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Serbia

6. Financial Sector

7. State-Owned Enterprises

State-owned enterprises (SOEs) dominate many sectors of the economy, including energy, transportation, utilities, telecommunications, infrastructure, mining, and natural resource extraction. Serbia’s Agency for Business Registers (ABR) maintains a publicly available database of all SOEs on its website at https://pretraga2.apr.gov.rs/EvidencijaPSRS . As of March 2022, according to this database, 266 SOEs are in normal operation, 42 are in bankruptcy, and two are in liquidation. However, the most recently available ABR annual report (pp. 29-32) recorded 545 SOEs employing a total of more than 114,000 people, or approximately 4% of the formal workforce and accounting for 6% of total business sector revenues. (The report for 2021 is expected to be published in June 2022.) At the beginning of 2022, 64 SOEs with a total of nearly 25,000 employees were slated to be resolved through privatization or bankruptcy, down from 90 companies in early 2019. The government has launched a privatization tendering process for two of those companies, and the Ministry of Economy is preparing 10-15 additional companies for divestiture (see Privatization Program, below).

The Law on Public Enterprises, adopted in February 2016, defines a public enterprise as “an enterprise pursuing an activity of common interest, founded by the State or Autonomous Province or a local government unit.” The law also defines “strategically important companies” as those in which the state has at least a 25% ownership share. The law aimed to introduce responsible corporate management in public companies and strengthen supervision over public companies’ management. The law requires that directors of public companies be selected through a public application procedure and that they not hold any political party positions while serving. The law also requires that a portion of public companies’ profits be paid directly to the state, provincial, or local government budget. However, Transparency International Serbia analyzed implementation of the law in an ad hoc report in September 2017 and concluded that almost none of these requirements have been implemented, including the professionalization and transparency of management. The full report can be seen at: http://transparentnost.org.rs/images/publikacije/Political_influence_on_public_enterprises_and_media.pdf

SOEs can purchase goods from the private sector and foreign firms under the Public Procurement Law. For example, foreign companies regularly win public tenders for the construction of roads and other infrastructure projects. Under the Public Procurement Law, a buyer must select a domestic supplier if the domestic supplier’s price is no more than 5% higher than a foreign supplier’s price. The Public Procurement Office, an independent state body, supervises implementation of the Law on Public Procurement. Serbia, not yet a member of the WTO, is not a party to the WTO’s Government Procurement Agreement.

Private enterprises have the same access to financing, land, and raw materials as SOEs, as well as the same tax burden and rebate policies. However, the IMF estimated that in 2014, SOEs enjoyed benefits amounting to approximately 2% of GDP.

The IMF has recommended that the government phase out support for SOEs. In 2016, Serbia committed to significantly reduce the fiscal cost of SOEs by curtailing direct and indirect subsidies, strictly limiting the issuance of new guarantees, and enhancing the accountability, transparency, and monitoring of SOEs. This goal remains a key element of Serbia’s current IMF program. The government decreased the level of quasi-fiscal support (issuing of new guarantees) from $860 million in 2016 to $110 million in 2020. In the latest IMF program, launched in June 2021, the IMF stressed the importance of advancing the SOE reform agenda, including improving corporate governance. Serbia, with EBRD support, adopted an action plan to implement a new ownership and governance strategy for SOEs in June 2021. The Action Plan is posted online at: https://privreda.gov.rs/lat/dokumenta/propisi/strategije/akcioni-plan-za-sprovodjenje-strategije-drzavnog-vlasnistva-i .

Investment Climate Statements
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