Ingeborg Ofsthus, Foreign Investors Council Vice President – There is a long road ahead of us

Foreign investors remain cautiously optimistic following the presentation of the latest issue of the White Book. In the upcoming period, a lot is expected from the joint Task Force of the FIC and the Government of Serbia, established in early 2017.

Ingeborg Ofsthus, FIC Vice President and CEO of Telenor Serbia, talks in her interview for eKapija about the progress made, but also about the reforms, which are “not welcome by everybody”.

eKapija: Serbia achieved progress in one third of proposals that the FIC stated in its White Book in last year. According to your opinion, can we be satisfied?

– From FIC perspective I think we can, having in mind all the efforts of our newly formed Task Force. It is a new format of dialogue between FIC and Government, established after the presentation of previous White Book. Our ambition is high, since the goal of the Task Force is to improve implementation of FIC White Book recommendations and achieve 50% progress on annual basis, instead of previous average of 35-45%. And we are always cautiously optimists, as this positive attitude is crucial if we want to push things forward.

eKapija: As a key message, at the White Book launch event, it was emphasized that reforms must be accelerated. What are your expectations in that regard? Why does Serbia lack “acceleration’’?

– We expect the acceleration of reforms, as we believe it would stimulate economic growth. In other words, reforms are driving the growth. And there are three main areas where we would like to see the acceleration in the upcoming period: we need to continue fiscal consolidation (structural reforms, especially privatization and corporatization of state-owned enterprises), to improve law implementation and implementation of reforms and, at the end, to continue EU accession process. On the other hand, what we see as main elements that stall down reforms are the complexity of their designing and executing and social sensitivities that are linked to them. Further on, we need time & funds to create administrative and institutional capacity to implement new laws. This includes strengthening of institutions and improvements of knowledge and skills of public servants.

Reforms are not welcome by everybody. There are groups that might lose something in the process. That is why there is a need for further education and awareness about their importance. There is a long road ahead of us.

eKapija: According to recently presented results, the biggest progress was marked in 4 fields in relation to last year’s recommendations - construction land and development, protection of users of financial services, transport, and tobacco. What has contributed the most to the progress in each of these fields?

– Talking about construction land, we see the biggest progress in conversion and construction permitting. Also, significant steps were made when it comes to building consumer awareness of protection of users of financial services and adoption of by-laws. In terms of transport, investing in modernization of infrastructure and maintenance of existing one were done, while in tobacco industry, we witnessed the adoption of a multi-year excise plan and good results in fighting illicit trade.

eKapija: The latest White Book also revealed 4 issues which should be urgently resolved in Serbia, according to foreign investors – company law, corporate income tax, restitution, and quality standards in milk production. What are key expectations in these 4 fields for 2018?

– Let me start with the Company Law. Our key recommendation is that limited liability partnerships (LLPs) should be expressly permitted. Also, we need to eliminate inconsistencies and provide clear procedures and competencies. It is necessary to precisely regulate increasing share capital through debt-to-equity swap and to align the Company Law with the Law on Contracts and Torts regarding limitations to the authority of a company’s representatives. As for corporate income tax law, we need to adopt definition of royalties for withholding tax purposes in line with international best practices, introduce monthly or quarterly tax filings and clarify the method of calculation and recognition of tax depreciation cost for the first group of fixed assets.

When we talk about restitution, FIC has two key proposals: the state should lead transparent restitution procedures and ensure that the acquired rights of foreign investors are protected, while enabling foreign nationals to exercise the right to restitution, equating them with Serbian nationals.

Our key expectations on quality standards in milk production are to have operational, fully independent, properly staffed, and technically equipped National Reference Laboratory, lower and more affordable current price of raw milk testing and farm registration procedure should be simplified and made efficient, as registration is needed for exports to the EU.

eKapija: Although real-estate was marked with positive grade, due to introduction of unified procedure and e-platform, restitution and conversion issue are still “hot” obstacles. Can Serbia cope with the restitution burden and what is the right recipe on that path?

– We believe so. For restitution, transparency and protection of rights are key words. It is also important to ensure that restitution does not automatically suspend conversion, except in case of public or state-owned company and to remove inconsistencies in the calculation of the conversion fee which hamper future investments.

(Photo: Syda Productions/shutterstock.com)

eKapija: According to foreign investors’ view, what does Serbia have to do regarding the Labour Law next year?

– Labour Law was amended in 2014 and since then, we were in reforms standstill. What still needs to be regulated is staff leasing. And it is something we have already talked about a lot in the public. There are other proposals, such as that salary compensation during leave should be equal to the amount of the base salary increased by seniority. Also, complex model of calculation of salaries should be simplified. Last, but not least, to treat compensation for unused annual leave as damage compensation, not salary.

eKapija: What do we need regarding changes of Law on Strikes? Can the interests of investors and workers be reconciled?

– We in FIC strongly believe that dialogue is the way to go and that the first step in resolution of issues that led to strikes is to sit and talk. Strikes do not contribute to the joint efforts of all stakeholders towards creating better, simpler and more attractive business environment in Serbia. On the contrary, they create disruption on the market and jeopardize much needed predictability of the business environment.

We are proud that our member companies are among best employers on the Serbian market since employees are protected, taxes are being regularly paid and through various CSR projects invested into local communities. FIC member companies are always ready and open to talk to their employees in finding the best possible solutions for the problems, respecting both relevant regulation and mutual interests.

eKapija: What are expectations of joint Task Force of FIC and Serbian Government for the next period?

– We strongly believe in Task Force, as it is arena for a close dialogue. We expect it to become a vehicle for accelerating reforms, both in terms of further harmonization of laws with EU and fostering better law implementation. FIC prepared a proposal of the work plan concentrating on 7 key areas and dominantly suggesting activities which can be swiftly executed, mainly by changing of ministry opinions or GoV decisions. These areas are: taxes, labour, inspections & food safety, real-estate, digitalization &e-commerce, bankruptcy and Forex. Once these activities are finalized, we plan to move on to another set of activities in the same areas, making Serbia more attractive place to invest. We believe that, by working together, both FIC and Government through our Task Force, we can make it happen.

M.M.

FIC - Savet stranih investitora

Vlada Republike Srbije

Foreign Investors Council

FIC

Government of Serbia

White Book

White Book 2017

White Book 2016

Ingeborg Ofsthus

foreign investors in Serbia

EU membership of Serbia

joining of Serbia to the European Union

fiscal consolidation

tobacco industry

cigarette smuggling

tobacco smuggling

illegal cigarette trade

excise plan

tobacco excise tax

cigarette excise tax

restitution

conversion

corporate income tax

Company Law

Law on Contracts and Torts

Labor Law

limited liability partnerships

debt to equity swap

tax amortization

National Reference Laboratory

price of milk

milk control

milk testing

farm registration

renting workforce

renting workers

leasing workers

leasing workforce

compensation for unused annual leave

Law on Strike

strike

strikes