Improved business inspections can transform Serbia’s investment climate

By Bojana Gajic

Improved business inspections can transform Serbia’s investment climate

If you ask entrepreneurs in Serbia their opinion of business inspections, the chances are that you will receive a rather negative response. Overlap of different inspections, changing regulations and difficulties in accessing information explain why business people often label them a burden.

“Frequent visits by various inspections which would often ask for the same information, check related things, and for which we needed to allocate our time and people, used to impose additional burden on our work,” says Dragan Penezić, Director of Regulatory Affairs at British American Tobacco.

Inspections are omnipresent. They control everything: from the quality of the air we breathe, food we eat, and the electronic appliances we use in our daily lives. Provided they are efficient, inspections are crucial for enforcement and compliance mechanisms and for fostering a secure business environment. The efficiency of inspections affects an economy’s image and can enhance or undermine its attractiveness as an investment destination.

Things are now changing in Serbia thanks to a comprehensive business inspections reform conducted by the Ministry of Public Administration and Local Governments, with the support of the EBRD.

“We believe that functioning business inspections play a crucial role in securing a healthy business environment. We support the creation of a system which will provide for greater respect of rule of law and security for Serbian citizens and businesses,” says Zsuzsanna Hargitai, EBRD Regional Head of Western Balkans.  

Step by step

The reform has been running for over three years now, and has focussed on three key areas: streamlining regulations, merging smaller inspections, and modernising work with the introduction of digital tools.

The process was based on dialogue with all relevant stakeholders – government, inspectors and the business community, accompanied by a key ingredient in the form of strong political will.   

The Minister of Public Administration and Local Government, Branko Ružić, recognised the reform as pivotal in the fight against the grey economy.

“Inspection reform is also important for creating a better, more predictable business environment, which is key for private sector development, job creation and a higher budget for Serbia,” he says.

However, despite strong political will supporting the reforms, their implementation was not so smooth.

“In the beginning, inspectors didn’t welcome the reform. Most of the current inspectors have been in their jobs for years, often even decades, and they are used to a certain methodology. As with any reform, people usually resist changes, but once they start experiencing benefits, they shift their perceptions,” says Dragan Pušara, Head of Coordination Commission for Inspections Oversight, a body created to implement the reform.

Expected results

Currently, 43 different business inspections exist in Serbia. By the time the reform is completed, this number should drop to 15. In addition to streamlining the work, the reform has already made good progress in modernising it.

Until recently, inspectors were logging all their work on paper. But from now on they will use “eInspector,” software which will harmonise their work, improve coordination and create a database of Serbian businesses.

“I expect this reform will bring transparent and coordinated work of inspectors, especially thanks to eInspector, but also time savings in the future planning of inspection visits. I hope we will achieve coordination with other relevant bodies in the interests of businesses and citizens,” says Olivera Topalov, Head of Industry Department, at the Inspection for Environment Protection.

The reform enjoys the strong support of the Prime Minister of Serbia, Ana Brnabić, who is an ardent believer in the digitalisation of public administration.  

“The inspectors are now paying fewer visits to businesses, nurturing their advisory role towards loyal businesses, and the inspectors finally have adequate working conditions,” the prime minister has said.

Dragan Penezić from British American Tobacco adds: “There are no more obscure and hidden requests from inspectors, and I am pleased that the economy has started to be divided into "good" and "bad" and fair business is appreciated.”

Next steps

The immediate next step will be hiring more inspectors and ensuring better working conditions, as announced by the Minister of Public Administration and Local Government, Branko Ružić. Serbia, in fact, has 2.5 times fewer inspectors per capita compared with the EU average and their average age is 54 years.

Inspectors will in future benefit from continuous professional development to help them learn new regulations and tools, but also help improve the image of inspections.

This improvement will go in parallel with the decrease of single inspections. The current number of 43 different inspections has proved to be too many and too complex to coordinate.

Additional benefits

The second phase of the reform envisages the creation of a centralised contact centre, where citizens and businesses will be able to report problems and irregularities. Instead of running from one office to another and submitting complaints in convoluted paper files, citizens will in future be able to report irregularities in a much quicker and simpler way.

The hope is that this centre will serve as an easy-to-use communication channel which fosters interaction between citizens and the state, giving citizens an active role and ownership in solving problems in their society.

It is expected that this should significantly help in fighting the shadow economy, as experience shows that the biggest number of such entities are discovered after they have been reported by either citizens or other legally run businesses.   

The set-up and operations of this contact centre will be supported by the EBRD and funding is expected to be secured through EBRD donors.