Serbia - Municipal Economic Growth Activity

SERBIA

Municipal Economic Growth Activity (MEGA)

Developing the skills of local governments and business groups to foster economic growth, promote job creation, and build a flourishing private sector

Following the tumultuous 1990s, Serbia was confronting serious economic challenges. Nationally, GDP was lagging behind pre-1989 levels. Locally, municipalities were grappling with unemployment and struggling to develop a viable private sector. Local governments found themselves strapped for resources, and service delivery suffered as a consequence. Moreover, the business climate of many municipalities restricted existing enterprises and deterred the development of new economic activity.

To respond to the challenges facing Serbia following years of conflict, UI is implementing the Municipal Economic Growth Activity (MEGA) under USAID sponsorship. MEGA’s goal is developing the skills of local governments and local business groups to foster economic growth and job creation in their communities, and to create a business-friendly environment where the local private sector may flourish. To that end, UI is working with 32 Serbian municipalities to build the capacity of local governments to create a business-friendly environment by having specific economic development processes and capacities in place, providing adequate information and services, and ensuring participation of the private and public sectors in decision-making processes.

Since 2005, program municipalities have developed local economic development (LED) strategic plans and  LED-office employees have successfully completed an intensive training cycle, developed new marketing and promotional materials, land inventory databases, and overall capacities to effectively market the business opportunities of their communities. Municipalities have developed business incubators, business improvement districts, educational centers for the unemployed, and business innovation centers. All municipalities have had employees attend investment fairs, conferences, and forums that emphasize the importance of economic development at the local level and stress the promotion of investment opportunities. Municipalities have improved the performance of citizen assistance centers, included the private sector in the LED processes, learned advanced debt management techniques and project finance concepts (including PPP applications), and improved their skills in investment. They have also begun implementing modern approaches to asset management. However, among MEGA’s most important achievements has been a change in mindset within program municipalities that has brought a new willingness to understand the problems and interests of businesses.

UI’s MEGA Program also includes a policy component. Work under this component has succeeded both in improving the legal/institutional framework for local development and in strengthening the ability of national associations of municipalities to advocate effectively on behalf of local government interests in this enabling framework.

Results

• Efforts by participating municipalities since program inception have resulted in €400 million of realized public and private investments and 7,389 new jobs, based on reports from the municipal LED offices. Municipalities have also reported over €1 billion of committed investments, based on agreements signed between the program municipalities and investors, with execution expected in 2009. 
• Economic development is recognized as one of the key competences of local governments for the first time in a new Law on Local Self-Government. This provision was added to the Government’s initial draft of the law at the behest of the Standing Conference of Towns and Municipalities (SCTM) with the assistance of UI.
• A National Alliance for Local Economic Development (NALED) was established with UI’s support and became financially independent and sustainable. Currently, it has 62 fee-paying members (representatives of major corporations, local governments (LGs) and NGOs) who are actively participating in policy advocacy efforts.
• To date, 21 municipalities have functional LED offices; 17 have catalogues of available land and sites; 17 have LED strategic plans; 16 have developed marketing and promotional materials; 15 have Citizen Assistance Centers/One-Stop Permitting Centers (CACs/OSPCs) where the information on construction permitting can be obtained; and 12 provide assistance to businesses in recruiting an adequate workforce.
• UI developed methodologies for different LED mechanisms, and supported business incubators, business improvement districts, industrial and technology parks, and business retention and expansion plans. The methodologies combine international and local knowledge and practical experience, applied in program municipalities.   
• Partner municipalities have a disproportionately high share of the proposed capital investment project entered into the EU pipeline for pre-accession funding and ranked highly in respect to the quality of their preparation.
• UI developed a certification program for business-friendly municipalities. On September 30, 2008, Loznica, Kragujevac, and Indjija received the first such certificates in Serbia. The certificates are an affirmation that any small or large business can count on sound-quality services, accurate information, and predictable start-up costs in these municipalities. More importantly, the certificate promotes a sense of partnership and accountability between the municipal administration and businesses.
• The Program contributed significantly to the adoption of a new Law on Local Government Finance, a landmark piece of legislation that for the first time placed central government transfers to local governments on a transparent and predictable, formula basis and fully devolved the property tax and other important fees to the local level. Advocacy efforts have also informed the drafting of other important legislation now well advanced in the adoption process, including a Law on Public Property, which would return real estate and other assets to municipal ownership, and a revised Public Procurement Law. These accomplishments have been achieved by working through the SCTM and with unprecedented stakeholder consultation in the adoption process.