Jorgovanka Tabaković: Continuous improvement of the business
environment
Speech by Dr Jorgovanka Tabaković, Governor of the National Bank of Serbia, at the
meeting with the representatives of the French-Serbian Chamber of Commerce, Belgrade,
15 March 2016.
* * *
Your Excellency Ms. Moro,
Ladies and Gentlemen,
It is a pleasure to speak here today. First of all, I wish to thank you for organizing this event.
As the Governor of the National Bank of Serbia, I am here with my associates to share with
you the experience of our past cooperation with entities founded by investors from the
French Republic, and to ensure this cooperation grows further in the period ahead. As the
central bank of this country, we have had the opportunity to influence not only financial and
banking cooperation, but also, indirectly, economic cooperation with the French Republic,
and we will be glad to do so in the future as well.
France has traditionally been a friend of Serbia, and that is something our people, with a
history riddled with tremendous challenges, will never forget. Not far away from here stands
the impressive monument of our gratitude to France. Our future cooperation, in the spirit of
modern times, will definitely focus on the economy, especially as France is a respectable
member of the European Union, to which we also aspire. For that reason in particular, we are
happy to see every French investment in Serbia and each type of economic association,
such as this joint chamber of commerce.
Data collected and published by the French-Serbian Chamber of Commerce reveal a very
positive trend in the field of economic cooperation, especially during the last couple of years.
There is, however, room for further growth, and that is, among other things, why we are here
today. As you well know, the National Bank of Serbia is an institution with broad powers,
each of which we seek to exercise with a maximum degree of professionalism and
coordination, in order to achieve the best results.
Speaking of French investment in the services sector, I must definitely single out financial
services which are the subject of direct supervision of the National Bank of Serbia and
include, in particular, commercial banking, insurance, financial leasing, and voluntary
pension funds. I am happy to say that Serbia saw direct investments in each of the above
areas through the establishment of companies with majority French capital.
French investors were among the first to enter Serbia's commercial banking sector and have
so far achieved stable performances and an excellent reputation. With us here today are the
representatives of "Credit Agricole", "Societe Generale Srbija" and "Findomestic BNP
Paribas" and I would like to use this opportunity to greet them. French entities are relatively
new to the Serbian insurance sector. We expect much of them, especially as the local
insurance market has great potential and needs drivers to kick off development. To bring this
industry closer to contemporary international standards, the National Bank of Serbia has
drafted and adopted new, modern regulations. I would also like to welcome the
representatives of "Societe Generale Osiguranje" and "AXA Osiguranje", while recalling that
the first greenfield license issued by the National Bank of Serbia in the insurance sector was
granted to a French investor - "Credit Agricole". Today, French capital is present in the agent
and broker network of the insurance industry as well, through "Gras Savoye". In the field of
financial leasing, we have "Sogelease" and "CA Leasing". As a result of market consolidation
in our voluntary pension funds sector, "Societe Generale" is no longer engaged directly in the
provision of these services, but remains present in this segment, providing custody services
to all voluntary pension fund management companies through its commercial bank.
I believe that each of the above names is in itself a guarantee that the National Bank of
Serbia has created a good investment environment in all financial services coming under its
remit, by generating legal certainty for setting up and doing business and by contributing,
through its supervisory activities, to the strengthening of the market and ensuring better
protection of all participants, consumers and investors alike. As most of the representatives
of these financial institutions are also active in the Foreign Investors Council, they can
confirm that we were most cooperative in drafting current regulations to our mutual
satisfaction. This is the standard of work I set out to achieve when I became Governor of the
National Bank of Serbia, and it is the standard to which I will adhere in the future. I believe
the best results can only be achieved through coordinated efforts, which will be continuously
adjusted and enriched by our mutual practical experience.
On the other hand, I feel quite certain that, when in the role of consumers of banking,
insurance, leasing or voluntary pension funds services, members of the French-Serbian
Chamber of Commerce who are active in the area of industry and agriculture fully appreciate
the work and the results of the National Bank of Serbia with regard to regulating and
ensuring the stability of that part of our financial system.
In addition, the National Bank of Serbia keeps making efforts to influence the business and
investment environment in Serbia in order for it to remain stimulative for maintaining current
and attracting new foreign investment. According to the law that regulates the activities of the
National Bank of Serbia, it is responsible for achieving and maintaining price stability,
contributes to maintaining and strengthening the stability of the financial system and supports
the pursuance of economic policy of the Serbian Government.
The National Bank of Serbia has achieved the objective of price stability. Inflation averaged
at 1.9% in 2015 and we expect it to stay low in 2016. Low and stable inflation, enjoyed by
Serbia today and for close to three years already, is imperative for preserving the real value
of wages and pensions but also for creating a predictable business environment. Because
Serbia is a small, open end euroised economy, the exchange rate represents an important
factor of financial stability and certainty of doing business. Larger oscillations of the
exchange rate substantially hinder the maintenance of price and financial stability. All of us
living and working in Serbia, corporates and households with loans to repay, are well aware
of this fact. Hence, maintaining relative stability of the exchange rate is one of the important
factors for strengthening the business and investment environment, contributing to higher
investment and lower country risk premium. We have no dilemma over this and remain
unwavering in our commitment to achieving stability in all respects - price stability, financial
stability, and relative stability of the exchange rate. With regard to the exchange rate, we
achieve stability by preventing excessive short-term oscillations in the foreign exchange
market. Foreign investors in particular have been highly appreciative of our results in this
respect, pointing out that this parameter is of great significance for their business. And that is
why I am proudly emphasizing this particular aspect today.
Also, by continuously trimming the key policy rate from May 2013 onwards, we have created
room for a recovery in lending and further economic growth. The fall in interest rates was
indeed one of the factors behind acceleration of economic growth. Today, interest rates on
dinar loans of corporates, households and the government are at their all-time lows since the
adoption of the inflation targeting regime. Interest rates declined by as much as up to
5 percentage points in 2015 relative to the previous year. The numbers speak for themselves
- we have achieved a huge reduction in costs for corporates, households and the
government. Economic growth in Serbia is also supported by net foreign direct investments
which came at EUR 1.8 billion, rising by 45.6% from a year earlier. The fact that, today,
investments in Serbia are channeled into a large number of projects, and that they originate
from a larger number of countries, indicates that companies which decided to invest in Serbia
are sure that they have made a good business move. And here, we must not forget to
mention domestic investors which we consider equally important and valuable.
By achieving successful coordination of monetary and fiscal policies, while ensuring a clear
division of powers among different institutions, we have strengthened our credibility with all
relevant entities considering the prospect of investing in Serbia. If I were to summarize the
results achieved by our institution with regard to the overall investment climate in just one
sentence, I would point out: low inflation rate, record low interest rates, anchored inflation
expectations, relatively stable exchange rate, stable and resilient financial system, higher
investment loans, increased confidence in the dinar coupled with higher household borrowing
and savings in the local currency. That we are not the only ones who say this is confirmed by
data and the assessment of credit agencies and relevant international institutions. We have
also enjoyed excellent cooperation with the International Monetary Fund, providing maximum
contribution to positive signals coming from that important institution, the arrangements with
which lend major support to our economic stability.
In particular, the National Bank of Serbia strongly supports the commitment of the Serbian
Government to European integrations and has taken direct part in this process, not only
through negotiations, but also through a series of other activities aimed at harmonizing
regulations and creating a better and safer investment environment, following the lead of
countries such as France. We are proud to say that all of the above has been achieved by
relying on our own resources, bravely facing all challenges coming from the international
environment and global financial flows. I therefore hope we will continue to enjoy your
understanding and support, and will fully reciprocate it, to our mutual satisfaction.
Finally, allow me to add a few facts regarding French-Serbian economic and cultural
cooperation. The National Bank of Serbia has had intense cooperation with the Bank of
France, but also with the French agency for prudential supervision of financial institutions.
The Bank of France took part in the technical assistance project for strengthening the
institutional capacities of the National Bank of Serbia, thereby continuing, in the best possible
way, the cooperation begun in late 19th and early 20th century when the French central bank
was printing Serbian banknotes. In honour of this fact, an exhibition dedicated to the
cooperation of the two central banks was organized in the Banque de France a few years
ago, while the International Day of Francophonie is celebrated in the National Bank of Serbia
each year. With regard to financial indicators, the Republic of Serbia regularly services its
debt obligations to the French Republic, while the French Republic has donated over
EUR 16 million to the public sector of the Republic of Serbia over the past eight years. The
value of French direct investment in Serbia has so far exceeded EUR 800 million. This is an
honour for us, but also an obligation, and the National Bank of Serbia will continue to be one
of the pillars of French-Serbian cooperation.
Thank you.