After the news that the company Geox will leave Serbia, and that 1,200 workers of that factory will lose their jobs – the old question is asked in public again – is the policy of subsidies to foreign investors justified? What are the effects of state aid in attracting foreign investments and how much have the incentives cost the Serbian budget so far?
Geox is leaving Serbia. It is no longer a guess, but news that was officially confirmed by the president of the state. A surprise for the workers, but not for the state leadership. They say: it was expected, but besides Geox, some other foreign investors, who were subsidized from the budget, will leave, writes N1.
Are subsidies to foreign investors justified then? It is a decade-long issue – says the economic editor of “Danas”, Aleksandar Milosevic, and for N1 he estimates that the specific goal of giving incentives is not clear even after so many years of implementing the policy of subsidizing foreign investors.
In the case of Geox, he says that he only exposed the fact that foreign investors have been reducing the number of employees for years – and in this case they are leaving – when their subsidies expire.
“According to a survey conducted by Danas in 2017, based on data from the National Employment Service, it has been shown that 3/4 of employees lose their jobs when subsidies expire. We had an exact example – more than 7,000 workers were employed on the basis of subsidies at that time, when the subsidies expired, about 2,000 employees remained at work. This is actually a practice in Serbia, which passes under the “carpet”, under the “radar”, it was not so much noticed because there was a reduction in the number of workers – it was not so often that they simply shut down production and everyone left. Here, Geox has now shown us that this is starting to happen to us as well,” says the economic editor of the daily “Danas”, Aleksandar Milosevic.
It is known for Geox that the company received subsidies from the state of 9,000 euros per worker. However, a detailed analysis of how much was allocated from the budget to attract foreign investors – has never been done, or at least the Government has not informed the public.
Some researches show that the state has set aside around 700 million euros for subsidies to investors in the last eight years, and out of that amount, as much as 75 percent went as an incentive to foreign ones, while 25 percent went to domestic investors. At the same time, according to the data of the Ministry of Economy, the money invested in subsidies will be returned in 16 months, four times as much.
However, Jelena Zarkovic, a professor at the Faculty of Economics, believes that the policy of subsidies has its positive sides, but states that it would be important for the entire economy for companies to come to Serbia that would look for workers with higher qualifications.
“What I would change in the policy of attracting foreign direct investments is that they are companies that can create some products with greater added value, and that means hiring people who have higher qualifications who are better educated. I say “and” because I would not exclude these activities that the state has helped so far, because let’s not forget – it was a policy that not only this Government but also the previous Government did, it is practically an inherited policy – that these investors they go to parts of Serbia that are less developed,” says Professor Zarkovic.
Prime Minister Ana Brnabic explains that Serbia has become an investment destination that such investors will want to come to – those who can give additional value and who are not looking for “cheap labor”.
You had to adjust our economy to that and the labor market and competencies and business conditions and lack of corruption, developed infrastructure, equal business conditions for all, low bureaucracy – you had to meet all that, so that those investors who bring higher salaries, higher the processing level actually wanted to come from you. And none of that has been done,” believes Aleksandar Milosevic.
If it was – companies in Vranje would already be fighting for workers. This way, 1,200 people, when Geox picks up their machines and closes production, will pick up workbooks and go to the office. Until investors appear, which for now are only in the promises of politicians. And that – according to the words of the President of Serbia – will happen by September 15, Nova reports.
