Issues Burdening Local Businesses
Businesses in Serbia do not see a major difference in evaluating the business conditions on the national level and the local government they work in. In both cases, more than a half think the business environment is mediocre, while a third to a quarter find the business development conditions are poor.
One of the more significant reasons is that they see the greatest obstacles for doing business in issues regulated on the state level. The most pronounced problem, as seen by 69% businesses, are the high salary taxes and contributions. This is followed by high VAT rates, lack of investment funds (33%), complicated administration and shadow economy, as shown by a business opinion survey that was conducted in February this year by NALED with the support of Development Agency of Serbia as part of the project Strengthening Local Government Structures for Supporting SMEs.
Through this project, with the aim of strengthening capacities of cities and municipalities for working with the business community, NALED and DAS organized a series of trainings for building relationships with business communities, supporting new businesses and new investments, cooperation with other municipalities, promotion of businesses, investments and local governments. Trainings were successfully completed by 22 heads and employees in offices for local economic development from 18 different local governments.
When answering the question of what benefits would be the most useful and have the greatest effect on business development, participants highlighted tax benefits, incentives for investments in fixed assets and employment incentives, as well as incentives on local levels in the form of tax exemptions or deductions. Despite local governments’ efforts to meet these wishes and allocate budget funds, 94% of businesses confirmed they never used these benefits (83% did not use benefits offered by state institutions).
The topics of interest to entrepreneurs that they wish to discuss with local governments are mostly related to finance, such as incentives, local tax and fee rates, budget plans for the following year and prices of utility services. However, research shows that businesses rarely take initiative upon these and other significant issues for the business environment – 91% admitted to never providing a suggestion to their local government, 5% did but with no effect, with the remaining 3% being fortunate in having their proposed suggestions adopted. On the other hand, this data shows that local governments end up adopting 40% of all suggestions the business community proposes. The only problem is that a mere 8% of businesses are interested or ready to propose something.
"It is clear the mechanism need to be developed that will allow businesses to more easily communicate with local governments. Cities and municipalities can ensure this by forming functional Business Councils where business and local management can meet and discuss mutual topics, as well as strengthening Offices for Local Economic Development, which have a significant role in offering support to the existing businesses and new investors. This is precisely what NALED’s BFC SEE program insists on" – said Vice President of NALED’s Managing Board and Mayor of Pirot Vladan Vasić, whose constituent city participated in the Strengthening Local Government Structures for Supporting MMSP project.
When talking about satisfaction with cooperation with local-level institutions, it is interesting that the business community is most satisfied with cooperation that they have with public utility enterprises. 71% businesseshighlight that they are completely or mostly satisfied with their cooperation with that part of the public sector. Positive evaluations were given by more than 50% of participants from Urbanism departments in charge of issuing construction permits, and the construction directorates.
As local governments report, urbanism departments received poor evaluations three years ago, but with the introduction of the new Law on Planning and Construction and e-permitting they are now ranked among the best departments. Mayors’ offices received positive evaluations in 49% responses, while 45% of participating entrepreneurs expressed satisfaction with the work of offices for local economic development.
Greatest Divide on Road Quality Issues
Communal infrastructure, which represents an important factor when evaluating business conditions, received positive scores in the poll. The highest rank went to telecommunication with which 91% of businesses are satisfied, followed by waterworks (80%), sewage (73%), gas (54%), whereas less than half of positive evaluations were received for heating systems (46%), but only a fifth of entrepreneurs are dissatisfied with heating services. Opinions are most divided on roads – 58% of entrepreneurs are satisfied with 42% holding an opposite opinion.