USAID’s Business Enabling Project Quarterly Report: Fourth Quarter 2012

The project aims to improve the competitiveness of the Serbian economy and its private sector businesses by providing technical assistance, training, and other support to improve the business enabling environment, maintain macroeconomic stability, and further develop financial markets. The project consists of three major components: Component 1, Business Regulation and Economic Governance, focuses on streamlining laws, regulations, and institutions; improving regulators' capacity to implement laws; and improving analysis and public-private dialogue. Component 2, Macroeconomic Policy and Public Financial Management, helps the Government implement new budget and fiscal responsibility laws, improve budgeting, increase public disclosure and transparency, strengthen public debt management, and improve economic analysis and forecasting. Component 3, Financial Market Development, improves regulatory frameworks for non-bank institutions, develops capacity to strengthen and expand capital markets, and improves conditions for debt market development. During the fourth quarter of 2012, BEP's Second Business Survey was released, providing insight into the composition of Serbia's private sector and the regulatory, legal, and policy barriers it currently faces. The survey showed some important improvements in areas where BEP has been providing assistance, including a 50% reduction in average inspection time and a 22% reduction in average money spent. However, the survey also demonstrated the biggest problems that companies in Serbia face, including inflation and exchange rate volatility, poor access to finance, and a cumbersome construction permit process. BEP also prepared a Draft Law on Inspections, which incorporates best international regulations and practice and lessons learned in a way that is consistent with the Serbian legal framework. The Draft Law was reviewed, improved, and approved by the Inspection Reform Leadership Group, and a study tour was organized to provide key Serbian policymakers with the understanding they need to develop inspections reforms. Additionally, BEP provided advisory assistance to the Fiscal Council to prepare two reports: the Assessment of the Proposed Budget for 2013 and the Assessment of the 2013-2015 Fiscal Strategy. The reports outline the risks and shortcomings of the latest budget proposal and mid-term fiscal strategies to curb spending and improve public finances. With BEP's assistance, the Fiscal Council was able to carry out extensive economic analysis of the program for public debt reduction and the effects of corporate income tax law changes. The reports were released at a press conference on November 13, 2012, and have received extensive media coverage. They are already shaping the course of the Government's actions, with the new Government implementing a series of previous recommendations outlined in analyses published by the Fiscal Council. BEP also released its White Paper on Financing the Growth of Small and Medium Enterprises (SMEs) in Serbia. The key findings and recommendations include the need to strengthen credit enforcement, increase financing options for SMEs, and improve collaboration between businesses, financial institutions, and the Government. The White Paper and exhaustive study provide a comprehensive analysis of the challenges faced by SMEs in Serbia and offer recommendations for addressing these challenges. The project's approach to achieving reforms is to help the GoS work closely with the private sector and outside experts to make reforms that improve business competitiveness. The reforms will reduce the time and money spent by Serbian businesses to comply with laws and regulations and will help the GoS to be more efficient. The reforms will also enable businesses to attract necessary investment at an appropriate cost, leading to export-led economic growth and increased employment.