Donnerstag, 27. März 2014

The approach to attracting foreign investors in Serbia

The rant

Yesterday, ten days since historic elections, and still around a month from the formation of the new government of Serbia, news were refreshingly low key after a campaign that was all over the ether and the internet. We are, however, still not blessed with news devoid of talk of foreign investment and ways in which Serbia is exuding efforts in attracting them. The gem of the day that triggered me into writing this piece was the conspicuous Russian investment (term used very loosely) in Serbian railroads. Our Russian partners are willing to invest in a whole new line, parallel to the existing one, leading from Belgrade to Pancevo, not even full 20km from the Serbian capital. Also conspicuously, Serbian president Nikolic and incumbent PM Dacic were there to show support for the project and esteem for the Russian investors/creditors. Interestingly enough, the reports of this significant event are missing from B92 or Blic websites, probably due to higher importance of other news, such as the arrest of SIEPA directors and one former minister for reasons of poorly-hidden corruption. Luckily, we have RTS to provide us with an article on the event.

Among the messages heard in the address of the president, he pointed to the chance for Serbia to raise itself from "a decade of stagnation". If I am interpreting this correctly, in the decade before previous, Serbia was prosperous. So, it is only during the rule of the "democrats" that Serbia reached its most disastrous economic moments. And presumably, in the coming decade of "progressive" rule, Serbia will prosper. Likely, because we have Russia to rely on for loans such as this one. Somehow, I remember things differently. Maybe the president is confusing his own prosperity during the 1990s with the misery of the majority of the people that occurred at the same time. Not everyone got massive apartments from the state.

But, I was most irritated by the reporting on RTS, during the "Beogradska hronika", a daily show that deals with all things Belgrade. The reporter from Pancevo, presumably a local, was glad to report that new trains will race at currently unimaginable 120km/h between Belgrade and Pancevo. This is after the bridge on Danube is strengthened and the new line is completed. So, in several years' time, at least. I couldn't stop from wondering how and where exactly will this new, probably Russian train, on new "Russian" tracks, achieve this speed? It is only 19km between Belgade and Pancevo, even less when you take out the bridge and all the turns, and I'm too lazy to calculate the acceleration and actual gains in saved time, but really, who can explain the massive time saving benefits of this project to me?

Another thing that the reporter mentioned, his comment on the benefit the city of Pancevo will gain from the project. He ended his report with remarks that not only will the new tracks connect Pancevo with the rest of the world and serve as a lure for fresh foreign investment, but there will also be some beautification done around the railroad and the station, which will undoubtedly impress the visitors and investors coming to Pancevo by train. 

The approach "logic"

Let's not talk about the standards of good news reporting and expectations of a reporter. Let's not talk about all the lies politicians tell daily. Let's not talk about the credibility of our president and the government in formation. Let's not talk about the special place our president has in his heart for all things Russian, and how ridiculous the PM looked trying to speak Russian (no link on the internet?). These are all part of the reality of living in Serbia, which is scarring a healthy mind every day, beyond face-palms. Let us talk about what Serbia is doing to attract foreign investors and what the approach is.

The "logic" is:"We are a poor country, ergo we need money from abroad so that we can develop. All foreign money is good if we can call it an investment, even falsely. Investment equals higher employment and higher employment equals votes for the politician who takes a picture with the investors." I have to mention here that this model went as far as to actually say:"We need foreign investment that creates employment, so we will pay for each new job opened by foreign investors." The SIEPA I mentioned earlier was the government agency that promoted this model and paid thousands of euros per job opening to the investor. And nobody said a word.

It was that last thing the reporter on RTS remarked that really unearthed the roots and showed the extent of the approach in everybody's subconsciousness. When he said that all the beautification will impress the investors so much that they will want to invest in Serbia (my words, not his), it really couldn't be more obvious - Serbia is building Potemkin villages!

What most people lose from sight, being constantly fed this narrative of attracting investors at all cost and using all means (except doing it systematically and with a plan), is that logic that actually attracts investors (and solves some other problems, such as brain drain) is:"Let's create a country in which people who live here would enjoy living in." Clearly, a country in which its own citizens do not want to live in (Serbia lost some 65,000 people through emigration in the past decade, and several hundred thousand in the decade before that) is in a bad position to attract anyone else, unless they are desperate enough to escape anywhere from places like Syria. A country that does not make it easy for its own citizens to open their businesses will inevitably fail to attract foreign capital, modern technologies and know-how, and maintain economic growth and prosperity. But the "logic", being what the politicians want to talk about, is in all the news. It is the dominant narrative and the excuse for all ad hoc moves the government makes to attract investors from abroad.

It is not easy to create a business environment that is healthy and functional, although there are many pointers how to do it, and we have the human capital to do it. What stands in the way is the system that uses political parties as employment agencies and state money distributors. What lacks is a system based on institutions. Like the business environment, institutions are not really there, because the political parties do not know how to function in a fair system. Political parties ARE the problem.

In the time between the elections and the formation of the government, expectations and hopes run high. In my case, that people who can make reforms happen will be appointed to key positions and be given free hands. Seeing the old faces on TV and increasing numbers of people who kiss the emperor's ass is annoying. Let's just wait till the next elections. Knowing their incompetence in anything other than winning elections and operating tabloids, all odds are in favor of the government failing to make a difference. This leaves some room for the parties not invited to join the government to sit out this round (if they can survive that long without fresh money stolen from the state). For everyone else not directly involved in running the country, it's same old same old.