LINK UP! Serbia Feasibility study Facilitating Diaspora Investments Prepared by the International Centre for Migration Policy Development (ICMPD) Gonzagagasse 1 A-1010 Vienna Austria www.icmpd.org November 2017 Authors: Svetlana Milutinović, Valerie Wolff Contributors: Branislav Savić, Eva Kitzler, Boško Knežević, Selma Prodanovic Layout: Jelena Lugonja The research team would also like to thank IDEA Pro and all our interviewing partners in the study. Original language of the study: English. Translated into Serbian. All rights reserved. No part of this publica- tion may be reproduced, copied or transmit- ted in any form or by any means, electronic or mechanical, including photocopy, record- ing, or any information storage and retrieval system, without permission of the copyright owners. This publication has been produced with the assistance of the Austrian Development Agency. The contents of this publication are the sole responsibility of ICMPD and can in no way be taken to reflect the views of the Austrian Development Agency. Printed and bound in Austria ISBN: 978-3-903120-21-1 LINK UP! Serbia Feasibility study Facilitating Diaspora Investments Foreword Foreword In the course of the last 25 years Compact for Safe, Orderly, and Reg- since the International Centre for ular Migration. Migration Policy Development’s existence, the pendulum on migra- More generally, migration and de- tion has swung on both sides, from velopment, whether in the context of being considered a security issue to circular migration, diaspora engage- being recognised as a positive force ment, transnational entrepreneurship for development. While migration and investments, is now recognised only appeared as the need to protect as a critical element of any migration the human rights of migrants and to policy. In that context, policy makers eliminate racism and xenophobia in and researchers often explore the the United Nations Millennium Dec- use of remittances for increased laration in 2000, the newly defined productive investments and its po- international framework under the tential for economic development in Sustainable Development Goals has the countries of origin. Remittances broadened the spectrum of migration and diaspora investments not only to include such important matters as represent a lifeline for many house- inclusive growth and development holds worldwide, in some countries, as well as remittances. they form a considerable part of the country’s GDP and, as such, are Innovative business models in the essential for the country’s entire remittances and financial markets economy. For that reason, reduc- and diaspora investments are mak- ing the transaction costs of migrant ing headway in the global discourse, remittances to less than 3% and more recently in the UN Global eliminating remittance corridors with 4 | LINK UP! Serbia | Feasibility study Foreword costs higher than 5% forms one of speed up their progress towards EU the Sustainable Development Goals membership. This also holds true for to be achieved by 2030. 1 billion Serbia, and ICMPD is here to contin- people either send or receive remit- ue supporting Serbia’s path towards tances, thereby affecting 1 out of 7 EU membership. people in the world. In 2016, USD 445 billion were sent to developing I would like to thank all those from countries. the government and non-govern- mental institutions who have provid- Against that background, many ed valuable inputs to the study. It is countries have embarked in the our pleasure to have Serbia as an development of diaspora strategies esteemed member of ICMPD and and investment policies, the promo- we look forward to further strength- tion of financial inclusion measures en our good relations in the coming and/or have increased the transpar- years. ency of remittance markets so that remittances can be sent faster, safer and cheaper. Every country in the Western Balkans has established or is about to establish a diaspora en- gagement strategy and related pol- icies, including in the framework of investment promotion programmes that can boost their market compet- Michael Spindelegger itiveness and which can ultimately Director General, ICMPD LINK UP! Serbia | Feasibility study | 5 Table of Contents Table of Contents Table of Contents 6 3 Business Support Executive Summary 8 System in Serbia 33 The business environment 33 The SME sector in Serbia 35 Introduction 13 The business support infrastructure 40 Business incubators and accelerators 41 1 Clusters 45 Industrial zones 45 Methodology 15 Financial and non-financial support 46 Financial support 46 Non-financial support 52 2 Background 17 Profile of Serbs in Austria 22 Number and place of origin 23 4 Time spent in Austria 23 Scoping Opportunities and Gender, age and motivation 24 Challenges for Diaspora Education 25 Investments 56 Employment 25 Findings from ICMPD’s field Serbian diaspora and their work in Serbia 57 home country: the Interviews with diaspora- ambivalent relationship 26 funded companies in Serbia 57 LED professionals’ questionnaire 61 Findings from ICMPD’s field work in Austria 62 6 | LINK UP! Serbia | Feasibility study Table of Contents Focus group and individual Specific Forms of Serbian interviews 62 Diaspora Engagement 101 The Vienna Workshop 68 In focus: Serbian diaspora 102 ICMPD’s survey analysis 70 Possible models for The respondents’ remitting entrepreneurial engagement habits 71 from Austria 103 The respondents’ interest in investing, starting or expanding a business in Serbia 73 6 The respondents’ need for Conclusions 107 financial and non-financial support 76 5 7 Bibliography 111 Potential Mechanisms for Boosting Diaspora Investments 80 Leveraging remittances 80 Mechanisms for enhancing 8 diaspora investments in Serbia: state of affairs and List of Acronyms 118 opportunities 88 Matching grants 89 National and municipal diaspora bonds 90 9 Revolving microloan fund 92 . Public credit guarantee Annexes 122 schemes for SMEs 95 Crowdfunding 97 Equity investment 99 LINK UP! Serbia | Feasibility study | 7 Executive Summary Executive Summary nomic and entrepreneurial activities Complementary to the sur- beyond the transfer of remittances. vey, consultations were un- dertaken with around 250 This study thus fills an existing stakeholders, including with research gap by exploring this link government institutions, with the aim of assessing whether an ADA-funded programme could business people in Serbia incentivise diaspora entrepreneur- as well as with entrepre- ship. With the findings of this study, neurs and business angels it was possible to assess to what living in Austria with a link extent private sector investments to Serbia. and the transfer of knowledge and capital from the Serb diaspora The potential of the diaspora to towards the economic development stimulate economic development of Serbia could be boosted, and in the Republic of Serbia is undis- through which means. The research puted and the topic of remittances also complements a request by the for productive use, specifically Ministry of Economy of the Republic diaspora entrepreneurship and of Serbia (MoE) to learn more about investments, has garnered atten- the Serbian diaspora in Austria – tion by the Serbian Government who are they, what is the potential for many decades. However, to to attract diaspora investments and date, little research has been done how to incentivise such an engage- to investigate the link between the ment. Serbian diaspora in Austria and the economic development of Serbia, For that purpose, a survey was especially with regards to their eco- disseminated widely online and 8 | LINK UP! Serbia | Feasibility study Executive Summary offline amongst the Serbian dias- The survey also found that many pora in Austria. To highlight some respondents expressed a negative of the most interesting findings opinion (25.3%) towards the state from the survey: 59.9% of the institutions’ capacity to help them respondents stated that they would start or expand their business, financially support their friends and while at the same time 27.6% were acquaintances to open a company positive about existing capacities, or expand their business in Serbia. though these were mostly people At the same time, 37.3% of them with links to Belgrade and its sur- are personally interested in starting rounding. such an activity or expanding their business to Serbia. The sectors of Complementary to the survey, highest interest are in agriculture consultations were undertaken with and forestry, followed by tourism, around 250 stakeholders, including trade, building construction, gas- with government institutions, busi- tronomy, recycling, education and ness people in Serbia as well as then advisory services. with entrepreneurs and business angels living in Austria with a link When asked about the motives to to Serbia. It showed that there is a do so, the main reason was their lack of trust by diaspora members wish to personally contribute to Ser- towards national and local authori- bia’s development, followed by the ties, highlighting that their potential reunification with family and friends, or already existing contributions and then nostalgia or patriotic and support are not adequately re- feelings toward the home country. cognised by the Government of This set of psychological motives Serbia. Nonetheless, there are was only then followed by econom- many business activities taking ic ones, and included good pros- place with those localities with pects for business based on lower which Serb diaspora members costs of