Newsletter, Jan, 2012
Sector Close Up
Machinery and Equipment
Source: Econom:east
The machinery and equipment industry in Serbia is still in development and constant changes on the list can be expected in the future. With reason, a lot is expected from this sector in the future, bearing in mind tradition, significance, publicized investments and government activities aimed at attracting the new ones.
The machines and equipment sector, due to the multiple effects it has on the rest of the economy, particularly its export orientation and the significance of the automobile and electronic industry in the world today, is a pillar of every economy.
The global financial crisis from 2009 has seriously shaken this sector, but Serbia is gradually showing some positive signs. This industry has also been globally affected by the crisis, which has led to a decrease in revenues and, consequently, the consolidation of the sector. Recovery is still slow, but on healthier basis and with positive perspectives.
The machines and equipment sector in Serbia is heterogenic and can be divided into several sub-sectors. The automobile production sub-sector should become one of the largest generators of future economic development in Serbia. A lot is expected from Fiat's investments. Fiat Automobiles Serbia, became the sector's leader over a short period, with revenues higher than €100 million. The company even posted a profit, which is specifically a result of the fact that revenues of more than 1.2 billion dinars were posted on the basis of State subsidies for the purchase of new vehicles. Among companies from this sub-sector, the list also includes Gosa FSV, IMT under restructuring and Group Zastava Vehicles under restructuring. In 2008, Gosa began to take off after initial investments of its new owner from Slovakia, but the crisis shook the production of railway vehicles greatly, for which revenues expressed in euros almost halved. Recovery of the Engine and Tractor Industry would be of high significance for Serbia's economy, but the expected appearance of a foreign partner, restructuring and integrating with another producer, the Engine Industry Rakovica, have been postponed indefinitely. The equipment and devices production sub-sector posted much better results. The investment of Slovenia's Gorenje in Serbia started showing good results, and this company has improved with constant growth of revenues and profitability. Besides Gorenje, the other two representatives of this sub-sector, with major Serbian capital - Alfa Plam and Galeb Group - continue to post good results, although with stagnation or a decline in revenues, but with a growth of profitability measured by the EBITDA margin.
The industrial equipment and machines production sub-sector is the largest with five companies, including Termoelektro, which is more oriented to construction and engineering of industrial equipment, but is classified in this group due to its connection with industrial equipment. Kolubara Metal is not the sector leader any more, and its losses are higher and higher. The enterprise will have to restructure its operations to a great extent in order to restore stability. This is of special importance, given that large investments are expected in Serbia's energy sector in the future, as well as that there is market space for this company. The company ATB Sever is in a similar situation.
The arms and ammunition production sub-sector has lately been given more significance, showing the ambition to achieve the results of the former defense industry of Serbia. Growth of this subsector is particularly the result of contracted export jobs, with a tendency to continue with a positive trend. Both companies on the list, Prvi Partizan and Holding Corporation Krusik, have a good tradition, but the upcoming period will show whether they are on the road of long-term recovery. Further strengthening of these companies and particularly by joining with companies from its sub-sectors, the machines and equipment sector could actually become the main engine of Serbia's economic development, especially through its contribution to the development of export activities.
Q & A
Andzej Schafernaker, Team Leader of SECEP
1. EU funded Support to Enterprise Competitiveness and Export Promotion project supports the development of a market economy and socio-economic cohesion in Serbia by improving the international competitiveness and export performance of SMEs. After 3 years of SECEP existence, what are your overall impressions?
First of all, I would like to emphasize that competitiveness is a complex concept that integrates many socio-economic factors which go well beyond the boundaries of our Project and its timeline. Our project has been focused only on some of those factors that primarily contribute to enterprise-level competitiveness, such as the degree of local supply chain development and inter-firm collaboration. My overall impression is that there is a lot of potential within Serbian industry, but unlocking this potential is a major challenge, especially in the current economic climate.
Management and workforce need to be able to focus on business improvement without the constant worry of surviving from one month to the next. We have found that whilst enterprise owners are ready to recognize weaknesses, they frequently lack the resources to implement the essential improvements. Secondly, there is strength in numbers and many issues could be better tackled through inter-firm collaboration. This is why the Project has supported clustering. Thirdly, Serbia is a small country, with a small market. Serbian companies will become more successful if they focus more on inter-firm regional collaboration and South East Europe's regional markets, which as a whole is sufficiently large. CEFTA is important but there are great opportunities to be had from collaboration with other countries in the region. A fourth observation, is the lack of collaboration between industry and academia, something which is now taken for granted in developed economies, since this plays a major role in enabling innovation, and you have to be innovative to be competitive.
2. What would you emphasize as your greatest results and how would you evaluate your cooperation with SIEPA?
SECEP is very pleased with its cooperation with SIEPA. On an operational level, SIEPA has probably been our closest partner in activities related to supplier and exporter development respectively. It has worked with us very closely in the organization and delivery of the Meet the Buyer events, and, in particular, played a key role in making the 4th and last one a great success in terms of international ‘reach' and numbers of participants that will continue to develop the embryonic commercial relationships that were established as a result of this B2B forum.
We believe that there are some excellent results in cluster development. For example, we are very happy with the development of the Serbian Furniture Cluster. It is a start-up cluster, and its members' commitment was demonstrated by how firms collaborated in producing a designer furniture collection, which they funded with their own funds. It is a great example of product and process innovation. The FACTS (Serbian Fashion & Apparel Cluster ) is another example of a cluster with great potential, whose members include important Serbian exporters, which has already achieved considerable benefits for its companies. Altogether, SECEP helped establish 4 new clusters, all of which have the potential of playing an important role in the development of their industries.
In supplier development, we were able to deliver substantial and highly relevant consulting support to 50 SME's. Several of the participating companies have managed to quickly use the advice to achieve significant changes in their organizational structures, sales and marketing strategies and production cycle effectiveness. The project intends to publicize some of these success stories in the hope that they will inspire other SMEs to adopt the techniques and business models give that they are low-cost, quick-win approaches. Without doubt, all four Meet the Buyer events were a major success.
The work we did in internationalization has also produced solid results. For example, the Nis based mechatronics cluster, NiCAT, is now collaborating with the Bulgarian mechatronics cluster. Another notable achievement should be the formation of the Serbian Exporters Association, whose future members have being receiving association development advice and support from SECEP.
3. For the last 2 years, together with the Serbian partner organizations, SECEP organized 4 Meet the Buyer events. Among them, the last one "Serbia Open 4 Business" has been recognized as the most successful. Are you satisfied with the results?
The 4th Meet the Buyer was unique in many respects. Firstly, we used a B2B website to promote the event, register participants' details, and enable them to contact one another to arrange meetings on the day of the event. It was a huge success that eliminated the administrative burden of matching companies. We were also successful in attracting a large number of foreign buyers who had not done business in Serbia before. We had buyers from as far away as Russia and Ireland. In fact only about 20% of the participating buyers were companies that were already doing business in Serbia. Whilst the event was mainly a meeting place between foreign buyers and Serbian sellers, a large number of Serbian companies decided to take advantage of the event to hold meetings between themselves. So, overall, the event was a great success! It usually takes time for B2B meetings to lead to deals between the companies and SIEPA will be monitoring this in the coming months.
4. Since SECEP project came to an end, what would be your advice for Serbian export-oriented companies?
Though most of Europe is in economic crisis, there are still market opportunities for Serbian firms that can supply high-value added products and services at competitive prices. Tool making and manufacture of complex components are examples where Serbian SMEs can leverage their cost advantage and provide a high quality product that meets the exacting standards of international customers.
My advice for export oriented companies is to seek business partnerships in the region and to strive to become competitive in the South East European regional markets. They are large enough as a whole to result in economies of scale and reduce unit prices. The preliminary findings of the Import Substitution Study we are carrying out is that meeting quality requirements is less of an obstacle than achieving competitive pricing and the volume/delivery deadlines stipulated by customers.
Finally, we would encourage companies to collaborate when tackling foreign markets. It is much easier to research markets and explore how to enter them with other companies having similar interests. We believe that the Serbian Exporters Association will be an excellent platform to enable this, as well as to tackle administrative obstacles in Serbia's business environment.
Monthly Reporting
Strong FDI Figures
Since the onset of economic reforms, Serbia has grown into one of the premier investment locations in Central and Eastern Europe. A list of leading foreign investors is topped by world-class companies and banks such as FIAT, Telenor, Stada, US Steel, Michelin, Gazprom, Siemens, Intesa Sanpaolo and many others.
Serbia's strong FDI track-record is substantiated by internationally recognized awards for local Greenfield investors. Between 2004 and 2006, Greenfield projects in Serbia were awarded by OECD as the largest investments of this type in South East Europe. The first Award was presented to Ball Packaging Europe (headquartered in USA), followed by METRO Cash & Carry (Germany), and Israeli Africa-Israel Corporation/Tidhar Group for their Airport City Belgrade real estate project.
FDI BY COUNTRIES
In terms of the country structure, investors from the European Union top the list, accounting for about 70% of the total FDI influx. The leading spot on the country list is held by Austria, followed by Greece, Norway, the Netherlands and Germany, while major investor countries also include Italy, Slovenia, the Russian Federation, France and Luxembourg.
The actual amount of U.S. investment is significantly higher than the official figure due to their companies investing primarily through European affiliates. This also holds for Belgium, Denmark, Israel, and a number of other countries.
FDI BY INDUSTRIES
Over the past six years, service sectors have proven to be the most attractive to international investors. Banking and insurance recorded the largest FDI inflow of $5.8 billion. Manufacturing industries held the 2nd spot with $3.9 billion, followed by real estate and renting, transport and telecommunications and trade.
Arts & Entertainment
European Men's Handball Championship
The 2012 EHF European Men's Handball Championship (10th tournament) will be held in Serbia from 15-29 January. Sixteen national teams will play in five halls in four cities across Serbia: Belgrade, Nis, Novi Sad, and Vrsac. Apart from enjoying excellent handball matches, this is a great opportunity to get to know some other citites in Serbia.
More info: www.arenabeograd.com
Glenn Miller Orchestra
On the 18th of January in the Great Hall of Sava Center Glenn Miller Orchestra will traditionaly perform for Belgrade audiance. Glenn Miller Orchestra is the most popular big band in the world today for both concert and swing dance engagements. With its unique jazz sound, the Glenn Miller Orchestra is considered to be one of the greatest bands of all time. The present Glenn Miller Orchestra was formed in 1956 and has been touring consistently since, playing an average of 300 live dates a year all around the world.
More info: www.savacentar.com
The Other Home
Andrzej Schafernaker, SECEP
I have been in Belgrade since January 2010 due to my job. Belgrade is a pleasant place to live in. I have met some really nice people here and enjoyed spending time with them!
Compared to other cities in SEE, Belgrade is a grand city. It really feels like a capital. It generally has a good infrastructure, shops, entertainment. Probably one of the things that makes it stand out is that in the center you are never far away from a cafe, restaurant, pub or night club. My favorite dinning place was a vegetarian restaurant Everest but there are many places I loved to go to, the Kalemegdan Park and the waterfront being amongst them.
Belgrade is definitely worth visiting and Serbia is a beautiful country. Travelling around is sometimes a challenge since not all roads are as good as the motorway from, say, Belgrade to Nis, but it is worth making the journeys, North, South, East and West.
Must See
Old Mountain Ski Resort
Serbia is richer for one more ski resort. The newly opened Old Mountain Ski Center is already attracting a number of lovers of good skiing and snow sport activities. The Center is located 1,350 meters above sea level and it is covered with snow for about five months a year. The first and only gondola lift in Serbia for transport of skiers, artificial snow, 13 km of ski trails and a brand new hotel with 146 rooms, wellness&spa are surely good enough reasons to visit this beauty from Eastern Serbia. Once you get tired of skiing, there is an archeological site Timacum Minus near the resort as well as several medieval monasteries nearby.
More info: www.hotelstaraplanina.com