Weekly Briefing, Vol. 26, No. 2 (RS), February 2020
Serbia at the 50th World Economic Forum in Davos
Abstract
The 50th World Economic Forum annual meeting 2020 was an opportunity to promote Serbian economic openness and stability, as well as a favorable investment environment. Representatives of the state and business community invite international companies to invest in Serbia. They also raised issues of deadlock in the implementation of Siemens’ investment projects and continued talks on the opening of the Japan Bank for International Cooperation. Further steps have been identified towards establishing a Western Balkans Regional Center for the Fourth Industrial Revolution in Belgrade.
The 50th World Economic Forum (WEF) annual meeting was held on 21-24 January 2020 in Davos. Although the goal of the annual WEF meetings is the general overview of the current challenges of the world economy, it is at the same time and opportunity to hold private meetings about investing in the economies of the participating countries, and a chance for business deals.
Representatives of the state and business community from Serbia participated in the World Economic Forum for the 6th time. Due to the political instability that has been considered the main feature of Western Balkans for decades, it is very important for the Serbian economy to be well represented in Davos. This is an exceptional opportunity to promote economic openness and stability, as well as a very favorable investment environment, and to invite international companies to invest in Serbia.
Serbian President Aleksandar Vucic, Prime Minister Ana Brnabic and Veselin Jevrosimovic, president and owner of Comtrade Group and the only businessman from Serbia, have had a series of meetings with world officials and representatives of the world’s largest companies. Among the dozens of meetings, only a few can be singled out that could potentially have a real positive implication for the Serbian economy.
The meeting of Serbian Prime Minister Ana Brnabic with Deputy General Manager of Siemens Company, Roland Bush is potentially significant for the realization of the started Siemens projects. Siemens has been present and relatively active in Serbia since the mid-1990s. This company employs almost 2,000 people in Serbia, engaged in all areas where the parent company is active. Most of them are employed at the factory in Subotica, which produces wind power generators.
In 2018, Siemens expanded its activities in Serbia and announced additional investments. In the Sobovica industrial zone near the city of Kragujevac, Siemens has built a factory for the production of aluminum bodies for passenger coaches. The first deliveries of these products are intended for the Austrian railway. The investment was originally a purchase of the Milanovic Engineering plant, with its 500 workers remaining engaged in Siemens. The investor has so far built new halls at around 40,000 square meters, and the plan envisages that the facilities will extend to around 60,000 square meters. The investment began with the promise that the company would start manufacturing tram parts and that it would employ about 2,000 more workers in the newly built facilities. Siemens director for Serbia, Udo Eichlinger, announced last year that production of Avenio brand trams, as the final product, would start in 2020 and that the German city of Bremen had bought the first trams. Capacity-building activities are still ongoing and plans have only been partially implemented. The Serbian government is working intensively on this, so it can be assumed that the topic of talks in Davos of Serbian Prime Minister Ana Brnabic and Deputy General Manager of Siemens was the realization of these additional investments.
Another significant encounter the Serbian Prime Minister had with the governor of the Japan Bank for International Cooperation (JBIC) Tadashi Maeda. JBIC is a public financial institution and export credit agency, wholly owned by the Japanese government. It operates in 18 countries and provides significant financial support and security to Japanese companies operating in foreign countries.
Japan Bank for International Cooperation was interested in investing in Serbia, in particular for establishing an investment fund with the aim of improving economic cooperation between Serbia and Japan. The Davos meeting is a continuation of talks started during the three-day visit of Serbian PM to Japan, in October 2019. It was agreed that Governor Maeda would visit Belgrade soon, after which JBIC would open a representative office in Serbia. The exact date for his visit has not yet been defined.
Japan’s investments in Serbia are relatively small, so there was no initiative to open Japanese banks before. It seems that Japan’s investment policy has been changing over the last two years in the direction of expansion into the European markets. According to Satoshi Abe, General Director of the JETRO Vienna Office, during the last twenty years, the business activities of Japanese companies in Europe became sluggish compared to those in the U.S. and China, but now it seems that they again regard to the European market as being important. JETRO e.g. Japan External Trade Organization was an institution of key importance for the development of the Japanese industry during the 1980s, with a still crucial role in the Japanese economy. As Abe said in an interview with CORD magazine, in the future JETRO will be more active in “promotion of foreign investments from Japan and help for Japanese companies to find new suppliers in Serbia”. Abe estimates that the Serbian “automotive industry, IT industry and perhaps the agriculture sector have opportunities to work with Japanese company”.
Serbia has several significant investments from Japan. These are mainly investments in the manufacturing industry. The first and the major Japanese investor in Serbia was Japan Tobacco International (JTI) which opened a factory in Senta with $180 million investments in 2006. The next Japanese investment came only after 11 years when Yazaki Corporation, one of the biggest automotive suppliers in the world, invested in the new wiring harness plant in Šabac in 2017. The company currently employs 100-200 workers but has announced the expansion of as many as 1,700 new ones. The investments of Mayekawa Manufacturing Company, a manufacturer of industrial refrigeration systems in Smederevo followed in 2018, as well as Soft Road Apps, the IT Company in Belgrade. The opening of the Toyo Tires in India for 2020 was announced. An investment of about $ 400 million is planned and production is expected to begin in 2022. Indeed, as announced by Abe, investments by Japanese manufacturers have become more frequent and more extensive. The opening of Japan Bank for International Cooperation in Serbia confirms JETRO’s announcement of a future increase in investment inflows from Japan. Foreign banks generally do not bring benefits to the host countries, but the presence of JBIC will promote untrusted Japanese companies to invest in doing business in Serbia.
The next important event for Serbia in Davos is not related to foreign investments, but to the deeper involvement of Serbia in the activities of the World Economic Forum. Namely, on the meeting of WEF dedicated to the Western Balkan countries, in Geneva on November 8, 2019, it was announced that the Western Balkans will launch a regional Centre for the Fourth Industrial Revolution in the region, open to the neighboring countries. The Centre will work “on agile governance of data policy, artificial intelligence and Internet of Things, robotics and smart cities”, as published in a report from this meeting on the WEF website. This meeting did not announce which of the Western Balkan countries will be the regional center. In Davos on January 23, 2020, Prime Minister Brnabic told the press that at the panel dedicated to the Fourth Industrial Revolution and Development “great attention was paid to the fact that the WEF has decided to open the regional center for the Fourth Industrial Revolution in Serbia”. On the same occasion, Serbian PM had a meeting with Martina Larkin, Head of Europe and Eurasia, Member of the Executive Committee of the WEF. They discussed the details of establishing a future regional center in Belgrade. Brnabic indicated that the opening of the regional center could come as early as February.
What does this mean for the Serbian economy? Generally, centers for the Fourth Industrial Revolution aim to maximize the benefits of science and technology for society. The pilot, tests, and iterates innovative policy frameworks with governments, global business leaders, international organizations, experts, and civil society. Artificial intelligence and the Internet of Things are some of the emerging technologies which WEF regional centers tend to apply in the economy and society. The implementation of these initiatives, with the assistance of WEF, would contribute to the transformation of the way of business, technological advancement of production and improvement of Serbia’s business image.
Serbian PM also met with representatives of the company Philips, which is not yet present in Serbia, with the President of the European Research Council, as with the Prime Minister of the Netherlands. Each of these meetings had an economic context, but the directions for the future development of these economic relations remain undefined.
Conclusions
Serbia’s participation in the annual meeting of the World Economic Forum in Davos 2020 can be considered relatively successful. The government and the Prime Minister of Serbia had a clear strategy for participation in the meeting. The topics of realization of the started and announced foreign investments were encouraged and the details of the formation of the Regional Center for the Fourth Industrial Revolution in Belgrade were elaborated. Initiatives for new jobs and projects were also initiated by the Prime Minister and representatives of the Serbian business sector, but the results of these negotiations seem to have been lacking.