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On behalf of the Serbian Association of Economists and the Serbian Association of Corporate Directors we are pleased to invite you to the 23rd Kopaonik Business Forum 2016.

Traditionally, the Forum is organized under the patronage of the Prime Minister of the Republic of Serbia. Every year the Forum gathers more than 600 participants, including respectable scholars, government representatives, diplomatic officials, business practitioners, and media.

The Forum will be held on March 8-10, 2016 at Kopaonik Convention Centre under the title:


The Program Committee has foreseen debate on the following three thematic clusters:

March   8, 2016:  Economic Consequences of the New Normality: Problems, Causes and Solutions
March   9, 2016:  Reform Agenda Update: State Reform and Public Sector Restructuring
March 10, 2016: Further Steps in the Reform Agenda

Between our two forums, things have radically changed in Serbia and its environment as well. In Serbia, fiscal consolidation is still in process. It is a headline. Fiscal imbalances always jeopardize the growth prospects. Inflation is under control (CPI y/y = 1.5%) and recently the World Bank has announced a significant improvement in business climate (9 places improvement in rank in Doing Business list). Public debt (75% of GDP) is critical vulnerability indicator. Other macroeconomic indicators are not good enough, primarily unemployment (19% ILO rate), particularly youth unemployment rate (>50%), investment ratio (2.5% of GDP), share of industrial production in output (22% of GDP), and growth rate (1.5%). Trends are good but performance improvement is not good enough. Without deepening, expanding and accelerating reforms in state sector and institutional setting, current achievements in fiscal sector will not be sustainable. Multi-pronged structural reforms are absolute must not only for sustainability of macro management achievements, but also for catching up with the EU.

Discontinuity or dominance of frequent, radical and inter-related changes in modern world is evident. In the EU, the new normality entails quantitative easing in monetary policy and social unrest due to refugee influx and terrorism.  Both factors challenge the economy, social cohesion and political stability. Money printing of such magnitude has never been done before. Emerging new bubbles in the financial sector and related sectors (real estate and fast-growing sectors out of real economy) is a real threat. Financialisation of the economy and growing concentration of wealth hamper investment and job creation and redirect economy from creation to redistribution of wealth.  It is hidden fracture of the system because an expansionary monetary policy without investments in real economy may trigger inflation and make spillover effect from the Eurozone to the connected economies. Finally yet importantly, the great migration of people and terrorism are deepening the crisis of political legitimacy. Terrorism not only agonize politicians in every corner of Europe, but also decrease economic expectations and growth prospects. Unfortunately, the new normality has further deepened old fractures in relations between nations, especially in sensitive regions of Europe like the Western Balkans.

Concerning technology development, there are two roadmaps, exogenous (strategically important areas like energy, food, infrastructure, health care and military) and endogenous (consumer and investment goods). The main constraint for exogenous technological development is sustainability. New tenets are decoupling well-being from resource consumption, providing full employment, and protecting the environment. Circular economy and inclusive growth are results of new vision. Endogenous technological development is typical in technologically intensive fields from commercial sectors like ICT, new and nano materials, bio technology, pharmacy, robotics, etc. Disruptive innovation and its deflationary character are the main characteristics of that path of development. Technological breakthroughs from ICT, such as cloud computing, application-centric computing, internet of things as well as disruptive innovations from high tech sectors like additive manufacturing are followed by cost-cutting business models (e-commerce, bitcoin, software transaction supply chain, etc.), and usually working as “neutron bomb” for labor force, particularly, in mature industries like banking, insurance, trade, manufacturing, etc., challenging social cohesion.  
In conceptual platform we are at the end of what has been known as neoliberal capitalism and associated long-running era of high growth and expectations. Regulated capitalism is new normality. It leads to a question. Is it possible to move from current economic model to a better one without a collapse? Fear of fear itself and greater risk aversion in regulated capitalism are new phenomena. They inhibit the growth of tradable sectors in developed economies. Another challenges are disruptive innovations and deflationary character of technological breakthroughs. In commodities and low-end products, threats are coming from agile low-cost competitors from emerging economies. Due to hyper competition, for mature industries from developed world reaching the poorest consumers, including the home market, is almost impossible. If we add to the above-mentioned trends the absence of demographic dividend due to diminishing birth rate and population ageing, we can conclude that keeping pace with technological progress, establishing circular economy and, in the same time, achieving sustainable competitive advantage, full employment and balanced budget are not easy targets for policy makers. Different views about distribution and control of power open the ultimate challenge, geopolitical crisis. Due to non-economic events like wars, sanctions and restrictions, trade and financial flows are not as global as they once were. As a consequence, there is a certain shift in mindset from ‘ready to be global’ to ‘ready to be local’. A deglobalization as reaction on the geopolitical crisis combined with growing awareness of the necessity for universal environmental control is the main contradiction of the modern world’s (dis)order.

In new realty every national economy, large or small, developed or developing, is looking for the new vision of growth. But, again, to survive and prosper, every economy needs to keep growing. Growth, sustainable and inclusive, should not be questioned at all. But achieving the growth in time of radical changes for the country like Serbia with delay in economic development is a moving target.

Despite recently imposed fiscal discipline, Serbian economy is fraught with hidden fractures fueling insolvency. Also, economy does not have reserves to cope with emerging risks factors in rapidly changing world. The economy is heavily burdened with the legacy of large state sector (public utilities and business controversial “500 +” group of commercial state-owned enterprises in restructuring). Public administration is large and inefficient. The share of public sector in GDP exceeds comparable level in the EU. Growing public debt and tacit liabilities (state-guaranteed loans to public sector) fuel insolvency. Economically inspired migration combined with refugee influx jeopardize the sustainability of rural areas, particularly near the country borders, and increasing security costs.

With a difficult external environment and a burden of negative consequences of inadequate macroeconomic fundamentals, in the following period Serbia could expect, at best, a moderate economic recovery. The IMF forecasts are 1.5% for 2016 and 2.0% for 2017.

To achieve income convergence with the EU, it means attaining compound average growth rate of 6% until 2030. Is this feasible? Maybe yes, maybe not. If the answer is yes, it requires some preconditions. In the time of radical structural changes just sitting back and doing nothing is the greatest mistake especially for small and impotent economy with the delay in economic development. To make the impossible possible, Serbia needs brilliant statesmen with the clear vision for new geopolitical positioning of the country and pro-reform mindset as well as skilled technocrats to execute multi-pronged structural reforms to redirect and accelerate the growth and, by doing this, to reignite income convergence with the EU. Shortly, country needs strategic leadership. If you don’t have a strategic leadership, you are probably a part of someone else’s strategy.

What is the main manifestation of strategic leadership in Serbia concerning the new global normality? First of all, strategists must address geopolitical risks to economic development instead of covering them up. They need to equip themselves with a broader perspective, expanded outlook and the will to settle open issues. Serbia must find sustainable balance between its own interests and those of the EU and other global players, on which it depends in numerous regards and towards which it is approaching. In order to do that, the leaders must confront major dilemmas and painful choices and act consistently.

Buying the time and being stuck in the middle might be dangerous geopolitical fault lines. Populism has never led to sustainable economic development and political stability. From economics perspective, the imperative is achieving compatibility in institutional setting with the EU. In case of achieving that tenet, the rhythm of geopolitical positioning would be less significant. Internally, Serbia must reorient itself toward relevant people like entrepreneurs, unemployed, in most cases, educated youngsters, and technocrats. To this end, Serbia must outdo itself. Land-locked country should not be mindset-blocked. Mindset is important, but mindsetting is critical.

In new economic policy, the major challenge is to reconcile fiscal stability and growth. Fiscal consolidation is in progress, inflation is under control and growth rate is in positive territory. But without strengthening reforms, these achievements are not sustainable. Serbia must continue with the policy of hard budget constraint, downsize public administration while reducing state footprint, tackle the legacy of burdensome public sector, escape fiscal inflation through transfer of funds released from rightsizing of public sector into investments, energize reforms inspired by a full compatibility of institutional setting with the EU, and start with industrialization based on new industrial policies. Debt servicing and balanced budget require tradable sectors expansion. The EU-like institutional setting, small but efficient state, business-friendly mindset of politicians, dual system of education, science focused on tradable sectors and sustainable health care are prerequisites for intelligent investments in private and state sectors.

In the hope that you will be able to adjust your schedule and make a valuable contribution to resolving the foregoing issues, we would like to invite you to take part in this interactive event, which aspires to be a true festivity for economists and business practitioners as well as a source of viable ideas for policy makers. Some observers assume that Forum will not allow for much more than an annual update and marching orders from the top. Our thought is that in every action or inaction, there are hidden values. These values always express themselves somehow. Moreover, ideas flow across the forum’s events, forming the Kopaonik Consensus and laying the groundwork for genuine collaboration afterwards. Just the same, we will take stock of the commitments from the last year’s Forum and pave the way to the next one.

As organizers of the Forum, we really seek to cultivate a network of relevant people and, by doing so, to create the structure of interactions in which there is a lot of discussion, debate, dialogue, and knowledge sharing. We seek to establish ourselves as a true force for new ideas in Serbia. Again, the choice is up to you!