- Firms in capital cities, not surprisingly, complain less about electricity cuts and more about land access. They are also more likely to face perceived skills shortages, and complain more about the macroeconomic environment and about regulation.

There are also are clear relationships between performance and perceived investment climate constraints:

- High TFP firms perceive higher constraints deriving from regulation, and complain less about finance.

- High employment growth firms face greater constraints from land access, regulation, and complain less about finance.

- Profit-reinvesting firms, and firms that have opened plants in the preceding three years, complain more about infrastructure, more about regulation, more about skills shortages, and more about property rights.

The interpretation of these results is straightforward: firms that have high productivity, are growing and investing, and that have characteristics that are associated with good performance and growth (private/foreign ownership and export orientation) are more likely to report that they face significant investment climate constraints of all sorts. The exception is finance, where poorer performers are more likely to complain they are constrained. The usefulness of these findings from the international PICS-BEEPS surveys is primarily to set a benchmark against which to compare the investment climate constraints perceived by Serbian firms.

**_Serbian evidence._** Do firms in Serbia face the same kinds of investment climate constraints as those types of firms in the rest of the world? The same methodology used above was applied to just the firms in the 2003 Serbian PICS survey. The investment climate variables are those described earlier, plus composite measures for infrastructure, taxation, regulation, macroeconomic conditions, finance, and property rights. We estimated the effects on these investment climate measures of ownership (privatized, new private, foreign-owned), export orientation, size, sector (manufacturing, agriculture, services), and location (operating in Belgrade, Vojvodina, or central Serbia).

The main results from the analysis are summarized below:

- Privatized firms face greater skills shortages and bigger constraints from business licensing (Figure 2).

- New private firms also perceive licensing as an important constraint (Figure 2).<sup>19</sup>

- Foreign-owned firms perceive greater constraints than domestically-owned firms across almost the entire investment climate: infrastructure, regulation, macro conditions, and property rights problems. The only areas in which they do not perceive greater constraints are finance and taxation (Figure 3).

- Exporters complain about excessive customs and trade regulations (Figure 4).

The characteristics of firms associated with greater perceived investment constraints are also characteristics that the earlier analysis showed was typical of productive, growing firms in the other PICS-BEEPS countries: private ownership, foreign ownership, and export activity. The exception, as before, is finance; these firms complain less about their finances, presumably because of the revenue their better performance generates.<sup>20</sup> 12