SERBIA: Still a Weak ‘Economic Tiger’

By Vesna Peric Zimonjic Reprint | | Print |

Vesna Peric Zimonjic

BELGRADE, Jan 12 2007 (IPS) - The big claims about the economic progress of Serbia at the start of the New Year came as no surprise. But the doubts about some of these claims should cause no surprise either.

The European Bank for Reconstruction and Development (EBRD) described Serbia as a “regional leader”, while the International Monetary Fund and the World Bank praised its six percent growth in 2006.

Minister for External Economic Relations Milan Parivodic became a favourite with almost all local media with his assessment that Serbia was turning into “an economic tiger” among its neighbours Albania, Bosnia-Herzegovina, Croatia, Macedonia and Montenegro.

“Our aim is to become champions of reforms in the Balkans,” Parivodic said. “All the activities undertaken in the past year have led to the record 5.2 billion dollars of investment in Serbia in 2006 and another 2.5 billion agreed for 2007.”

This year Serbia is due to complete a privatisation process begun after former leader Slobodan Milosevic was ousted in 2000.

“After the process is finished, our economy will have extremely good and competitive performance and in seven to 10 years time this country will really become the economic tiger,” Parivodic told the popular B92 Radio in Belgrade.

But some experts say that impressive figures on paper differ from reality.

“The sum of 5.2 billion dollars is correct, but what is often omitted when it is quoted in public is the fact that most of the money came through sale of telecommunication and banks to foreign companies,” analyst Misa Brkic told IPS.

“Those are one-off sales. Serbia lacks real foreign investment that would stimulate creation of new jobs, and a rise in production that could bring more tangible results for ordinary people.”

Serbia auctioned its Mobi63 mobile network for 1.95 billion dollars to a Norwegian operator in August. The largest pharmaceutical company Hemofarm was sold to a German firm for 617.5 million dollars. Five banks were sold to Greek, Hungarian and Cypriot banks for another 969 million dollars, in some of the bigger sales.

Following these sales, the government launched a National Investment Plan in September with a budget of 1.9 billion dollars.

The plan aims to support small and medium firms, and provide for reconstruction and modernisation of infrastructure such as roads, railways, and oil and gas pipelines.

“In order to become a real tiger, Serbia needs more greenfield investment which would provide more jobs, build production and service capacities, and enable production of market competitive produce,” economist Jurij Bajec told IPS. “This is still impossible in the politically unstable environment and under the condition that Serbia does not allow foreigners to own land.”

Greenfield investments have reached 910 million dollars in the past two years, but they have to be significantly larger for Serbia to be successful, he added.

Gross domestic product (GDP) has risen to 44.7 billion dollars and per capita income has exceeded 5,700 dollars, but Serbia’s economic performance is still poorer than in 1990, the last pre-war year in former Yugoslavia.

Unemployment stands at 28.1 percent, and remains one of the most serious problems. That is not just the consequence of the transition to a market economy, but a hangover of the isolation through the 1990s under strict international sanctions, the wars of disintegration of former Yugoslavia, and the North Atlantic Treaty Organisation (NATO) bombing in 1999.

There are some worrying signs about the ability to progress further. A study by the education ministry shows that almost half the adult population among Serbia’s 7.5 million people has only elementary education.

“This means that about two million people above the age of 15 practically have no qualification for any work,” Mirjana Milanovic, researcher at the ministry told reporters earlier this week. “This also means that the country has to develop a strategy for improving adult education if it has any ambitions to improve economic performance and economic development.”