Serbia has undergone impressive reforms in recent years that have seen strong economic growth, record levels of foreign investment enter the country, and a drop in inflation from 17.5% in 2005 to below 7% by the end of 2006. But despite this, many challenges remain and further advances must be made to promote Serbia’s ongoing switch from a command to a market economy, says the EBRD in its latest country strategy.


The strategy highlights core areas of reform needed to support the country’s ongoing transition. For example, Serbia should accelerate its privatisation and restructuring programme, especially for medium and large businesses in order to attract much-needed investment and boost competitiveness.


Authorities should implement important new laws that promote business, such as on competition policy and bankruptcy that have been passed in recent years. Competition and a greater role for the private sector should be further introduced, especially in infrastructure, energy and the development of municipalities. And in the financial sector, credit growth should be monitored carefully, and non-bank financial institutions should be targeted for development.


The EBRD, the largest institutional investor in Serbia, has and will continue play a major role in supporting the country’s shift to a market economy. The Bank has invested around €
550mn in nearly 70 projects and has mobilised a total €1.1bn in investment in the country. To further support Serbia’s transition process, the EBRD will promote:


Corporate sector development, such as promoting privatisations to local and foreign businesses and post-privatisation restructurings, supporting agribusiness projects, developing projects in property and tourism, and greenfield investments, especially working with foreign strategic investors, and in projects that have a regional dimension.


As far as energy and infrastructure, the bank will, together with partners like the European Investment Bank, European Union and World Bank, help develop transport, energy and municipal projects across the country. In particular, the bank will aim to invest in medium-sized municipalities in regions across Serbia, support transport projects such as helping to complete the development of a modern highway and railway network, and support the energy sector through, for example, the commercialisation of energy utilities. The EBRD will also aim to introduce private sector activities in promoting sustainable energy and energy efficiency initiatives.


Financial sector development, where the bank will support any further consolidation of the banking sector, work with local banks to finance micro, small and medium-sized enterprises, and help finance and develop non-banking financial institutions, especially in insurance, private pension funds and mutual investment funds.


Technical co-operation, commercial and official co-financing, where the bank will continue the work of the Turn Around Management Programme (TAM) and Business Advisory Services (BAS), which are important projects that benefit entrepreneurs, local companies and the economy.


Regardless of the international decision on its final status, expected later this year, Kosovo faces huge transition challenges. Privatisation has advanced but new investment is limited. Reform of large public enterprises is at an early stage. There has been progress in reforming publicly-owned enterprises, including the airport, railways, post and telecommunications, and the energy utility. But in other areas, such as the power sector, reform is urgently needed.


To support Kosovo’s ongoing reform agenda, the bank will continue to focus on working with local banks and micro-lending institutions. The bank will also focus on assisting the SME sector through frameworks targeting this sector, such as the newly established EBRD-Italy Western Balkans Local Enterprise Facility. The bank will also monitor progress in the transport, telecommunications and energy sectors in order to explore potential projects.


Peter Reiniger, business group director for Central Europe and the Western Balkans, says that despite a lost decade in the 1990s, the pace of reforms in Serbia since 2001 has helped transform the country into one of the most dynamic countries in the Western Balkans. Serbia is an important partner for the EBRD, and through this latest strategy the bank is committed to helping Serbia build on its reforms, says Reiniger.