ECONOMIC CRISIS: ECONOMIC CRISIS:

IMPACTS AND IMPACTS AND RESPONSES BY THE RESPONSES BY THE

BUSINESS COMMUNITYBUSINESS COMMUNITY

Kiev, June, 2009Kiev, June, 2009

NALED was established in March 2006 NALED was established in March 2006 at the at the initiative of USAID/MEGA program as a unique initiative of USAID/MEGA program as a unique body that blends the influences of public, private body that blends the influences of public, private and civil sector in Serbiaand civil sector in Serbia..

President Tadic and Michael Polt signing NALED President Tadic and Michael Polt signing NALED declarationdeclaration

MISSIONMISSION

The primary mission of NALED is to The primary mission of NALED is to facilitate dialogue between local and facilitate dialogue between local and central government, institutions and central government, institutions and the private sector and thus create the private sector and thus create enabling environment for the growth enabling environment for the growth of business community in Serbia, of business community in Serbia, increased investments and enhanced increased investments and enhanced economic development.economic development.

STRATEGIC GOALS OF THE ALLIANCESTRATEGIC GOALS OF THE ALLIANCE

II Promote legal reforms that support Promote legal reforms that support local economic local economic development development

IIII Create an enabling environment for Create an enabling environment for investments and investments and business developmentbusiness development

IIIIII EstablishEstablish dialogue between private, dialogue between private, public and NGO public and NGO sectorsector

IVIV Strengthen municipal capacities Strengthen municipal capacities through training through training aand consulting servicesnd consulting services

VV Public private partnershipsPublic private partnerships

MYTH # 1: DONOR-DRIVEN MYTH # 1: DONOR-DRIVEN ORGANIZATIONS CANNOT BECOME ORGANIZATIONS CANNOT BECOME SUSTAINABLESUSTAINABLE

• 90 MEMBERS90 MEMBERS

• INDEPENDENT OPERATIONSINDEPENDENT OPERATIONS

• MEMBERSHIP FEES = OPERATIONAL COSTSMEMBERSHIP FEES = OPERATIONAL COSTS

MYTH # 2: THERE IS NO CRISISMYTH # 2: THERE IS NO CRISIS

• OVERLY OPTIMISTIC BUDGET PROJECTIONSOVERLY OPTIMISTIC BUDGET PROJECTIONS

• NO PREPARATORY ACTIVITIESNO PREPARATORY ACTIVITIES

• LACK OF INSTITUTIONAL RESPONSELACK OF INSTITUTIONAL RESPONSE

GlobalGlobaleconomyeconomy

Crisis Crisis detectiondetection

AnaAnalyses & lyses & discussiondiscussion

of adequate of adequate measuresmeasures

First First reactions & reactions & mitigation mitigation measuresmeasures

Review of effectsReview of effects

Responses and reactions to global financial crisisResponses and reactions to global financial crisis

IV Q 07IV Q 07 IV Q 08IV Q 08I Q 08I Q 08 II Q 08II Q 08 I Q 09I Q 09III Q 08III Q 08

Serbian Serbian economyeconomy

Following global trends and Following global trends and interpreting crisis as an investmentinterpreting crisis as an investment

opportunity for Serbian economyopportunity for Serbian economy

Detection of Detection of crisis in Serbiacrisis in Serbia

Delivery of initial Delivery of initial assistance measuresassistance measures

SerbianSerbianagriculturagricultur

ee

Seeing a chance for Serbian Seeing a chance for Serbian AgricultureAgriculture

Lack of interest to analyze and prevent Lack of interest to analyze and prevent effects of the crisis, followed by overlyeffects of the crisis, followed by overly

optimistic projections for Ag sectoroptimistic projections for Ag sector

MYTH # 3: CRISIS WILL AVOID MYTH # 3: CRISIS WILL AVOID SERBIASERBIA

• CRISIS AS MODUS OPERANDI CRISIS AS MODUS OPERANDI

• CRISIS AS A WINDOW OF OPPORTUNITYCRISIS AS A WINDOW OF OPPORTUNITY

• SERBIA TO EMERGE VICTORIOUSSERBIA TO EMERGE VICTORIOUS

MYTH # 4: CRISIS EFFECTSMYTH # 4: CRISIS EFFECTS • GLOBAL EFFECTS vs. LOCAL GLOBAL EFFECTS vs. LOCAL CONSEQUENCESCONSEQUENCES• UnemploymentUnemployment• Less FDILess FDI• Lack of financingLack of financing

• CRISIS – good excuseCRISIS – good excuse – – top prioritytop priority

CROSS-CUTTING EFFECTS

Favoritism in policy responseLower demandDrop in production Decreased buyer financingTightened credit for producers Growing unemployment Falling asset pricesDelayed reforms and EU integrationProtectionism

Lower credit Lower credit capacitycapacity

Drop in Drop in available inputsavailable inputs

Less profitLess profit Drop in Drop in productionproduction

Drop inDrop inconsumptionconsumption

Decreased Decreased financingfinancing

IncreasedIncreasedpricesprices

Drop in pricesDrop in prices Decreased Decreased competitivenesscompetitiveness

NALED-REPORTED EFFECTS

NEGATIVE :

Increased taxes on deed contractsIncreased local fees and taxes imposed on businessesCut in intergovernmental transfersDrop in project activities (donor and business driven)Default clients and deferred payments

NALED-REPORTED EFFECTS

POSITIVE:

New mechanisms of financingLess local and central government employeesResponsible and cost-saving behavior Regional alliancesPublic private partnership

MYTH # 5: CRISIS IS MYTH # 5: CRISIS IS RESPONSIBILITY OF THE RESPONSIBILITY OF THE GOVERNMENTGOVERNMENT

• TRUE! TRUE! But no government can do it aloneBut no government can do it alone

• LOCAL AND REGIONAL STRATEGIESLOCAL AND REGIONAL STRATEGIES

• SUPPORT FROM PRIVATE AND CIVIL SUPPORT FROM PRIVATE AND CIVIL SECTORSECTOR

PROPOSED GOVERNMENT MEASURES

Deliver information about the depth of the crisis Deliver information about the depth of the crisis and its effects, Offer exit and mitigation and its effects, Offer exit and mitigation strategiesstrategiesFollow consistent and foreseeable policy Follow consistent and foreseeable policy approachapproachStimulate borrowing for productionStimulate borrowing for productionProvide budget subsidies and investment supportProvide budget subsidies and investment supportDelay the drop in FDIDelay the drop in FDIFacilitate access to donor fundsFacilitate access to donor fundsDevelop capacity for IPA fundingDevelop capacity for IPA funding

NALED – RESPONSE TO THE CRISIS

1.DIRECT

Partnership with the governmentSupport in delivery of mitigation measures

2. INDIRECT

Business-government encountersBusiness Friendly CertificationOut of the Maze

Certification of Business Friendly Municipalities

Partners:USAID, Ministry of economy, SIEPA,Provincial Secretariat for local government

Municipalities in evaluation process:Vranje, Subotica, Prokuplje,Uzice, Leskovac

Status:Three holders of certificates: Loznica, Kragujevac, Indjija

DetaDetailed analysisiled analysisof local governmentsof local governments

Input by the Input by the business communitybusiness community

COUNTER THE CRISIS!COUNTER THE CRISIS!

Out of the MazeOut of the MazePartners

GoalCut red tape in Serbia

NALED’s GREY BOOK as a guide with proposed recommendations for removal of administrative barriers for business development in Serbia.

ResultsOne-stop shop for business registration

OUT OF THE CRISIS MAZEOUT OF THE CRISIS MAZE

Dialogue between public and private sector. Regulatory reform.Good governance.

NALEDNALEDZetska 4a/2Zetska 4a/2, 11000 Belgrade, 11000 Belgrade

T: +381 11 334 7634T: +381 11 334 7634F: +381 11 334 7614F: +381 11 334 7614

naled@naled-serbia.org