ECONOMIC CRISIS: IMPACTS AND RESPONSES BY THE BUSINESS COMMUNITY Kiev, June, 2009

NALED was established in March 2006 at the initiative of USAID/MEGA program as a unique body that blends the influences of public, private and civil sector in Serbia. President Tadic and Michael Polt signing NALED declaration

MISSION The primary mission of NALED is to facilitate dialogue between local and central government, institutions and the private sector and thus create enabling environment for the growth of business community in Serbia, increased investments and enhanced economic development.

STRATEGIC GOALS OF THE ALLIANCE IPromote legal reforms that support local economic development IPromote legal reforms that support local economic development IICreate an enabling environment for investments and business development IIIEstablish dialogue between private, public and NGO sector IVStrengthen municipal capacities through training and consulting services VPublic private partnerships

MYTH # 1: DONOR-DRIVEN ORGANIZATIONS CANNOT BECOME SUSTAINABLE 90 MEMBERS 90 MEMBERS INDEPENDENT OPERATIONS INDEPENDENT OPERATIONS MEMBERSHIP FEES = OPERATIONAL COSTS MEMBERSHIP FEES = OPERATIONAL COSTS

MYTH # 2: THERE IS NO CRISIS OVERLY OPTIMISTIC BUDGET PROJECTIONS OVERLY OPTIMISTIC BUDGET PROJECTIONS NO PREPARATORY ACTIVITIES NO PREPARATORY ACTIVITIES LACK OF INSTITUTIONAL RESPONSE LACK OF INSTITUTIONAL RESPONSE

Globaleconomy Crisisdetection Analyses & discussion of adequate measures First reactions & mitigation measures Review of effects Responses and reactions to global financial crisis IV Q 07 IV Q 08 I Q 08 II Q 08 I Q 09 III Q 08 Serbian economy Following global trends and interpreting crisis as an investment opportunity for Serbian economy Detection of crisis in Serbia Delivery of initial assistance measures Serbianagriculture Seeing a chance for Serbian Agriculture Lack of interest to analyze and prevent effects of the crisis, followed by overly optimistic projections for Ag sector

MYTH # 3: CRISIS WILL AVOID SERBIA CRISIS AS MODUS OPERANDI CRISIS AS MODUS OPERANDI CRISIS AS A WINDOW OF OPPORTUNITY CRISIS AS A WINDOW OF OPPORTUNITY SERBIA TO EMERGE VICTORIOUS SERBIA TO EMERGE VICTORIOUS

MYTH # 4: CRISIS EFFECTS GLOBAL EFFECTS vs. LOCAL CONSEQUENCES GLOBAL EFFECTS vs. LOCAL CONSEQUENCES Unemployment Unemployment Less FDI Less FDI Lack of financing Lack of financing CRISIS – good excuse CRISIS – good excuse – top priority – top priority

CROSS-CUTTING EFFECTS   Favoritism in policy response   Lower demand   Drop in production   Decreased buyer financing   Tightened credit for producers   Growing unemployment   Falling asset prices   Delayed reforms and EU integration   Protectionism

Lower credit capacity Drop in available inputs Less profit Drop in production consumption Decreasedfinancing Increased prices Drop in prices Decreasedcompetitiveness

NALED-REPORTED EFFECTS NEGATIVE : Increased taxes on deed contracts Increased local fees and taxes imposed on businesses Cut in intergovernmental transfers Drop in project activities (donor and business driven) Default clients and deferred payments

NALED-REPORTED EFFECTS POSITIVE: New mechanisms of financing Less local and central government employees Responsible and cost-saving behavior Regional alliances Public private partnership

MYTH # 5: CRISIS IS RESPONSIBILITY OF THE GOVERNMENT TRUE! TRUE! But no government can do it alone LOCAL AND REGIONAL STRATEGIES LOCAL AND REGIONAL STRATEGIES SUPPORT FROM PRIVATE AND CIVIL SECTOR SUPPORT FROM PRIVATE AND CIVIL SECTOR

PROPOSED GOVERNMENT MEASURES Deliver information about the depth of the crisis and its effects, Offer exit and mitigation strategies Follow consistent and foreseeable policy approach Stimulate borrowing for production Provide budget subsidies and investment support Delay the drop in FDI Facilitate access to donor funds Develop capacity for IPA funding

NALED – RESPONSE TO THE CRISIS 1. 1.DIRECT Partnership with the government Support in delivery of mitigation measures 2. INDIRECT Business-government encounters Business Friendly Certification Out of the Maze

Certification of Business Friendly Municipalities Partners: USAID, Ministry of economy, SIEPA, Provincial Secretariat for local government Municipalities in evaluation process: Vranje, Subotica, Prokuplje, Uzice, Leskovac Status: Three holders of certificates: Loznica, Kragujevac, Indjija Detailed analysis of local governments Input by the business community

COUNTER THE CRISIS!

Out of the Maze Partners Goal Cut red tape in Serbia NALED’s GREY BOOK as a guide with proposed recommendations for removal of administrative barriers for business development in Serbia. Results One-stop shop for business registration

OUT OF THE CRISIS MAZE Dialogue between public and private sector. Regulatory reform. Good governance.

NALED Zetska 4a/2, Belgrade T: F: