Forbes Weekly Review: Between Risk and Promise – New Questions for Serbia's Budget, Economy, and Citizens

Nearly three years after the adoption of a law intended to reform state-owned enterprises by removing the "public" designation and professionalizing management, little has changed within these companies. The core objectives of the new regulation, professionalizing leadership and centralizing control, appear unmet. The Serbian government has continued its practice of appointing acting directors, undermining the goal of professional management. Furthermore, the law's attempt to remove the "public" status from these firms has also meant that their leaders are no longer considered public officials, thereby removing the obligation to report their assets and income. This regulatory shift raises questions about transparency and accountability. Economically, Serbia faces a period of stagnation in employment over the next three years, according to projections in the Fiscal Strategy. While this does not automatically equate to increased unemployment, it signals a critical juncture for the country's economic model. The growth strategy, heavily reliant on inexpensive and accessible labor, has seemingly reached its natural boundaries as labor costs have risen. This shift is already evident, with several foreign companies in lower value-added sectors closing their Serbian operations because the country is no longer a cheap destination. The primary challenge for Serbia in the coming years will be restructuring its economy, moving from traditional industries to more advanced sectors. Danko Brčerević, chief economist at the Fiscal Council of Serbia, noted that the departure of low-productivity businesses is a natural outcome of economic progress, with some relocating to cheaper countries. However, he stressed that the real problem lies not in the exit of low-productivity jobs, but in the lack of replacement industries. The ongoing saga surrounding the state-owned oil company NIS continues to unfold with dramatic and almost theatrical developments, despite expectations that the public had seen all aspects of this multi-month narrative.

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The departure of such companies (from sectors with lower added value) is not a problem in itself. It is, to a certain extent, a natural outcome of economic progress. Some of those factories are moving to countries cheaper than Serbia, which could have been expected when they first arrived. The real problem is not that low-productivity jobs are leaving, but that we still don't have anything to replace them with.