Your Excellencies, Ladies and Gentlemen,
Advising many countries and corporations around the globe, Joel Barker once said that:
"Vision without action is a dream. Action without vision is simply passing the time. Action with Vision is making a positive difference."
It seems to me that all of us here who are committed to Serbia should contribute to turning vision into action.
The recent times have not been easy … and that is probably a severe understatement. However, a lot was accomplished indeed in the past decade and, more recently, in response to a world crisis that hit Serbia hard.
Among the achievements, let me mention the sustained growth of the 2000s and what is widely acknowledged to be pretty deft management of the crisis, including tough but necessary fiscal adjustment. To the authorities’ credit, effective programs to protect the poorest and prevent the erosion of crucial human capital were sustained, as social assistance transfers were not only spared, but actually boosted as the worst of the crisis unfolded.
With support from the Government and the NBS, the banking system weathered the external shocks well. Actions were also taken to improve the business environment for the real sector, in particular through introduction of Regulatory Impact Assessment, adoption of a new Company Law and implementation of many recommendations of the regulatory "guillotine". Much has already been done and continues to be done on a daily basis - in too many areas to list them all - to advance Serbia’s goal to be granted EU candidate member country status.
Additionally, one cannot fail to mention the authorities’ responsible, constructive, and active role in the international and regional community.
More importantly, Serbia has a vision for the future: European Union membership and reliance on a new model to drive the economy. We, at the World Bank share Serbia’s vision, which among other things aims at accelerating growth through exports and higher productivity; at improving infrastructure; at increasing employment and labor skills; at energy efficiency; at social inclusion and eradication of poverty. There is a wide consensus among professionals, policy makers, businesses and other stakeholders in the country that this is where Serbia wants to go.
However, the challenge for all of us is: How to get there? What actions to take to turn the vision into a reality?
At the World Bank we wish to contribute to shaping some of the answers to this question. Namely, every three to four years our teams produce what we call Country Economic Memorandum (in our jargon CEM). The CEM analyzes certain aspects of the economy in a country. My colleagues recently started to work on one for Serbia and already had very fruitful discussions with a number of you present in this audience. I am sure members of the team will continue this interaction and consult many more in the process in the coming months.
What issues do we propose to cover in the forthcoming CEM and why did we select these particular ones? Our starting point was to look at constrains for the future and a new model of growth.
It is clear that infrastructure is important but it is well covered in many studies. So, let me bring out areas that get less attention but represent "the vast land of opportunities" that needs to be tapped for Serbia to succeed.
One of these opportunities is the land - literally! With such good land and such a tradition it would seem a no-brainer that agriculture should be one of the key engines of export - led growth. However, at the time when food prices are skyrocketing globally, agriculture in Serbia is seriously underperforming. Between 2002 and 2010 the sector grew by only 0.6 percent annually on average! In addition Serbia exports just USD 464 per a hectare of its arable land, while Poland exports around 950 USD, the Czech Republic and Slovenia around 1,200 USD. Without increased competitiveness, Serbian producers will lose market share, not only in export markets but also in domestic ones, in spite of country’s high quality arable land, a favorable climate, and abundant labor.
A competitive enterprise sector is absolutely essential for improving Serbia’s export performance and thus generating rapid, sustainable growth. In today’s world being good is not good enough. One has to be better and to move faster than the others, and competitiveness is the name of the game in an increasingly open world of trade. According to the recently published Global Competitiveness Index 2010-2011, Serbia ranks only 96 among 139 countries! It scores rather badly in two important areas: its local market is not competitive enough (ranked 125) and its institutions need to be much improved (ranked 120). The first one is critically important. Recently, Gunnar Hökmark, Vice-Chair of the Group of the European People's Party in the European Parliament remarked that "Those economies that are not open to competition will not achieve competitiveness".
The transition has been especially hard on the manufacturing sector in Serbia. Industrial output stands at roughly 50% of what it was in the late 80s. Not all of that decrease is a bad thing since we all know that many industrial enterprises were created in the past according to a logic that was very different from that of a market economy. Nevertheless, in 2008 (let’s not look at 2009 and 2010, which were excessively tough for industry) the share of industry in value-added was just 21%, down from 27% in 2000. Even more thought-provoking is to compare this figure with the 26% in Romania, 27% in Poland and 40% in Slovakia. Also, unlike in Serbia, in most of these countries the share of industry in value added has been growing over the last decade. In Poland, for instance, the share of industry increased from 23% in 2001 to 27% in 2008 and in Slovakia from 30% to 40%.
Beyond agriculture and industry, what are some cross-cutting issues of competitiveness that the CEM proposes to look at?