Corruption in Serbia dispels investors - Our country as regional leader in bribery

The amount of foreign direct investments (FDI) in Serbia since 2000 is very small. During this year, the value of FDI reached only about USD 500 million. One of the biggest obstacles to the significant "inflow" of investments is widespread corruption. According to a survey conducted by Transparency International, Serbia ranks 78th in the world and it is also among the lowest-ranked countries in the region, leaving only Albania and Bosnia-Herzegovina behind.

Judging by the Corruption perception index created by Transparency International, Serbia is among the worst-ranked countries in the region. When compared to other regional centers in the amount of attracted FDI, Serbia is in even more unfavorable position since Romania ranks 69th, Bulgaria is 73rd, while Hungary ranks 50th. Actually, stagnation represents a decline since other countries that compete with Serbia for FDI are either better-ranked or advance much faster.

In the opinion of the author of Macroeconomic Analyses and Trends (MAT), the unfavorable assessment is primarily caused by complicated procedures, which are such that they practically encourage corruption. What is especially underlined in Doing Business study for 2011 is the complexity of the process of acquiring building permits and property registration. Unnecessary procedures blur transparency, thus enabling officials to engage in corruption. Owing to poor institutional capacities, procedures practically make the arrival of investors impossible and they rather choose other countries. For example, it takes 279 days and 20 procedures to get a building permit. In order to shorten the time of the construction of a facility, the investor in this way gets a stimulus to either offer a bribe or find another country to implement his project in.

In Bulgaria, for example, it takes half as much time as in Serbia to receive a building permit. The price of a building permit in Hungary averages 10 percent of GDP per capita, while that price in Serbia amounts to 1,821 percent of GDP per capita.

Previous results of investment attracting

FDI is very important for overcoming the crisis faster and enabling the stronger growth of industry. So far, FDI has mainly been directed to the sectors of finance, telecommunications and trade. Although a quicker development of the sectors of processing industry, agriculture and energy is required, there was no bigger inflow of investment in these fields in the previous period.

As economists from MAT point out, apart from being small, FDI in Serbia also has an unfavorable structure for economic development. The funds primarily came from privatization, and much less in the form of greenfield investment. Major share of FDI was focused on non-industrial sectors, such as financial mediation and telecommunications. Industrial greenfield investment demands a favorable climate for business, macroeconomic stability and efficient institutions.

More corruption - more low-technology investment

High level of corruption not only reduces the total volume of investment, but also attracts low-technology investment. That is a result of lack of trust of foreign investors in local institutions and business partners, which is why they decide not to transfer contemporary technologies to such countries.

M.D.