World Bank Report Sees Food Processing, Automobile and Metal

December 9, 2011

Enhancing productivity is critical to boosting exports and growth in Serbia

BELGRADE, December 9, 2011
– If Serbia wants a healthy, rapidly growing economy, it must give more attention to its exports, says the new World Bank Serbia Country Economic Memorandum “The Road to Prosperity: Productivity and Exports”, launched today.  The report  looks at  opportunities to boost Serbian exports, with a focus on industry and agriculture. It also identifies  a number of impediments  to increasing Serbian competitiveness in world markets, in particular in the business environment, education, energy, land use, and logistics.

“Export-led growth is necessary to convert Serbia’s vast resources into higher living standards for its citizens,” says Lazar Šestović, World Bank Country Economist and co-author of the report. “Higher exports could help Serbia’s economic growth engine to start firing on all cylinders: consumption, investment, and exports.”

Enhancing productivity is critical to boosting exports and growth in a sustainable manner, concludes the Country Economic Memorandum (CEM)  report  for Serbia. The report finds that Serbian companies are less productive and their unit labor costs are higher than those of firms in other countries of the region. For example, workers in Serbia produce less than half of those in Slovakia. However, with appropriate reforms, Serbia can substantially increase its worker productivity.

According to the report, in order to improve productivity, entrepreneurs need an enabling business environment, capable institutions, regulations that support competition, skilled labor force, and quality infrastructure. This will require dismantling barriers to domestic and foreign investments,  advancing structural reforms, and further integrating with European and global markets.

Which products could Serbia export? The report analyzes 237 product categories  and  reveals many profitable opportunities, especially in the automobile, food processing, and metals industries. Agriculture is critical to  the  Serbian economy.  Yet, there is significant room to increase agricultural productivity and exports. Recommendations to enhance agricultural productivity include measures such as making the policy more predictable, building an effective farm advisory service, improving supply chains, continuing with trade liberalization, and improving the efficiency of the agricultural budget.

Regarding the business environment, the report identifies many  obstacles that prevent Serbian firms’ exports and growth. For example, there is a disconnect between the type and skills of graduating students and labor demand. Also, the looming deficit in domestic electricity production and  a  low level of energy
efficiency are  acute  constraints for  increased competitiveness and  sustained expansion of Serbia’s exports.The uncertainty  around  land rights and  inefficiencies in land administration  also constrain economic activity and exports.

The report outlines a broad policy agenda to address these issues and accelerate Serbia’s productivity and export growth.  It covers both short and medium term measures.
“We hope this report will stimulate Serbian society as a whole and policy makers in particular to launch a debate about a new model for growth, and will help them to create a wide alliance around the set of policy actions that would be most effective in raising the rate of productivity and  export growth of Serbia’s enterprises,”  says Loup Brefort, World Bank Country Manager for Serbia. “The analysis shows that this strategy could lead to a doubling of per capita income in Serbia by 2020. While difficult, this is achievable. However, half measures will not do. It will take a coordinated, simultaneous push in all the vital areas discussed in the report to move things forward.”

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