavior, of course, along with political and social consensus as the basis of the successful long-term economic development. Without this, it would be very difficult to complete the institutional reforms and respond to new challenges in ever tougher global economic environment. This means more competition and more difficult access to attractive markets in terms of lower demand and increased protectionism, reduced opportunities for credit financing and significant restrictions on capital flows. Of course, along with necessary corrections, it is therefore necessary to follow up carefully on the development strategy by the year 2020, which relies on the export orientation and external financing resources.