Lessons learned from Ireland
Many people say that Serbia should focus on its land, build strong agriculture. But these people do not realise that every single European country is protecting its agriculture, and thus the main market for the Serbian agriculture would be within Serbia itself, and this does not qualify as export.
Ireland in 80s was in a pretty much similair situation. Its economy was dominated by the small agricultural farms, and there were no major competitve industries. Ok, Serbia has got an advantage to Ireland, that its land is more fertile, but on the global scale agriculture in Europe is a pretty much a protected market.
In the 90s Ireland started investing into IT sector, building strong universities of IT sciences. The government was supporting the IT sector, and now Ireland is the EU’s giant in IT. By talking to taxi drivers in Ireland ( taxi drivers across the world are always the best source of information), I was told that in the last decade Ireland has completely changed. It is the fastest growing economy in Europe, standard-wise as well as price-wise.
In combination in subsidy of strong IT sector, Ireland enjoys benefit of the lowest Corporate tax rate in EU. That attracted many IT and non IT companies, which then tried to push their revenues into Ireland, so that they would enjoy the tax benefits of Ireland.
Serbia has got among the lowest corporate tax rates in Europe, but that is still not enough to become a magnet of foreign investments. Why? Most of the managers I talked to replied with the answer of ” political instability”. Now that we entered in the “Partnership of Peace”, maybe foreign investors would find us more attractive. Maybe.
But the answer really lies in fact that Serbia has to find its position in Europe if not world (now that globalization is taking place). Ireland managed to get the image of an IT country expert, while Italy with fashion and clothes industry. What should Serbia choose? Is agriculture really the answer? Time will tell….
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Hey Ivan,
Actually, there have been many articles that compared Ireland and Serbia, especially mentioning that Serbia has the same potentials as Ireland had. Well, agriculture is a segment that can be profitable, but only under better circumstances with the EU. I don’t realy know which market segment would make a boom, but I think that Serbia can also compete on the regional IT sector, or maybe also on the liquor sector (rakija), which can also create a image, such as ouzo for Greece or whiskey for Scotland. We can also take the example of the Czech Republic and the profits from Skoda, by selling it to the Germans.
The geographical position of Serbia (Corridor 10) can also make large profits.
All in all, Serbia has many economic potential that can make us leaders in the regions, we just need right people to recognize them
Thanks for the experiences you shared with us
Cheers
Ireland has had success in agriculture as well as IT choosing neglected areas. For example, they now produce most of the EUs mushrooms. One thing against Serbia is the ridiculous rates of customs duty on imports as well as the fact that things “disappear”. Another is the complicated bureaucracy. These are matters of administration and can easily be rectified if the will is there, but it requires a political tendency towards openness rather than isolation.
The thing is, we need politicians with vision, who realise what needs to be done. Not only blindly copying other countries, but growing the economy with innovative policies, along with combating the white plague and attracting back highly qualified members of the diaspora. Two members of my family are MIT Phds and are about to leave Serbia for the second time, because they couldn’t find any appropriate jobs after returning. A complete waste, the government should be giving these people tax holidays upon return and so on…
Also, governance needs to drastically improve. Every municipality should basically try to emulate Indjija as much as possible. It’s hard to believe that some municipalities don’t even have a website in 2006! In my eyes, Dinkić and Koštunica are the two most able politicians on the scene. Just look how much Serbia has advanced since they came to power – for example, exports have doubled in just three years (2003-2006). However, that sort of performance needs to continue in the next 15-20 years, as Serbia’s GDP is still only about 70% of the 1990 level, although it’s improved immeasurably since 2000. Much has been done, but much remains to be done.
This is a good topic. Many Serbian government Ministers also used the comparison with Ireland. Some of it is of course wishful thinking but the broader point is relevant – particularly concerning a business strategy.
It seems to me that this national strategy is still lacking in Serbia. There have been a number of good, incremental moves in certain fields such as fulfilment of certain agricultural standards which will enable Serbian companies to export to the EU and beyond. That sector is a particularly important one for Serbia as we all know.
Two large barriers in Serbia to my mind are corruption and a party political state (the two are very much connected). What we need is a concensus by political parties to quit political appointments. That means that instead of the DSS members and tycoons which dominate the power sector, we have capable, non political business types. That means that the Serbian Renewal Movement party or G17 doesnt control economic decision making. That means that SPS members are not given houses in return for support to prop up the government. Serbia cannot move ahead at the pace it might do as long as party political corruption continues. I have yet to see one political party that adocates the ending of this state of affairs although there was some debate in the Democratic Party some months / years back on this.
People say that privatisation will cure this problem by ensuring that state officials will no longer run the public companies – perhaps, but if one considers corruption a serious problem in Serbia, then one has to wonder whether those awarded tenders, those companies chosen to run the former state companies, win this right fairly. There have been instances such as Knjaz Milos and others so one might wonder.
Look for example at what happened at Belgrade Airport cargo sale with that crooked firm Dyncorp which has now withdrawn after winning its bid. The government tried to sit on that information but it was leaked.
I would echo some of (Ivans) and Estavisti’s optimism. The Serbian growth rate is relatively high at 7.5 and is predicted to be the same next year. However, theres no doubt in my mind if we really were to clamp down on corrupt practice and implement a real co-ordinated strategy it would hit 10 percent.
One must remember the starting point is much lower for Serbia as we have got many years of economic stagnation behind us. Officials and public employees (and indeed the public) should be reminded that there is no time to rest and enjoy the partial success. There are only a few more large privatisations left – that money must be spent wisely and with the future in mind.
Шта би било кад би било... If we had a strong, stable government lead by someone like Goran Ješić (NOT someone like Tadić or Čeda), who knows how fast we’d bounce back (and overtake our neighbours). The thing is, people in Serbia expect too much FROM the government and demand to little OF the government. Does the government stop people from helping each other out, from keeping their bulding clean and tidy, from working together to achieve something? In my experience, Serbs have become individualists expecting handouts. On the other hand, the government needs to stop screwing up, and let people get on with it. A classic example was the introduction of VAT on IT imports. I can only imagine what the country lost for the sake of a few million euros. Or the persistence of a telecoms monopoly, as we fall further and further behind the rest of Europe на том плану. And so on…
I see two problems in Serbia. One is that we all expect the government to take care of things, and the second one is that the government does not do anything. I will start with the second point. In Serbia there are too many political parties, concerned more about their internal fights than for the good for Serbia. Not go to into political details, but the end result is that Serbia is jumping in the same spot, not able to jump far ahead.
The first point relates to the fact that people again expect the government to solve problems, which in fact it is only the people that can do. What the government can do is give incentives to the people to start its own businesses. And I think the government is doing that to a great extent, but it has not defined the competitive advantage of Serbia. What part should be given the biggest incentive?
My personal belief is not in agriculture, but in industry. But this can be agricultural industry, where we take the raw agricultural products, and add more value on them. For example making fruit juices, or oils, or Rakija as one other Bolger stated. But in order to succeed on the world market, we would need strong companies, strong marketing. That is where the government can help out in forms of subsidies and tax incentives.
As an Irish citizen who lived through the lean years and witnessed the birth of the Celtic Tiger,I would note a few things:
I think the the process of rehabilitation in Ireland really started back in the mid 80’s and only paid off in the late 90’s.
It was a combination of factors that saved Ireland. Here are a few (the whole history is long and complicated):
1. In the 90’s one party finally was able to dominate politics (Fianna Fail) and get things done. Throughout the 80’s governments were collapsing almost as regularly as Italy’s and each successive government undid the the work or cancelled the projects initiated by the previous government.
2. Corruption caused massive economic problems throughout the 70’s and 80’s and anti-corruption efforts in the 90’s – led by the Irish press – have had a massive pay-off. Today there are dozens of official enquiries into corruption. One day the thieves of Serbia will have this reckoning.
3. The government used the Irish diaspora to lobby for the country all over the world and as a source for inward investment.
4. The government invested heavily in mid-level IT education and pragmatic training through the national training and employment authority (FAS).
5. Massive diplomatic efforts were invested in attracting major IT sector players to invest in Ireland: Dell, Apple, Microsoft all signed up. The appeal was not mere corporate tax breaks. In the 80’s companies were offered zero corporate tax for 10 years and used to pack up and go at 9 years and 6 months. The appeal included abundant high quality certified staff, excellent IT infrastructure and lower than average wages.
Finally, the Irish farming sector has collapsed (except for a s few specialty areas). Agriculture in today’s EU is a very risky business. Serbia would be crazy to bank on agriculture or commodities. Its future lies in exporting services.
Kind regards,
Jonathan
http://www.limbicnutrition.com/blog/
Jonathan,
thanks for this comment, I am sure that Serbia has got a lot to learn from ireland.