During the past few years, the European Commission initiated numerous programs with the goal of successfully reforming the legal and institutional framework related to competitiveness in the Western Balkan region. These changes have often been counter-effective in certain areas, which has been negative on the overall business environment, for instance unpredictability, legal uncertainty, increased regulatory risk, and a number of other issues resulted in higher costs of conducting business. Such a situation is, inter alia, a consequence of the weak use of analysis in the process of creating public policies. Having in mind the aforementioned consequences, these certainly have caused a great deal of harm to investors, the economy and the citizens in general. In such an unhealthy environment, neither Serbian nor foreign investors can base their decisions for investments on a predictable course of public policy. To speak of the broader picture, such a state of affairs will, in effect, reflect negatively on the accession negotiation process between Serbia and the EU, as well as the country’s membership once it becomes a fully-fledged member state.
According to the 2013 World Economic Forum report, which produced the Global Competitiveness Index 2013–2014, Serbia ranks 101st on a list that covers 148 countries. This ranking represents a drop from 95th rank the previous year, signifying that the competitiveness situation in the country’s market worsened, and illustrates the fact that Serbia is lagging in the region with respect to competitiveness behind Montenegro (67th), Macedonia (73rd), Croatia (75th), Bosnia and Herzegovina (87th) and Albania (95th), who all seem to be more successful (although this is arguable). This report was conducted on the basis of two criteria, the level of GDP per capita at market exchange rates and the share of exports of mineral goods in total exports. It also allocates countries into stages of development; Serbia is currently with its aforementioned neighbouring countries in the so-called Stage 2-efficiency-driven economies. The sole exception is Croatia, who is recorded to be transitioning to Stage 3-innovation-driven economies. The situation clearly indicates the need for further institutional strengthening and structural changes. Moreover, according to the breakdown of the ranking and scoring on the basis of institutions, infrastructure, the macroeconomic environment as well as health and primary education, and basic institutional requirements, Serbia is ranked 126th, again behind all the countries in the region.
In addition, it is relevant to reflect upon the Doing Business 2014: Understanding Regulations for Small and Medium-Size Enterprises of the International Bank for Reconstruction and Development/The World Bank, which aims to compare business regulations for domestic firms in 189 countries according to a common set of indicators, namely, the estimated ease of doing business. Serbia is ranked 93rd, a drop from the previous year (86th) and a steady return to the situation in 2012 (92nd). Moreover, the corporate income tax rate was increased in Serbia, which, in return, made it more costly for companies to pay taxes. Chief improvements are continuously noted for the practice of not having a minimum capital requirement for starting a business. As it was concluded from Doing Business 2013, this progress was achieved mostly as a result of simplification of the procedure to starting up own business.
However, businesses remain hampered by a variety of bureaucratic procedures given by numerous sectoral laws and by-laws, which are very often not in accordance with the proclaimed government’s strategic goals.
Even though it may be concluded on the basis of the aforementioned reports that there is evident development in regards to certain questions raised in the past, the current state of affairs still needs substantial improvement. Significant efforts were put into reducing the administrative and regulatory burden on businesses so as to foster a more favourable business environment. Despite the efforts made, it cannot be said that the work in this area is finalized, but only in its onset since businesses keep being affected to a large extent by a low degree of predictability, lack of transparency, inconsistency in the implementation of legislation and governmental interference on the market. Therefore, market distortions and anticompetitive actions need to be addressed further, if long-term improvements are to be achieved. The overall environment remains to be a problem, as there are major distortions on the market and a high degree of anticompetitive behaviour.
Specific attention should be given to ensuring better links between the intensive regulatory activities performed as part of the process of transposition of the EU acquis, and ensuring maximum regulatory and administrative simplicity through effective regulatory impact analysis and other types of ex-ante and ex-post assessments. An illustrative case, in point, could be the fact that the Serbian Parliament has adopted three laws on consumer protection since 2002 (the fourth is in development).
It is thus evident that administrative and regulatory simplification should be addressed through the reform of the public administration so that the competitiveness sector can ensure proper application of these processes in the business sector. Having in mind the political and economic past of the region and the lack of a culture of competition on the market, it is unfortunately understandable that Serbian companies usually do not perceive their own behaviour as anticompetitive, and have deemed it acceptable as an intrinsic part of doing business until the belated transition period. The war period and the economic sanctions should not be forgotten when assessing the influence of their legacy on competitiveness, at that time the monopolies were flourishing and had significantly exacerbated the existing economic problems, which were consequently continued in the process of privatization. Hence, the market was being increasingly distorted perpetually and continuously, while the state could not effectively improve the situation because of a lack of capacities to conduct accurate impact assessment and an analysis of the underlying causes.
Along with the large number of abovementioned systemic problems, low competitiveness within the Serbian economy is a result of a poorly defined and led sate public policy as well as deficiencies of the legal system i.e. poorly conducted legal reform. Additionally, the lack of an evidence based policy making system, weak analytical support and various incoherent approaches of the state in the competitiveness sector have resulted in additional failures of the state in tackling existing problems.
In time, alongside additional requirements, which had to be fulfilled so that the state would progress in the process of EU integration, new types of issues arose, specifically in relation to the incoherence of legislation in certain sectors and across other sectors as well. Due to an inadequate approach, the legal harmonization was not addressed properly, as impact assessments, interdependence and interrelations etc. of horizontal legislations were misjudged, specifically when it came to policy making in the commercial sector. Thus, a more comprehensive, analytical and focused approach is needed for the future in order to ensure synergic action of the state in policies affecting the competitiveness sector.
It should also be taken into consideration that EU law was created for stable Western democracies where market distortions are usually rarities rather than a systemic issue, as is the case in the Western Balkan countries.
Therefore, questions that have arisen and should be given additional thought are the following:
1. It is clear that all prospective members must enact legislation to align their legislative framework with the EU acquis. However is it sufficient to work on legal transposition and expect that it will in itself inevitably result in a successful legal system?
2. Is there a market economy that is in the process of arising in Serbia, and if so, is it able to fulfill the economic criterion i.e. have a functioning market economy capable of coping with competitive pressures and market forces within the Union?
3. Is it essential to establish a proper evidence-based policy making system in order to become a successful EU member state?
Is it possible for domestic companies, which have inherently worked in an anti-competitive field, to easily adjust and function well in the European single market?