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PROMISING RELATIONSHIP IN A YEAR FULL OF JUBILEES
erbia is the most desirable in-
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Svestment destination in the region, according to German business people, and German companies are the most desirable employers in Serbia, according to polls. It all started in early 2001, when German companies, following the October 5th political changes, started investing heavily in Serbia.
After 20 years, Serbs and Germans understand each other better economically. Many advertisements are promoting "the German quality", while people in Serbia are adopting the German way of thinking and spending. Germany remains an important partner of Serbia on its road to EU accession. German companies in Serbia employ over 67,000 people, and the German government has implemented projects worth two billion euro in Serbia in the last 20 years, together with its institutions KfW and GIZ.
What you are holding in your hands, dear readers, is the sixth special edition of our InFocus issue dedicated to Germany. Five years ago, around this time, we excitedly put together the first issue and the launch party for Diplomacy&Commerce magazine and a supplement that was entirely dedicated to bilateral and economic cooperation between Serbia and Germany.
|INTRO | PROMISING RELATIONSHIP IN A YEAR FULL OF JUBILEES
The first 20 years of investments have passed and the next 20 are expected to be even more dynamic
There are two important reasons why we chose Germany as the first country to cover. The first reason was that the German-Serbian Chamber of Commerce was the first business association which Color Media Communications joined, and the second, equally important reason is that we wanted to put one of the most important foreign policy and trade partners of Serbia in the first issue. 60 issues later, we are celebrating our 5th birthday, the German-Serbian Chamber of Commerce (AHK Serbia) is marking five years of its official establishment, and the Delegation of the German Economy is celebrating 20 years of investing in Serbia. This is a year of jubilees and great occasions to celebrate.
Unfortunately, due to the COVID-19 epidemic, we cannot celebrate the jubilee the way we would want to and you are used to - with all of you, giving out D&C awards to companies, organizations and individuals. But that's why we have prepared for you an edition full of interesting stories, an overview of German investments from the year 2000 until today, interviews with over 20 leading figures from the German economy, articles about tradition and culture, and interesting facts about the economy, tourism and history of this beautiful country.
Together with the magazine’s founder, Robert Čoban, we would like to express our deepest gratitude to our dearest partners and important interlocutors who appear in this edition - Marko Čadež, President of the Chamber of Commerce and Industry of Serbia who selflessly supported us all these years and highlighted Germany’s importance for the development of Serbia, the German Ambassador to Serbia, H.E. Thomas Schieb, who is always willing to talk about the importance of relations between our two countries, the entire German-Serbian Chamber of Commerce (AHK Serbia) together with the Chamber’s newly elected President and Director, Mr. Udo Eichlinger and Mr. Frank Aletter respectively, who were kind enough to share with us their views on bilateral and economic relations, and the staff of both the Embassy and the Chamber - Milica, Doris, Marija and Milica - without whom this issue would not be as interesting.
Dear readers, we wish you a myriad of great moments while reading our magazine, but first and foremost, we wish you good health and a good year ahead.
All the best!
RUŽA VELJOVIĆ
Director of Diplomacy&Commerce magazine
H.E. THOMAS SCHIEB
Ambassador of Germany to Serbia
When I started as German ambassador in 2018, the number of jobs created by German companies was 48,000. Today, 2 ½ years later, this number is around 68,000. It is also very positive that the quality of created jobs has changed – German companies offer more and more job opportunities for a highly qualified workforce, like engineers and IT experts
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n the last 20 years, the German
Igovernment, together with its institutions KfW and GIZ, has implemented projects worth two billion euro in Serbia. German companies have an exceptional influence on the entrepreneurial spirit and work habits, as well as on the development of dual education in our country. For the jubilee issue of InFocus Germany, we spoke with the German Ambassador in Serbia, H.E. Thomas Schieb, about further cooperation between the two countries.
Economic relations between Germany and Serbia are at an exceptional level, which is a good basis for further improvement of the overall relations. In which segments can the cooperation between our two countries become even better?
Our bilateral and economic relations are flourishing indeed. This is true for our bilateral trade as well as for investments of German companies. The trade has been growing constantly, even during the pandemic, and the level of activities of German businesses in Serbia has exponentially increased. Today, we count more than 2.5 billion euros of total investments since the year 2000.
When I started as the German ambassador in 2018, the number of jobs created by German companies was 48,000. Today, 2 ½ years later, this number is around 68,000. It is also very positive that the quality of created jobs has changed – German companies offer more and more job opportunities for a highly qualified workforce, like engineers and IT experts. A number of companies established state-of-the-art R&D centres. Such investments might create fewer jobs than those in more labour intensive sectors. However, they show the companies’ intention to stay long-term.
It is good that the Serbian government intends to put more focus on the so-called green agenda, i.e. investing in climate protection and air pollution measurements as well as water- and wastewater infrastructure as well as in renewable energy and energy efficiency of buildings. As one of the pioneers in green engineering solutions and the energy transition (we call it “Energiewende”), Germany has the know-how as well as climate and environmental friendly solutions to offer. These sectors have a huge potential for enhanced cooperation.
Germany strongly supports Serbia in the European accession process. What determines how fast a candidate country will join the EU and what should be the priority of the Serbian Government in that context?
Serbia is as a fellow European country, which should become member of the EU sooner rather than later. Once a candidate country has adopted the complete legal framework of the EU, the so-called Acquis Communautaire, it is ready for accession. This includes the country fully aligning itself with foreign policy positions of the EU, and overcoming unresolved disputes with its neighbours, i.e. with Kosovo.
Whereas some parts (so-called chapters) of the Acquis are rather technical in nature, others touch upon core principles of the EU, i.e. those related to the rule of law. Since there has been a lack of progress in the field of rule of law, particularly in improving media freedom and independence of the judiciary as well as in the fight against corruption, there was very little progress in terms of EU accession last year. Substantial progress is necessary in all these fields.
What do you think about the relations between the EU and the new U.S. administration, helmed by President Joe Biden. Which direction will they take?
President Biden expressed his determination and willingness to cooperate and engage with international partners and multilateral organizations. It is excellent to see the US back in the WHO, to mention just one prominent example. In times of a raging global pandemic, we need worldwide cooperation and inspired leadership on both sides of the Atlantic more than ever. I am convinced that we will see new impetus for the trans-Atlantic relations, both on the EU and bilateral levels.
The dialogue between Belgrade and Priština is a very important topic as it is part of the European integration process to and also important for the entire region of the WB. What direction will the related initiatives take to move the entire region closer towards the EU?
Normalisation of relations between Serbia and Kosovo would be extremely positive for many reasons. It would help unleash the full economic potential not only of the parties but the whole region and the people of the region would benefit enormously. It would also be a huge step forward on the path towards EU membership. Once a new government is in place
FOCUS ON
The reforms in the rule of law field are a clear priority. We are talking about justice reform, the fight against corruption, improving the situation of journalists and strong and good laws protecting the citizens
in Priština, we expect the dialogue under the auspices of EU Special Representative Lajčák to resume with new momentum. It goes without saying that both parties need to have a constructive attitude to make progress.
In the last 20 years, the German government, together with its institutions KfW and GIZ, has implemented projects worth two billion euro in Serbia. What will be the focus this year and in the years to come?
Our development cooperation follows a more long-term perspective, rather than focusing on short-term impacts. Hence, our overarching goal is to support Serbia on its European path. In the next years, we will focus on the provision of vocational training and the creation of jobs for young people in particular, the expansion of renewable energy sources, like wind and solar energy, and the provision of expertise in the area of rule of law. Improvements in the rule of law are, as I said earlier, particularly important for progress towards EU membership. Additionally, we support the Roma community by helping to rehabilitate basic infrastructure, such as water and sewage grids in informal settlements or through awareness-raising and educational programmes.
German companies have an exceptional influence on the entrepreneurial spirit and work habits, as well as on the development of dual education in our country. What else can we learn from the Germans and vice versa?
As an ambassador, it’s not my job to lecture. My advice would be, to Germans as to Serbians alike, to find out themselves what they can learn from each other. This is why the German embassy is supporting and facilitating exchange between the German and Serbian people on many levels.
What one country might learn from another, what an individual can learn from his or her friends and neighbors, is best discovered in direct communication. I hope, that, once the pandemic is defeated, many Serbs will visit Germany and many Germans will travel to Serbia again to experience what the other country has to offer. One additional remark… I am impressed by the Serbian ability to make do in a rapidly changing environment. Germans have a tendency to plan everything well in advance. However, sometimes a bit more flexibility might be useful.
The 30th anniversary of the German reunification was marked on 3rd October 2020. Have any planned celebration activities been postponed for this year and how did Germany mark this jubilee?
In Germany, the Day of German Unity celebration ceremony had to be re-arranged at short notice. Instead of thousands of people celebrating the 30th anniversary, as in normal times, a modest outdoor exhibition with a limited number of guests took place in Potsdam.
I very much regret that we were not able to celebrate 30 years of German unity last year here Belgrade, in the way we had planned. We were looking forward to including the festivities in a series of cultural events called “German Weeks”. If the situation with the coronavirus allows it, we will hold the German Weeks this autumn, and also open the doors of our brand new embassy building in Knez Miloš Street to the public.
FRIENDLY AND WELCOMING
What do you like most in Serbia and Belgrade in particular? — The hospitality I have been experiencing since coming to Serbia is exceptional and the people are very friendly and welcoming. I very much like the humour and the talent for improvisation that we Germans sometimes lack. Belgrade is such a lively, interesting city. My wife and I are very much looking forward to enjoying the uniquely vibrant cultural scene again, once the pandemic is conquered. Given the impressive progress of the vaccination campaign in Serbia, the prospects for this are not so bad. However, for the time being, extreme caution and complying with the distance and hygiene rules are of pivotal importance.
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UDO EICHLINGER
President of the German-Serbian Chamber of Commerce in Serbia (AHK Serbia) and CEO of Siemens d.o.o. Beograd and Siemens Mobility
We are and will remain a stable partner of the Serbian business community, with the aim of improving the business climate in the country and supporting economic reforms as well as the efforts of the Serbian government to implement these reforms
his year, the German-Serbian
TChamber of Commerce (AHK Serbia) marks 5 years of its official establishment, while German investors, represented by the then Delegation of the German Businesses in Serbia and the German-Serbian Business Association, are celebrating 20 years of their activities in Serbia. In this year's edition of InFocus Germany, AHK Serbia’s president, Udo Eichlinger, talks about German investments, business environment, dual education project, workforce supply, digitalization, and predictions for 2021.
You have been a member of AHK’s Managing Board for a long time. How would you rate relations between Germany and Serbia today?
Germany has been one of Serbia's most important economic partners for years. On the other side, the reaction of the German business community in Serbia confirms the continuous positive development of German-Serbian economic relations. German investors have been present in Serbia for two decades and currently about 400 German companies employ about 67,000 workers. Germany has so far invested around 2 billion euros in Serbia, is the country's largest bilateral trade partner, and the total trade exchange until November 2020 amounted to 4.8 billion euros. Even besides the current situation with Corona virus, Serbia continues to be in high demand among foreign partners. According to many forecasts, Serbia continues to be the economic engine of the Western Balkans.
As President of the German-Serbian Chamber of Commerce, the largest bilateral chamber in Serbia, I will continue to focus on strong and efficient representation of member companies' interests visà-vis state institutions as well as in the public sphere.
What were the consequences of the pandemic in 2020 on the operations of German companies in Serbia and on companies in general in Germany?
Due to the challenges surrounding the coronavirus, the world has changed significantly. Our habits, plans and freedom of movement have been restricted or rearranged over the past year. The Coronavirus crisis has shown how sensitive our
supply chains are. Asia, for example, was considered a major risk factor. Due to disrupted supply chains, interest grew in industrialized countries such as Serbia, Northern Macedonia, Bosnia & Herzegovina, Romania.
In the past years, we have observed that German companies are specifically looking for suppliers from Serbia. We as Chamber have positioned Serbia as a supplier market for Germany as part of the Western Balkans Purchasing Initiative. Serbian companies are reliable, flexible and deliver high-quality goods and services at competitive prices. Serbia has a large number of IT and software developers working on innovative solutions. German and Serbian companies can benefit from this.
In order for Serbia to win over investors, what does the country need to do in terms of improving its business environment and making it even more attractive for investors?
The Serbian government restructured the area of vocational education in 2018. Here, it has oriented itself to the model of dual training. However, there is still work to be done - in particular, the acceptance of general training needs to be increased and more qualification offers are needed in companies, or further training offers for experienced employees.
It is noteworthy that the latest investments are not so much in personnel-in-
tensive areas, but rather in technically demanding processes. In addition to medium-sized companies, investors also include global corporations with strict compliance requirements. Here, a regular exchange between the private and public sectors can certainly contribute to a sustainable improvement in the areas of legal security and the environment.
Considering your experience from the industry you come from and as a CEO of Siemens, how would you assess the progress of digitalization in Serbia?
With the fourth industrial revolution, digitalization became a major catalyst for innovation, modernization, economic growth, competitiveness, and socioeconomic progress and development in total. Digitalization and automation are now more urgent and important than ever for companies, as well as for the countries. The world of today needs technology which transforms everyday life, and Siemens as a company focused on industry, infrastructure and transport, has set a digitalization as a pylon of subsistence for the benefit of customers and society, as well for further development, because no industrial company in the world, no matter its size, will be able to sidestep digitalization.
Serbian Government has recognized the importance of digitalization which has contributed to significant development in this area in the past few years, and has acknowledged the importance of investing in this as a great capital of economic stability and growth in the future. Digitalization, as one of the priorities, transforms the everyday work in public sector and raises its economy, transparency, and quality of work. In order to keep up with digitalization, large systems, small and medium enterprises, experts are needed to guide through the whole process, step by step, experts that Serbia already has in enough quantity to use the potential and benefits Does Serbia have appropriate workforce to meet the expectations of German investors, both in terms of high school and university graduates?
Absolutely! Even though we have been witnessing in the past so called “brain drain”, we see that the Government of Serbia has applied measures to increase output of all relevant technical schools and Universities. Both companies and countries are aware that the race for talents has started, and in my opinion the Government of Serbia does the right steps and “walk the talk” in this regard.
Ever since I have been living in Serbia, I have met great experts almost in every segment of the Industry. From CEOs to factory workers. This is the topic I have thought a lot, being a Manager in the company myself. Serbian education system gives an amazing breadth and sense of responsibility and dedication trough schooling. What sets apart an average Serbian employer from the ones from other countries I have worked in is this ability of thinking outside the box, being flexible and finding the solution which may not be obvious at the first glance.
The key is how employer is going to establish the business bond. With the good compensation package, life/work balance, and respect towards the knowledge these people have and are willing to show, you have a winning combination for thriving. I am witnessing that every day trough work and would for sure advocate for every German company to come and see for itself.
How important is it to complete the process of implementing the dual education system in Serbia and how much do German companies and AHK members support and participate in this process?
An important step towards reducing the unemployment rate, especially among younger people, is the introduction of dual vocational training based on the German, Austrian and Swiss models. The law on dual vocational training was passed in the Serbian parliament in November 2017 and has been successfully implemented since the 2019/2020 school year. The German-Serbian Chamber of Commerce has accompanied this process with the aim of supporting the local economy with the qualification of young people.
Now, about 4,500 students are taught in 80 schools, in 52 cities and municipalities, in about 600 companies, so that today dual education is represented in 10% of the total secondary vocational education with an increasing trend. In 2014, Siemens recognized the importance of dual education and initiated the introduction of this type of schooling at the Ivan Sarić Technical School in Subotica. We see dual education as a very important area in which we have been investing and promoting for years with the intention of providing our own contribution to the education of young people and of course, a channel for finding our employees.
What are your predictions in 2021 when it comes to economic cooperation between our two countries? How can this cooperation expand further?
As I have already mentioned, the Federal Republic of Germany ranks first among Serbia's most important supplier countries. The main import products from Germany are machinery, cars and car parts, electrical engineering and plastics. How-
ever, Germany is also one of the main consumers of Serbian products, with the most important role also played by products from the mechanical engineering and electrical engineering sectors, as well as from the chemical sector.
Apart from the consequences of the Corona pandemic, the growth forecasts for 2021 are not bad at all. Economists and economic institutions predict positive growth in Serbia's GDP in 2021, which should at least match the successes achieved in 2018 and 2019 with growth of around 4.4 percent. In 2019, the trade volume between Germany and Serbia was 5.2 billion euros; the 2020 figures are not yet available. However, we expect Germany to remain the most important trading partner for Serbia in terms of imports and exports.
GERMANY WILL CONTINUE TO INVEST
Can Serbia achieve the same results as in 2020 regarding GDP growth? — In this year, Serbia is expected to return to its pre-crisis level. The decisive factor will be how the Balkan state masters all coronavirus waves, efficiency of vaccination, as well as the way in which the Serbian Government will manage to overcome them. The ramp-up of international supply relations will also be important and these depend on the economic situation in the EU. However, it is certain that German companies will continue to invest in Serbia.
|INTERVIEW | OUR ECONOMIC, TRADE AND INVESTMENT TIES ARE CONSTANTLY REINFORCED
MARKO ČADEŽ
Our trump card in the race for investors are the people which is something that German companies especially appreciate as seen in previous surveys, that is a competitive, trained, skilled workforce and top experts and engineers recognized globally
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ive years ago, Marko Čadež,
Fthe President of the Chamber of Commerce and Industry of Serbia, gave his predictions regarding the development of German-Serbian relations in the first edition of INFocus Germany and forcasted only growth. Five years later, we talked with him about further development of relations between the two countries, the growth of German investments, implementation of initiatives for the Western Balkan common market, successfully implemented dual education project, nearshoring and what was in store for Serbia this year in terms of EU accession.
Germany is still Serbia's most important trade partner, with the trading between the two countries amounting to over 5.2 billion euro. To what extent will GDP growth in 2020 affect the continuation of cooperation and recovery after the crisis and pandemic?
It is extremely important for Serbia that our economic, trade and investment ties with Germany, as our main economic partner, continue to grow stronger during the pandemic. Over 11,000 Serbian companies did business with German partners last year – both imported from Serbia and Germany alike. Trading in goods and services has continued. The total external trade in goods and services last year exceeded 6.5 billion euro. We were especially pleased to see that the coronavirus did not stop foreign investments in Serbia, that German companies here invested in expanding their capacities and announcing further investments in the past year, and that negotiations with potential investors, for whom we are competing with the neighbouring EU countries, have continued.
The fact that, despite the pandemic, we have managed to save workers and companies, production and export capacities, macroeconomic stability and economic base for the planned growth of 5-6% this year, has additionally solidified our position and made the Serbian economy a more reliable partner for potential German investors. Our recovery and further growth will depend on domestic and international developments, and how quickly the EU, i.e. the economies of our largest external trade partners, especially Germany, will recover.
Serbia is becoming increasingly interesting for investors from Germany and the opportunities are growing, for instance, in the IT and environmental protection sectors. What economic segments have good potential?
Industries with the greatest development and export potential are the food industry (food for future), the production of technologically advanced machines and devices, the automotive industry, ICT technologies and creative industries, such as the film industry. We are talking about investments in high-tech sectors which, in addition to creating new jobs, will bring the latest technologies to Serbia, contribute to raising the technological level of our economy, create more added value products, enable our companies to join their supply chains and employ highly educated people. We are increasingly directing our investment incentive policy towards them, which is also part of our New Industrial Policy and Smart Specialization Strategy.
To attract high-tech companies, which are nowadays frequently deciding to open their research and development facilities in addition to factories in Serbia, as did Germany's Continental, Draexlmaier or ZF Friedrichshafen, in addition to ease of starting a business, having a good regulatory framework and fostering strategic commitment to development and application of artificial intelligence, we have two other trump cards - people and a set of tax incentives for companies willing to invest in research, development and innovation.
Many German companies are considering investing in Serbia as part of their strategies to shorten the supply chain (so-called nearshoring). What can Serbia offer them?
First of all, security and stability, which have been sustained even in the most difficult circumstances during that pandemic and is something that very few investment destinations in the world can boast of, and better medium- and long-term prospects than most comparable economies. Also, our borders are open for business people from all over the world, who could enter Serbia during the pandemic with fewer formalities than other passengers. For us, this means greater chances and greater attractiveness for the international business community, which, in the coming period, will search for safe, stimulating and investment destinations closer to home more than ever before, which guarantee safer supply, better conditions for doing business, greater predictability and profit.
Investors that decide to relocate their production plants from very remote destinations to Serbia and spend their capital here, can count on simpler procedures for setting up a company, obtaining building permits faster and doing business easier and cheaper than anywhere else in the region. They will also have lower operating costs here than in competing locations and will be entitled to a whole set of financial incentives - tax and customs reliefs, state subsidies, incentives from local governments, functional infrastructure, and the shortest routes for transporting goods through European corridors. Thanks to free trade agreements, producers in Serbia can export to the market of almost 1.4 billion consumers worldwide duty-free.
In Serbia, investors can also rely on the local economy, i.e. reliable domestic companies which can join supply chains of multinational companies and meet the standards of the most complex markets and the most demanding customers. We have further boosted the quality and availability of workforce by incorporating dual education in our school system – both in high schools and colleges. Ultimately, there is no better recommendation to future investors than the experience of almost a thousand German companies already operating here.
How important for Serbia is forming a single market in the Western Balkans and would that bring a larger influx of FDI?
I believe that there is nothing that could contribute to the improvement of the business climate, the recovery and growth of our economies and the greater influx of foreign investments in both Serbia and
the Western Balkans like economic integrations in this region. Establishing a common, regional market without barriers and the Western Balkans as a single investment destination will reduce costs and make business more efficient, only one paper will be needed to accompany goods moving through all six economies, waiting time for trucks at borders will be drastcially reduced, exchange of workers and experts without having to produce work permits will be facilitated and tourists will be able to travel around the region freely. Other benefits include the WB countries harmonizing regulations and practice in all areas important for business with each other and with EU standards and working according to the same rules.
This will allow the companies operating here to cut their costs, be more productive and competitive, produce, export and invest more, and make the WB even more attractive to the international business community. This is why it is important that the new action plan for
the common regional market, which was adopted in Sofia this autumn, at the WB Summit under the auspices of the Berlin Process, and which officially started to be implemented on January 1, is implemented more consistently.
In 2018, the Government of Serbia restructured vocational education, which is now based on a dual model. How far Business people are actively participating in devising the enrollment policy and curricula for dual educational profiles. They have also joined the National Council for Higher Education and the councils of educational institutions.
About 4,000 students have so far graduated from their high schools in line with the dual model, 70 percent of them work jobs they studied for, and in addition to working in about 900 companies, 6,900 students are currently studying for 47 educational profiles. Almost half or 3,289 students in 415 companies are preparing for dual occupations, i.e. profiles that have been developed with the support of German partners.
We are grateful to the German government and partner organizations, such as GIZ and the German-Serbian Chamber of Commerce (AHK), for their support so far in the development of dual education. It is especially important for us to continue the current cooperation on improving regulation and to continue stimulating German companies to participate in dual education in Serbia. Also, financial and expert support is important for the development of dual education in Serbia and the region, which can be realized through the Regional Challenge Fund, which the German Development Bank (KfW) has founded in cooperation with the Western Balkan Six Chamber Investment Forum (WB6 CIF).
What awaits Serbia this year?
It is important to bring the virus under control as soon as possible, not to prolong the crisis, to continue and accelerate the pace of vaccination and create conditions for normal business, planned growth and reforms on our way to the EU accession. At the same time, we need to fight for people's lives and health, which is the most important thing for the economy, and we do not want to prevent people from working and earning, while adhering to epidemiological measures.
It is important that, as part of the European economy, we monitor the situation at the international level and, if necessary, respond with appropriate support to businesses. We also need to turn to new tools to support companies and to new business models that will create new value so we can operate better in the post-COVID period.
