As every banker knows, subsidized finance is of little use if the financed activity is not profitable. The opening of the SIMEST office in Belgrade, the first foreign office by the company that operates under Cassa Depositi e Prestiti Group, is not only a strategic choice of the Italian state aiming at boosting the Italian presence in Serbia.
It is also a spearhead for the Italian companies themselves, those already present and those planning an investment. Will they be able to meet the challenge of profitability in a country where inflation is growing at the rate of 15 percent a year, the minimum wage has doubled in six years and is still considered too low by workers and where internal emigration has decimated villages and towns of thousands of young people?
The Falc East case stands to show that even in small towns where living standard is lower, expecting to boost competitiveness on the back of reducing wages not only does not pay in the long run but eventually leads to having to give in to workers’ entirely reasonable demands if production is to be saved.
But the Falc East case is not isolated. Many Italian companies in Serbia find themselves caught in the trap of low labour costs – having arrived in Serbia years ago, when wages were much lower and the workforce easily available, they have focused on labour costs as the only factor of competitiveness, finding themselves more and more affected by the transformation of the social and economic environment that the country has been going through year-on-year. Their objections about the rigidity of the exchange rate, the cost of labour and social security contributions, the absenteeism plaguing businesses with unmotivated labour due to low wages, and government subsidies that are no longer as generous as before, which are all often mentioned in the meetings of Italian entrepreneurs, are a patent indication of an attitude more focused on the past than on understanding in which direction the country is headed.
If labour costs were the only parameter for investing, other Balkan countries such as Bosnia and Herzegovina, Albania, Bulgaria, and even Moldova are certainly more attractive. On the other hand, with the arrival of SIMEST, the upcoming opening of SACE office and a local office of Cassa Depositi e Prestiti by the year-end, Italy offers investors in Serbia a package of services, financial and commercial tools, subsidized credits and institutional interlocution capacity that is unmatched in this region of Europe. Today, operating and investing in Serbia means having the levers available to meet the challenges imposed by change, both in the country and internationally.
As SIMEST Managing Director, Regina Corradini D’Arienzo, remarked in her speech at the Italian Embassy on Tuesday evening “energy efficiency, environmental and social sustainability, automation of processes, and the development of workforce skills are the directions we are aiming at in order to make the companies we finance more efficient, profitable and capable of facing the rapid transformations of international markets. It is up to entrepreneurs to know how to use credit lines to transform their company in all respects. We cannot compete on rates with commercial banks, but rather work with them to boost the global presence of our economic system.”
“Against a backdrop of rising global rates, our credit offering remains highly competitive, but our business partners need to grasp one thing – having SIMEST as a partner or lender means having the Italian state betting on you and crediting you to the highest institutions of the state in which you operate. This is a competitive advantage that needs to be put to good use,” SIMEST President Pasquale Salzano said in his speech.
“Renewing the Italian presence in the country is a strategic goal that we have set for ourselves and we are aware that it cannot just be wishful thinking. The Italian state is demonstrating that it is able to quickly put into practice the commitments and agreements defined during the Italy-Serbia Business and Science Forum last March and demonstrates it views Serbia as a hub of its interests from a collaborative perspective and not a mere manufacturing location. Serbia hosting the specialized EXPO 2027 exhibition creates further opportunities for the country’s growth and its workforce. The EXPO theme ‘Play for humanity: sport and music for all’ seems tailor-made to push the two countries to collaborate in areas where both are recognized around the world,” the Italian Ambassador to Serbia, Luca Gori, pointed out.
Continuing to operate as before is not only shortsighted but suicidal. High-interest rates are accelerating the global recession, geopolitical tensions risk closing some markets overnight, and some industries, such as the automotive industry, find themselves going through multiple changes, from declining demand to electrical conversion to people being more prone to renting rather than owning. While the German economy, the driving force behind Europe, has officially entered recession, posing serious concerns for the many companies operating in the subcontracting supply chains of German companies, manufacturing in Serbia may allow them to find new clients in new markets, thanks to a trade diplomacy that will soon conclude a free trade agreement with the People’s Republic of China. Change should be pursued together with capable, competent, up-to-date and motivated managers, through sustainability and automation and thanks to the desire to internationalize to innovate and not to relocate in pursuit of lower labour costs. The challenge is, as always, to increase the added value recognized by the market, not to cut costs to the point of losing value.
Thanks to the socio-economic changes that the country is experiencing and the tools that Italy is preparing, today’s Serbia has the best prerequisites to better prepare for an international competition that promises to be uncertain, unstable, and in some ways even indecipherable.
SIMEST is a CDP Group company that has supported the growth of Italian companies abroad since 1991. At the moment, SIMEST is present in the capital of four Serbian companies founded by the Italians – I-NOVI TEKSTILI located in Bečej, LA LINEA VERDE in Dobrinci, P&T DESIGN in Novi Sad, and VOPACHEL in Šabac. Overall, SIMEST investments in Serbia currently contribute to a turnover of 27,593,535 euros in companies that have a total of 572 employees. The SIMEST office in Belgrade will be located on the premises of Banca Intesa Beograd’s headquarters.
This post is also available in: Italiano