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Eight priorities for new Government



American Chamber of Commerce in Serbia has announced that the new Government should primarily focus on the continued implementation of key economic reforms. Representatives of AmCham have drafted a list of economic priorities which they believe should be on top of the Government’s agenda in order to overcome the recession and improve international competitiveness of Serbia as an investment destination.

Eight key recommendations are as follows:

1. Strict budget deficit control, through the rationalising public spending and an increasing tax revenues, is achievable through resolute fight against the grey economy and consistent tax collection from all tax payers, including public companies and parts of the public administration. Bearing in mind that the crisis has mainly burdened the private sector so far, through higher unemployment rate and major pressure caused by lack of liquidity, i.e. belated settlement of the state obligations, it is most important to strictly control state spending, particularly its segment not related to investments.

2. Restriction on proliferation of para-fiscal charges, with the consolidation and adding the existing para-fiscal taxes to the budget. It is also necessary to adopt the list of all para-fiscal charges, revise their purpose and rate, establish clear rules who can introduce additional para-fiscal burden and how, as well as provide monitoring of its enforcement. Finally, it is necessary to regulate the system of financing local self-governments in a manner which will provide sustainability of local finances, with a uniform methodology of defining local revenues, their maximum amounts and higher transparency, which will enable a price competition among local self-governments, as well as predictability for investors.

3. In the area of structural reforms, in addition to the public administration reform, it is highly important to complete the process of restructuring and privatising public companies, which would contribute to higher liquidity in the economy and to efficiency of the public sector. Public administration reform should be set as a priority project with clearly defined goals, oversight and management team. In order to exclude arbitrariness in the process, the project should be lead in accordance with the best project management practise and advisory team should be complied from the ranks of experienced independent experts, mandated with the task to review of internal processes, number of people engaged, internal organization and provide recommendations for optimization, as well as the future employment practices.

4. Modernisation of regulations in the area of labour relations, aimed at increased predictability of the legal framework, flexibility of employment as well as the elimination of complex administrative procedures, making business operations more expensive and providing disincentives for employment. From the aspect of predictability of business environment, it is most important to establish precise rules, where extension of applicability of collective bargaining and branch agreements to the parties which did not participate in negotiations should be an exception, rather than a rule. It is also necessary to fully amend the Labour Law, with a special focus on reducing complex administrative procedures, facilitating employment through more flexible forms of employment contracts, such as extension of a fixed-term employment contract from one to three years. In addition, the amendments should eliminate disincentives for employing people with more experience by changing rules of paying severance packages for the total number of years of employment, but only limiting them to time of employment with the current employer.

5. In the construction and real estate sector, it is necessary to efficiently shorten the process of obtaining construction permits, as well as eliminate numerous obstacles for efficient conversion of the right to use land to the ownership right. The first measure should be consistent implementation of the existing regulations, particularly in regard to lengthy procedures, penalties for breach of deadlines, and, later on, reduction of the number of various entities an investor must address in a process of obtaining a permit. Reduced obstacles in this area would not only improve conditions for the construction industry, but also, due to its multiple effect on other sectors, for all other sectors, as well as increase the competitiveness of Serbia as an investment destination.

6. Improve the public procurement system, primarily through higher transparency and efficiency of tender procedures, which will ultimately result in savings. The proposed measures include limiting the application of restricted negotiating procedure (in order to increase transparency), introduce the practice of publicising all public procurements at a specialised portal (instead of just large procurement), announcement of annual procurement plans and reducing red tape.

7. Public debate for introducing economic laws. This is possible to achieve only by organising mandatory public debates and consultations with the private sector, primarily trough amendments to the Government’s Rulebook, where a mandatory public debate would be introduced for all laws affecting the economy. Adoption of this proposal would increase the quality of legal framework, better implementation and more predictable and stable conditions for doing business.

8.  Finally, the problem of high share of NPLs in the banking sector should be addressed as well, especially because of its negative impact on credit growth, aggregate demand and investments. In this regards, AmCham is proposing a formation of the special working group comprising representatives of NBS, Ministry of Finance (Tax Admin), Ministry of Justice and banks, with the aim of adopting concrete plan of action.