Serbia: Business outlook

Serbia: Business outlook. Check it out:
(EIU Viewswire Via Thomson Dialog NewsEdge) COUNTRY VIEW

FROM THE ECONOMIST INTELLIGENCE UNIT

Business environment rankings(a)Value of index(b)Global rank(c)Regional rank(d)2001-052006-102001-052006-102001-052006-10Overall position4.836.0168601413Political environment4.14.668641313Political stability4.85.164611514Political effectiveness3.64.265621212Macroeconomic environment4.76.679661615Market opportunities4.85.064681414Policy towards private enterprise & competition3.55.371601212Policy towards foreign investment6.46.949521011Foreign trade & exchange controls5.16.965631315Taxes5.86.7413375Financing3.65.971571412The labour market6.06.650401210Infrastructure4.45.858501312(a) See Guide to the business rankings model at the end of this report. (b) Out of 10. (c) Out of 82 countries. (d) Out of 16 countries: Azerbaijan, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Kazakhstan, Latvia, Lithuania, Poland, Romania, Russia, Serbia, Slovakia, Slovenia and Ukraine.The Economist Intelligence Unit's business environment rankings assess a wide range of factors that have an impact on the business environment in 82countries, and compare the situation in 2001-05 with what is expected in 2006-10. Serbia's overall score is 4.83 in the historical period, putting it 68th in our global rankings and 14th out of 16 transition economies. In 2006-10 Serbia's overall score improves to 6.01. This pushes the country up eight places in the global rankings to 6o. We expect significant improvements in policy towards private enterprise and competition, the foreign trade and exchange regime, and the labour market. Taxation policy and the quality of the infrastructure are also expected to make notable advances over the forecast period.



Making up lost ground

Serbia lost a lot of ground relative to its central European neighbours under the regime of Slobodan Milosevic in the 1990s, during which time relations with the West were, in effect, frozen and economic reform was limited. Alongside the rapid reform progress achieved in several of the new EU member states from central Europe over the past decade, this has meant that Serbia's regional ranking is fairly low, despite its relatively favourable initial conditions. Most of the laws affecting businesses in Serbia came into force after October 2000, when MrMilosevic was ousted. In 2001-05 two successive governments made great progress in transforming Serbia's business environment, by liberalising prices and foreign trade; undertaking wide-ranging privatisation aimed at making the private sector dominant within the economy; pushing through comprehensive fiscal reforms; pursuing a tight monetary policy; and reforming the banking and financial system. The Serbian authorities have broadly adhered to this reformist agenda over past five years, despite widespread political bickering among the reformist parties, the assassination of the prime minister, Zoran Djindjic, in March 2003 and the installation of a minority coalition government led by Vojislav Kostunica in March 2004.

In the World Bank's latest Doing Business (2007), a much narrower measure of the ease of doing business than our business environment rankings model, Serbia comes 68th out of 175 countries in terms of the ease of doing business, just two places behind Hungary and well ahead of Croatia (ranked 124th). In Doing Business (2006), which measured progress in 2004, Serbia was singled out as the world's leading pro-business reformer, reflecting progress in easing business start-up rules, making the labour market more flexible, making it easier to register property, and taking steps to reform bankruptcy legislation, which is generally seen as a test of reforming vigour in a transition country. However, Serbia still has much to do to achieve a flexible, liberal and efficient business environment. The bureaucracy has changed less rapidly than the legal framework, and it lacks the capacity to implement new laws effectively. The signing of an EU stabilisation and association agreement (SAA), and further steps toward EU integration, should lead to improvements in public administration. However, corruption and cronyism, some of which dates from the Milosevic era, will continue to be considerable problems.

Copyright 2006 Economist Intelligence Unit
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