POLICY BRIEF your comments to [email protected]. Territorial Economic (InTER). Development Please send 1 the concept oflocaleconomic development isnot number ofnewenterprises, etc.), because primarily indicators (e.g. GDPgrowth, unemployment rate, come measured ofanintervention, by economic considering localeconomic development asanout This separated definitionshouldbeclearly from opment. ning and implementation of local economic devel- for factors successfulcies are plan- alsoimportant andharmonisationofpublicpoli- levels ofauthority localities. Vertical coordination between different inrespective actors tion between socio-economic modelofcooperait mostlyinvolves- aparticipatory aboutlocaleconomic development, when talking and conditions for economic growth. Therefore, joinpowers toterritory improve oflife thequality in a respective andother actors local authorities Local economic development isaprocess inwhich growth andemployment onthelocallevel. other instruments aimedat improving economic investments, andmany public-private partnerships tegic andplanningdocumentspublic that prioritise establishing businessincubators, developing stra- investments, zones buildingindustrial andparks, in attracting local self-governments putefforts ment intheirrespective territories. With that goal, velopment andimprovement ofbusinessenviron- ever, becameinvolved in planning ofeconomic de markets. Thus, localself-governments, more than solving problems causedby openingofdomestic regional) indeveloping authorities conditions and ated anichefor amore significant role oflocal(and to adequately respond to thesechallenges. This cre cies have notsucceeded to establishmechanisms and competitiveness developmentpartments poli- around theworld. National economic planningde ing from theburden imposedby competition from both contributed to localeconomic systems suffer globalisation andliberal economyMarket concept Introduction December 2012 Dragiša Mijačić the future lessonsfor in : economic development A decadeoflocal

Dragiša is adirector of Mijačić the Institute for 1 - - - - - RSEDP2. (all three phases),MSPIPA 2007,MISP(allphases) and Exchange EUprojects: comprises The firstcategory municipalities that are territoriallyconnected. in implemented or concentrated, geographically • nicipalities that are notterritoriallyconnected, and mu- in implemented or dispersed, geographically • • national, velopment canbedividedinto: onlocaleconomic de impact orindirect had adirect According to thegeography, that theprojects have way, andothers. ofDenmark theKingdom SDC, Sida,ADA, Government ofNor oftheKingdom from EUfundsandbilateral donorssuchasUSAID, development were projects initiated aswell, funded dle ofthefirstdecadenewmillennium, strong development character. However, inthemid- local communities, thus, assuch,theydidnothave a changes andtheywere focused onrevitalisation of First were projects initiated democratic rightafter onbothlocalandnational level. ness amongactors and initiatives that contributed to raising aware presented theconcept through arange ofprojects ated by international development agencieswhich Local economic development was initi- inSerbia economic development inthefieldoflocal ofdonorprojects Overview projects. this programme is placed in the category of national to all local units in Serbia, self-government support regional development agencies. Since thisincludes municipalities andcitieswhere there are no supports where theyexist,andontheotherhand itdirectly to regional development agencies through support local economicbecause development itsupports 2 life andimprovement ofbusinessenvironment. lated aimedat improving to of activities thequality basedoneconomic growthstrictly re butprimarily 2 These have projects or indirectly directly RSEDP2 can case analysedasaspecial be - - - - A decade of local economic development Page 2 in Serbia: lessons for the future?

dealt with issues of importance for local economic develop- ment in the whole territory of the Republic of Serbia. As in case of Switzerland, the Government of the Republic of Austria participated through its development agency ADA Geographically dispersed projects include USAID MEGA, that in multi-donor programmes, but also separately financed was implemented in 32 local self-governments throughout projects relevant for local development with a clear territori- Serbia, as well as the first stage of the Municipal Support Pro- al focus. The first such project is the Integrated Regional De- gramme, financed by the Swiss Government, implemented velopment Plan of the Autonomous Province of in 7 municipalities and cities of .3 that was implemented at the provincial level, but affected the local development of municipalities in Vojvodina. The Nevertheless, most projects dealing with local economic de- second project is the Programme of Support to Sustainable velopment had a clear territorial focus, mostly covering poor Regional Development of and Pčinja Districts that municipalities in Southwest, South and East Serbia. Unlike was implemented in the south of Serbia. the first two categories, this one includes multi-donor initia- tives, such as MIR, PRO, EU Progres and PBILD, which repre- GIZ also has a project significant for local economic devel- sent the most significant projects in local self-governments opment, named Municipal Economic Development in the in Southwest and South Serbia. Danube Region. This project is implemented in ten munici- palities of East Serbia.11 Some of the EU projects in this category also include the first phase of the Regional Socio-Economic Development German humanitarian organisation HELP is also active in the Programme4 and the Municipal Support Programme North- implementation of projects supporting entrepreneurship East Serbia (MSP NE).5 As special cases, Cross-Border Coop- development and poverty reduction by supporting vul- eration Programmes can also be considered as programmes nerable population groups, refugees and IDPs, and others. supporting local economic development with a clear terri- Between 2002 and 2012, HELP provided support for 4,491 torial focus on border territories of the Republic of Serbia. beneficiaries who were provided equipment and business trainings and counselling. HELP’s activities are geographical- USAID has also been implementing projects in this cate- ly concentrated in relation to their four offices, in , gory: CRDA and CRDA-E that were implemented between Niš, Kraljevo and Bujanovac. 2001 and 20076, as well as Sustainable Local Development Project (SLDP), that has been implemented since 2011 in 32 Finally, there is also the Local Economic Development in municipalities joined in eight inter-municipal cooperation the Balkans programme, funded by the Government of the clusters.7 Kingdom of Denmark, and implemented in municipalities of Nišavski District. Apart from support to multi-donor initiatives, the Swiss Gov- ernment (through its development agency SDC) has been There are also several smaller projects financed by different financing two separate projects that belong to this category. foundations, such as the Fund for an Open Society, Balkan The first one is Municipal Support Programme - MSP (second Trust for Democracy and many others. However, all these and third stage) that was implemented in six municipalities projects are small in size, and not necessary to be treated of Central and West Serbia.8 The other two initiatives are the separately in this paper. Private Sector Development in Southwest Serbia, that was focused on 6 municipalities of Zlatibor District9 and the Pri- Types of interventions in the field of local economic vate Sector Development in South Serbia, implemented in 6 development municipalities of Pcinja and Jablanica District.10 Local economic development projects were mostly cov- 3 Čačak, Kraljevo, Kuršumlija, Niš, Novi Pazar, Požega ering the following four intervention areas: and Užice 4 The first stage of RSEDP programme was imple- • preparation of strategic and action plans for local devel- mented in the three Banat Districts, Šumadija and Pomorav- opment, lje District, as well as Jablanica and Pčinja District. • capacity building for project proposal writing and imple- 5 Three Banat Districts and Braničevo District mentation, 6 Even though CRDA and CRDA-E were implemented • development of local social and communal infrastructure, in the whole territory of Serbia, the modality of their im- and plementation through partner organisations that covered • establishing local economic development offices. clearly defined territories places these two programmes in the category of geographically concentrated projects. Almost all projects focused on local economic develop- 7 Geographical areas where USAID SLDP is active ment have supported the preparation of strategic and ac- can be found on the webpage http://www.lokalnirazvoj.rs/ tion planning documentation on the local level. As a result gde-radimo.html 8 Arilje, Čajetina, Čačak, Kraljevo, Požega and Užice and . This programme is implemented by VEEDA 9 Arilje, Nova Varoš, Priboj, Prijepolje, Čajetina and from Vranje. The project started in 2011 and it will last until Užice. This programme is implemented by RDA Zlatibor 2014. from Užice 11 Golubac, Zaječar, Sokobanja, Majdanpek, Veliko 10 Preševo, Bujanovac, Surdulica ,Trgovište, Vranje Gradište, Kladovo, Negotin, Knjaževac, Boljevac and Bor A decade of local economic development Page 3 in Serbia: lessons for the future?

of these interventions, in 2012, the Standing Conference Developing communal infrastructure and reconstructing of Towns and Municipalities registered 708 strategic and buildings of social importance (schools, hospitals, cultural action plans prepared or being prepared by municipali- centres, etc.) are important parts of all projects focused in ties and cities. This can lead to a conclusion that the first local economic development. They can be split into pro- cycle of strategic planning in Serbia has been finished in a jects dealing exclusively with the development of local large majority of municipalities and cities. Also, there are infrastructure (e.g. MISP and its preceded projects) and a number of local self-governments that have initiated a projects supporting infrastructure development within new cycle of designing strategic and action plans. a component or through calls for proposals for grants (e.g. MIR, PRO, EU Progres, Cross-Border Cooperation Pro- Main problems in strategic planning include the lack of grammes, etc.). properly elaborated action plans and financial mecha- nisms for their implementation. Therefore, a significant Establishing local economic development offices and number of strategic plans remain to be wish lists, often developing their capacities are also a frequent focus of unrealistic. Solution for these problems is expected in the local development project interventions. The project introduction of the programmed budgeting system on that stands out by scope of support to this area is USAID the local level.12 MEGA that supported the establishment of 32 local eco- nomic development offices in self-governments through- Also, in many municipalities and cities there is an obstacle out Serbia, but other projects as well, such as RSEDP, MIR, for implementation of strategic plans in the lack of politi- PRO, PBILD, LEDIB, MSP SDC and many others. Technical cal will and a general consensus on development priori- support for establishment of offices was also provided by ties and goals. In a number of municipalities, there is also regional development agencies Zlatibor, REDAŠP, RARIS, a big problem in systematic monitoring of strategy imple- Centre for Development Banat and Bačka. mentation based on clear indicators. According to the results of the latest research carried out Another area of intervention targeted by local economic by InTER in 2012, out of 144 self-government units in development projects is capacity building for project Serbia (not including Belgrade), 121 have some form of development and implementation, especially projects local economic development office. Capacities of those financed within the EU Instrument for Pre-Accession As- offices vary in different self-government units, with a vis- sistance. Results of these activities significantly vary be- ible disparity between cities and municipalities. Also, in tween cities and municipalities. Namely, the key problem cities and municipalities with strong capacities within lo- in capacities to write and implement projects is insuffi- cal economic development offices, political influence on cient knowledge of English language at the local level, es- their work is much weaker than in those with weak capac- pecially in small and undeveloped municipalities. Anoth- ities. Another problem shared by local economic devel- er problem is the lack of formal education programmes opment offices is the lack of standardised set of services in the field of Project Cycle Management (PCM). Local that should be provided by these units. Namely, local eco- professionals are trained in PCM through ad-hoc train- nomic development offices mostly work on preparation ings that are often only explaining basic terms, without and implementation of projects and local development tackling the essence. The third key problem is frequent planning, whereas other activities are carried out to a fluctuation of workforce within self-government units. much smaller extent. Namely, with the change of political structure on the lo- cal level it often happens that trained staff is replaced or Conclusion: what next in local economic develop- marginalised, which significantly reduces local capacities ment? in this field. This is especially a case in smaller municipali- ties where most often one or two persons are in charge Today, ten years after the first projects implemented in of project related work. It should also be mentioned that local development, the question is what future project in- people working on projects often cover several other du- terventions should focus on. The economic environment ties, which adds to their burden, and thus reduces their in Serbia is characterised by inadequate economic legisla- efficiency. tion, high unemployment, uncompetitive local economy and a high degree of corruption in public procurement Poor local communal infrastructure is typical for all local on all levels. Even though they have been constrained self-government units in Serbia. Hoping to solve the ac- with the legal framework, local self-governments should cumulated problems, local governments are actively en- be proactive, maximising their potentials and moving gaged in searching external funds. Therefore, for most lo- the limits of their actions in areas relevant for local de- cal self-governments in Serbia, investments in social and velopment. Also, it is necessary to advance cooperation communal infrastructure are the most attractive part of with the business sector by introducing mechanisms participation in projects. for continuous consultations and cooperation. Capacity building for public and private partnerships will be one of the biggest challenges in the upcoming period. In ad- 12 In accordance with the Law on Budgetary System, dition, it should be kept in mind that democracy includes starting with 2015, local self-governments in Serbia have to pluralism and consensus, and it is of great importance to initiate a new practice in the creation and execution of local include both private and civil sector in making important budgets – programmed budgets. decisions for local development. A decade of local economic development Page 4 in Serbia: lessons for the future?

neighbouring municipalities, based on political, histori- Promotion of entrepreneurship is also an important cal, cultural or ethnic grounds. However, there are evi- field of intervention. Entrepreneurship based on econ- dences showing that the level of inter-municipal and omy of knowledge and modern technologies, as well as regional cooperation is in a clear correlation with the on industries generating added value and job creation number of geographically concentrated project inter- needs to be promoted and encouraged. In this sense, it ventions in a specific territory. This means that the level is necessary to work on development of entrepreneur- of inter-municipal cooperation is significantly higher in ial skills, especially among qualified professionals who areas with stronger presence of donor projects. Inter- want to start their own business, as well youth, women municipal cooperation is also stronger in areas with and the unemployed. active regional development agencies. This shows the importance of initiating and implementing projects of Integrated development of business support infrastruc- joint interest for local self-governments on the district ture at the local and regional level should also have a or regional level, as well as strengthening cooperation significant place in future local development interven- between local self-government units and regional de- tions. Elements of business support infrastructure, clus- velopment agencies. ters, business incubators and industrial zones and parks have mostly developed independently of each other, At the national level it is necessary to work on improv- and often in disharmony with local economic systems ing legislation that affects the development and imple- and development policies. In order to achieve as effi- mentation of local economic development policies. A cient local development as possible, these elements set of indicators that would follow the level of develop- need to be linked to serve for a unique vision and stra- ment of local self-governments in Serbia in a compara- tegic orientation of local economic systems. It is also tive way should also be developed. necessary to work more actively on the revitalisation of Brownfield locations in order to put them in operation Finally, it is important to mention that it is necessary to to serve the economic development. work on the promotion of lessons learned and good practice examples from previous work in the field of lo- Attracting local and foreign direct investments is also an cal economic development. With that regard, it is nec- area where a more active role of local self-governments essary to conduct a comprehensive impact assessment is needed. Many municipalities and towns prepared of implemented projects on sustainable local econom- promotional materials and they actively participate in ic development in Serbia, which would adequately an- investment fairs in the country and abroad. However, it swer which types of interventions helped the most in is necessary to work more actively with potential inves- building human and operational capacities, as well as tors (both national and foreign) and the national gov- economic empowerment on the local level. n ernment in order to solve problems that follow every investment: from obtaining different permits from national and local institutions to finding high quality workforce, building the necessary infrastructure, etc. Establishing a unique one-stop shop system that would work within LED offices could be the first step towards a more active approach to supporting foreign investors on the local level.

Capacity building of local self-governments and LED offices is also a significant field of intervention in the following years. It is especially necessary to strengthen human potentials to develop local development poli- cies based on quality analyses. Collecting and analys- ing statistical data on the local level is also a necessity which can considerably contribute to better local de- velopment planning of in Serbia.

There is no city or municipality that can solve develop- ment problems on their own. Thus it is necessary for them to work more on implementation of regional de- velopment policies and strengthening inter-municipal cooperation. However, majority of local self-govern- ments in Serbia develop their own development poli- cies without analysing their immediate territorial envi- ronment. In many cases, there are animosities between A decade of local economic development Page 5 in Serbia: lessons for the future?

Table 1: Overview of projects with impact on local economic development in the Republic of Serbia Time period

Donors Project National dispersed concentrated 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Geographically Geographically Geographically

Municipal Improvement and Revival √ RS* Programme (MIR) Norway, Norway, EU, Sida, EU, ADA and ADA

Municipal Development √ Programme(PRO) and RS EU, SDC EU,

European Partnership with Municipali- √ Multidonor ties (EU PROGRES) and RS EU, SDC EU,

Peacebuilding and Inclusive Local Devel-

RS √ opment (PBILD) Norway, Norway, Sida, SDC, MDG-F and EU Exchange (I, II, III) √ MSP IPA 2007 √ MISP (MIASP, MISP CARDS2006 and MISP √ IPA2008)

EU RSEDP √ RSEDP2 √ MSP NE √ IPA CBC √ CRDA √ CRDA-E √

USAID MEGA √ SLDP √ MSP I √ MSP II, III √ Donor Private Sector Development in South-

SDC √ west Serbia Private Sector Development in South √ Serbia Strategic Partnership in Support of the √ Economic Development of Vojvodina

ADA Support to Sustainable Regional Devel- √ opment of Jablanica and Pčinja Districts Municipal Economic Development in √ GIZ the Danube Region Programme of Support to entrepreneur- ship Development and Socially Vulner- √ HELP able Population Groups

LEDIB √ Den - mark

*RS - Government of the Republic of Serbia InTER – Institute for Territorial Economic Development – is an independent non- governmental think thank with the mission of promoting and advancing sustain- able socio-economic territorial development in the Western Balkans.

InTER • Vlajkovićeva 29, Belgrade • e-mail: [email protected] • web: www.lokalnirazvoj.org