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This is an archived USAID document retained on this web site as a matter of public record.
DIALOGUE
In this section:
Mission of the Month: Serbia and Montenegro
Notes from Natsios
Mission of the Month: Serbia and Montenegro
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Srdjan Marinkovic, a resident of the central Serbian
city of Jagodina, finishes a piece of window glass on
equipment he obtained through one of 600 USAID-funded
microgrants available to small-business entrepreneurs
in the region.
Jasmina Mladenovic, ACDI/VOCA |
CHALLENGE
The former Yugoslavia long steered a path between the Warsaw
Pact nations and the West. In the early 1990s, the federation
unraveled. The Yugoslav wars between 1991 and 2001 affected
all of the six former republics. Serbia, led by President
Slobodan Milosevic, attempted to unite ethnic Serbs in Croatia,
Bosnia, and the Kosovo territory to create a “Greater
Serbia.” The result was Yugoslavia’s breakup, with
Slovenia, Croatia, Macedonia, and Bosnia and Herzegovina all
now recognized as independent countries.
The wars left much of the former Yugoslavia in poverty,
with massive economic disruption and persistent instability
across territories where the worst fighting occurred. Serbia’s
President Slobodan Milosevic was ousted in 2000 and now faces
war crime charges at The Hague’s International Criminal
Tribunal.
Svetozar Marovic was elected president of the State Union
of Serbia and Montenegro in 2003, which today aims to join
the European Union (EU). Among the federation’s significant
obstacles to joining the EU were outdated business regulations
and a stagnant business climate.
USAID RESPONSE
When the new government came to power in 2001, it began
working with USAID on a series of targeted emergency initiatives
aimed at strengthening the banking and financial systems before
focusing on building up the private sector.
USAID helped Serbia draft and enact pro-business reform
and other laws that make business more transparent and accountable.
The Agency also worked on a tax reform project to reduce Serbia’s
dependence on indirect taxes and steer it toward raising income
from a value-added tax, a prerequisite for EU accession and
an important revenue generator.
Through another project, businesses were helped to speak with
a common voice about labor issues, making hiring more flexible
to meet the employer’s needs while also creating new
jobs.
To further encourage growth, businesses and local governments
in four regions created business improvement districts. The
concept, originating in the United States, is typically successful
at improving the conditions for business development, reducing
real estate vacancy rates, increasing property values, and
creating jobs.
One hurdle facing potential entrepreneurs has always been
the length of time it took to obtain a business license. So
the Serbian Business Registry Agency was created. It took
over registration of businesses from the commercial courts.
Computers and software were provided to the new agency. At
the municipal level, it also created information and one-stop
shops, where citizens can obtain documents such as construction
and business permits faster than before.
U.S. loans and advice were provided to startup ventures
through microloan and community revitalization projects. A
credit fair was organized so entrepreneurs could seek counsel
and help from major business institutions.
In Montenegro, the republican government designed and is
carrying out a far-reaching economic reform agenda aimed at
building an open market economy, based on private property
and protection of property rights and contracts. Laws on bankruptcy,
business organization, and mortgages have been enacted and
are now being implemented, with U.S. technical assistance.
USAID has also supported Montenegro’s businesses to
unite into an association that can lobby the government for
pro-business reforms and create a healthier environment that
might attract foreign investors.
RESULTS
Serbia’s business environment has flourished, and
the World Bank’s Doing Business in 2006 report
recognized this by naming the country this year’s leading
performer.
Starting a business in Serbia now takes 15 days, not 51
as before, thanks to the creation of the Serbian Business
Registry Agency. The new entity has also improved corporate
governance and transparency through its computerized and accessible
databases of company structures, founders, directors, and
key financial information.
More businesses are starting up—between January and
October more than 8,100 new businesses registered, an increase
from 6,329 for all of calendar year 2004.
“The system has changed. We have electronic mail and
computers. Our clients get all information immediately, and
their requests are resolved in one place,” said Bojan
Radic, an employee at the municipal one-stop shop in Zrenjanin,
one of 23 such entities.
Business creation is also easier because of loans and other
U.S. aid.
Gordana Milankovic, a footwear designer and refugee from
Croatia, lives in Serbia with her mother and grandmother and
has sought different jobs. Last year, she got a U.S. loan
and started her own business.
“It is difficult for a person to start a business,”
she said. “The machines and equipment are very expensive.
I needed a few sewing machines to help me work faster.”
Entrepreneurs in Krusevac are getting help through the business
improvement district. Property values there have jumped from
about $600 to $700 per square meter. Residential prices have
risen too.
Serbia now also has a labor law that the World Bank says
encourages economic growth. The law makes it easier to hire
workers by allowing firms to offer term contracts, rather
than having to hire under indefinite contracts even when addressing
temporary needs. Commercial court reforms have reduced the
enforcement waiting period on business contracts from 1028
to 635 days.
In Montenegro, corporate tax has been reduced from 15 to
9 percent, the lowest corporate tax rate in Europe. And the
business organization law lets entrepreneurs get started in
just four days, at the cost of about $15.
Notes from Natsios
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Andrew Natsios
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For nearly the past five years, I have had the distinct privilege
of serving the president with you. I returned to USAID in
March 2001 believing that the work that we would do is perhaps
the most important work that the U.S. Government does. This
has become especially true, given the challenges presented
by the newly emerging world order.
As I began, I knew what I wanted to achieve in transforming
both USAID as an institution and development as a discipline.
Together, we have taken the challenges presented to us, and
we have made an impact that will be recognized for generations
to come.
First, we have broadened and changed the discipline of development,
and in doing so elevated its importance. We recognized that
it is not enough for us to simply deliver services, but that
we must change the cultures and build the institutions which
lead to growth and sustainability. To achieve this, we distinguished
between strengthening fragile states and promoting transformational
development. We encouraged transformation by linking private
foreign assistance with our own resources—through the
Global Development Alliance, where we have invested $1.1 billion
and nontraditional partners have invested $3.7 billion through
290 alliances. In fragile states, you courageously engaged,
alongside our military and diplomatic colleagues, in some
of the most difficult development contexts—Iraq, Afghanistan,
and Sudan.
Second, we have built this Agency into one of the most effective
and efficient organizations in the federal government. We
realigned the Agency’s mission and overhauled its structure
to confront national security threats. Policy and strategy
are being implemented through our budgeting system, and programming
has remained decentralized through our field missions. The
modernization of Agency business systems—financial management,
procurement, and information systems—has resulted in
three years of unqualified audits and receipt of the first
and only “A+” for computer security in the federal
government, among many other achievements. USAID can deliver
what is asked of it.
Finally, we are communicating what we do more clearly and
more aggressively. Our branding and communication campaign
is a worldwide success, and is giving credit to the American
people for our programs.
Within the U.S. Government, we have earned “a seat
at the table,” and are today engaged with our interagency
partners on both crucial national security and development
matters. People have begun to understand the vital role that
USAID plays in securing freedom for people around the world.
During my time here, I have found that when people in the
United States truly understand what we do, they are in awe.
The biggest ongoing challenge we face is the absence of a
real understanding, within the Beltway and in the United States
generally, of what it means to run international development
programs under very challenging circumstances around the world.
My next position presents me with a singular opportunity
to explain how we do successful development. To do this in
conjunction with training the next generation of development
professionals has long been an interest of mine, and so this
was an opportunity that I could not pass up.
It has been my privilege to serve with you.
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