Digital ‘raspberries’ pushing Serbian economy forward

The huge interest for IT majors that future students showed in June, during the enrollment in high schools and universities, just shows that the image of IT professionals earning high salary has become ingrained in the minds of both Serbian parents and their children.

It’s not only mothers and fathers who trust that their children would have the best future in the IT sector. The figures indicate that this is perhaps the healthiest branch of the Serbian economy, while people from the IT profession believe that IT has the potential to be a driving force behind economic growth, and even a unique opportunity for Serbia to be included in a group of wealthy countries.

Reuters recently published an extensive article on how Serbia is making a U-turn with modern technologies and is expected to grow by four percent this year, with the IT services sector having a big contribution to this. Prime Minister, Ana Brnabic commented on this on her Twitter account, while the head of the government’s IT office, Mihajlo Jovanovic replied that the concept of digitization, one of the government’s priorities, has been yielding results and is recognized in the world.

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It is true that this sector has been developing for quite some time now, on the tide of global technological advances, and has been recording double-digit growth for many years without much involvement from the powers to be. Cynics would say that it is progressing precisely because of the authorities not getting involved, although the IT profession has long encouraged policymakers to make the necessary steps, first and foremost in the field of education and legislation, in order to take advantage of the opportunity that is being provided.

In the last 10 years, while Serbian businessmen were struggling under the burden of loans and governments paid incentives to foreign investors for each new job they created, IT professionals were creating new jobs without anybody’s help. By utilizing their know-how and the fact that digital economy knows no boundaries, some of them developed globally successful companies from scratch.

Nordeus, the company that created the world famous game Top 11 that features Jose Mourinho, has become a paradigm of the Serbian IT industry. The 7 Bridges Company, which Google calls one of the 50 smartest companies in the world, uses algorithms to help scientists in their research of various genetic illnesses. The recipient of many global awards, the BioSense Institute from Novi Sad is developing tools that enable remote analysis of satellite images and sensors while the solutions created by another Novi Sad-based company, RT-RK are used by companies such as Philips, Sony, Samsung and BMW.

In order to attract the sorely needed IT professionals, the Belgrade, Nis and Novi Sad offices of these companies have started to resemble those in other countries – they have gyms, foosball tables and even swimming pools. As observers, all we see is these perks and high salaries (on average 1,300 euro a month, up to 3,000 euro), but not the other side of the business: the pressure for constant improvement, sleepless nights because of short deadlines, nightly video conference calls with colleagues living on the other side of the world and in a different time zone…

The result is that, in the last ten years, the Serbian foreign trade deficit in IT services, fell from 35 million euro, in 2007 and 2008, and turned into a surplus (407 million euro in 2016 and 430 million in 2017). Software became the number one export product of Serbia in 2011, even surpassing raspberries and last year, maize) – the data collated by the Vojvodinian ICT Cluster show.

Reuters quotes Serbian Finance Minister, Sinisa Mali who said that, this year, the export value generated by the IT sector has already reached a billion euro, and that it has a 10% share in the national GDP. People who are closely monitoring the developments in the IT industry say that those figures look unrealistic and are guessing that the minister was probably wrongly quoted. The data collated by the National Bank of Serbia show that, in the first five months of this year, the value of the Serbian IT sector’s export stood at 389 million euro. There is a possibility that a one billion euro mark could be reached by the year end which would mean that the goal, set by the former government, of reached this figure by 2020 would be realized. The only concern is that the import is growing even faster and has reached 152 million euro in the first five months of this year – the director of the Vojvodinian ICT Cluster (VICTC), Milan Solaja says.

“Imagine this headline – “A billion euro worth of maize export, and a half a billion euro worth of maize import”! For years, we have been saying that Serbia is exporting its highly intelligent labour force for very little money, and imports very expensive IT solutions. The domestic IT market has been stagnating for years now, while the export has been growing at a tremendous rate which, in translation, means that companies from Serbia are servicing the developed global markets. Instead of the Serbian public sector ordering domestically created software, we are using the imported one, which shows that our public sector has no trust in Serbian know-how, unlike foreigners”, Solaja underlines.

The entire story about the Serbian IT scene is often accompanied by comments such as that domestic programmers are a cheap workforce working for foreigners who are profiting on our know-how. This is an outsourcing format where the creator of the software gets money for their part of the work, while the company which commissioned this software then sells it at a much higher price. Director of the VICTC doesn’t see this as necessarily bad, but the fact remains that the other business model – that is creating our own IT solutions – can generate a much higher value.

Drawing a parallel with the above-mentioned raspberries, Solaja says that these “digital raspberries”, after a lot of effort and investments, can be sold several times over while satisfied customers are coming one after the other, paying for the same product (in this case, an IT licence) over and over again.

The number of companies using this business model is growing by the day, but not significantly because this model requires much higher investments and a very stimulating economic and regulatory environment, which is something that Serbia still has to work on.

“Companies are doing business where it is profitable for them and it is not their job to worry about macroeconomic and other measures that would stimulate domestic demand. That’s the state’s job”, Solaja underlines.

Ivan Nikolic from the Economics Institute says that the expectations from the IT sector are too big.

“We should not be under the illusion that this sector can be the key driving force behind the country’s economic development. It is only one of the segments that that will contribute to it and as such, should be supported. It cannot replace the basic branches of industry which should also be development”, Nikolic adds.

(Politika, 25.08.2018)

http://www.politika.rs/scc/clanak/410006/Digitalne-maline-vuku-srpsku-privredu

 

 

 

This post is also available in: Italiano

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