Wheeling & Dealing

August 1, 2012

Loup Brefort

Many argue that the Serbian economy is based on two business models. One is to buy for 1 and sell for 2 or 3 (dinars, Euros, dollars) and the other to buy for two or three and sell for one.

The first model is that of some private sector companies, while the second occurs in public or state owned companies. And none of them make for sustainable economic development. What is more, citizens of Serbia end up paying twice: once as consumers, the second time as taxpayers.

Buying for 1 and selling for 2 or 3 is usually the inevitable result of opportunities offered to monopolies or oligopolies – when one or two big companies control the market. So, Serbia should encourage more companies in the sectors where this trend exists. Newcomers will compete with established companies by lowering prices of products or offering higher quality for same price in order to attract consumers. Households of Serbia would clearly benefit. Liberalizing the market may not please those that benefit from such a comfortable position, but it is the right policy to pursue.

An example of the second model is gas: the price for gas paid by consumers in Serbia is lower than the price paid when it is imported. The result is the loss of the company that sells the gas. Since this is a public company – Srbijagas - the loss is ultimately covered by the taxpayers. And these tax payers are both the citizens who use gas and those who don’t. Further, some of the people who use gas can actually afford to pay the real price since they are well off. If gas in Serbia would be sold at a real market price, Srbijagas would not have losses, taxpayers wouldn’t have to cover this cost, and Serbian budget would have more money to help those people who are poor, and only those, pay for their energy consumption bill.

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