The investor subsidy model, which in 2006 was introduced to reflect the similar subsidy models in Ireland and Slovakia by the then Minister of Economy and Regional Development, Mladjan Dinkic, will reach its peak next year.
A total of 15 billion dinars will be allocated from the 2019 state budgets for subsidies for private companies, which is 2.5 billion dinars more than in 2018.
The Fiscal Council says that the next year’s budget keeps the practice of disclosing only the total sum of investments and providing a list of around 40 companies-recipients.
“This means we still don’t know how much each investor gets individually, which reduces the transparency of the budget”, the Fiscal Council warns in its “Assessment of the draft law on the budget for 2019”.
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Experts have believed for a long time now that it is not justified to subsidize each job, but that priority areas must be defined. Milorad Filipovic, a professor at the Faculty of Economics, says that certain progress has been made and that companies which bring high technologies to Serbia have been targeted recently. Innovative activities and technology parks have been promoted much more this year, but their effects will be visible only in three to five years.
“Foreign investors have received 443 million euro in subsidies so far, which is 6,795 euro per each new job created, on average. Keeping in mind that the amount of subsidies equals one fourth of the value of the investments made, it’s unclear how we benefit from it”, Filipovic comments on the policy of allocation of subsidies to foreign investors.
An analysis prepared in 2017 by Filipovic and Miroljub Nikolic, an associate of the Ministry of Economy, (“Analysis of the effects of approved incentive funds for attracting investments from 2006 to 2016 “) shows that the Serbian government spent 501.8 million euro on subsidies in the observed period. 90 percent of this amount was given to foreign investors. With the help of subsidies, 82,015 new jobs were created. There were 314 subsidy contracts signed, 149 with domestic and 165 with foreign investors. A total of 83 subsidy contracts with domestic companies and 16 subsidy contracts with foreign companies were terminated.
The analysis also showed that the majority of subsidies were allocated in the most developed municipalities (140 projects), whereas only 30 projects in the least developed municipalities have received subsidies. Most of the money went to the manufacturing and processing industry. These are mostly relatively simple products with low added value, involving a lot of manual work by low-qualified workers, without considerable spillover effects and without the inclusion of local suppliers in production chains. Of the 188 subsidized manufacturing industry projects, only four were in the field of high technology.
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