Serbia

Feasibility study for the project “New Economic Opportunities for Returnees and Local People in Southeast Serbia”

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Executive Summary

This study has been elaborated in order to respond to the needs of CARE International Balkans for the design of the project “New economic opportunities for returnees and local marginalised local people in South-East Serbia”. The research is comprised of several approaches with the aim to deliver sufficient information and data on prospects for the successful implementation of the planned action: information on possibilities for socioeconomic inclusion of returnees (in Serbia) and prospects of economic improvement for other groups of citizens vulnerable to migration to western countries.

Purpose of this study is to provide a sound basis for developing a project concept and proposal, by identifying project preconditions, opportunities and risks for its implementation.
This study provides relevant information on the socio-economic status of returnees and vulnerable local population, their capacity for economic engagement and employment, access to the labour market, as well as economic potential of local business environment.

CARE International Balkans as the lead organization has selected two partners from civil society organizations, ENECA and NEXUS, as project partners which are situated in the regions in which the project would be implemented. The initial project idea has defined geographical coverage which would include 6 administrative districts in Serbia, concentrated in South East Serbia (districts of Pcinj, Jablanica, Nis, Pirot, Bor and Timok). According to the Population Census conducted in 2011 in Serbia, the population of 6 identified districts totals to 1 089 142 inhabitants of which 481 576 are females. These 6 districts make up 15.15% of the overall population of Serbia according to the 2011 Census. Of the 32 local self governments, 21 are classified in the 4th category of development, 5 are in the 3rd category of development, 4 are in the 2nd category and only 2 (Nis and Bor) are in the 1st category of economic development defined by the Regional Development Agency of Serbia.

Additionally, a large number of the LSGs in the 4th category are additionally classified into the group of devastated areas/LSGs.

The specific regions, South and East Serbia, are characterized as the poorest areas of the Republic of Serbia. As stated, listed districts had a population of 1 082 004 inhabitants in 2011, but the expectations are that this number has drastically reduced since the census.

Unfortunately, migration from these regions is devastating in respect to the demographic structure of the population. A huge number of young people have migrated from the region to larger cities in Serbia but also have left Serbia and went abroad in search of better living conditions. One of the main reasons for the almost systematic outflow of young people is the reduced employment possibilities and offers which exist.

In the first quarter of 2020 the corona virus outbreak became a major concern for the health of global population, as well as for the global economy and international projects implementation. The Republic of Serbia has also been affected by the pandemic, but with adequate prevention and protection measures, it responded quickly to contain the impact.
According to WHO forecasts, it is possible that a new pandemic wave might follow at the beginning of autumn. In that regard, it is necessary to adjust the project implementation to such conditions, to recognize potential risks and anticipate adequate mitigation measures.

According to statistics from the National Employment Action Plan for 2019, in the second quarter of 2018, the highest employment rate was in the Belgrade region (51.5%) and in the Sumadija and Western Serbia region (49.1%). In the Region of Vojvodina this rate was 48.1%, and the lowest value was in the Region of South and East Serbia (45.3%).
The unemployment rate was highest in Region of South and East Serbia (15.6%). In the Region of Sumadija and Western Serbia it was 12.6%, and in the Belgrade region 10.1%.

The unemployment rate was the lowest in the Region of Vojvodina (10.0%).

In Serbia, unemployment and general economic inactivity of citizens is high, particularly among women and youth. The number of unemployed end of 2017 was 618.826 and,

particularly alarming; around 1 in 5 persons in the age group 15-24 was not in employment, education, or training (NEET). Economy is in no state to generate employment: due to a high government debt employment in the public sector is officially stopped several years ago and the private sector is underdeveloped and needs support in order to create new jobs.

One of the key challenges of Serbia is related to growing disparities in socio-economic development of different country parts. Strong disparities in economic development of Serbia’s territories are caused by long-standing deficiencies in key factors of competitiveness – poor infrastructure, maladjustment of workers to market conditions, insufficient support for business, and inadequate innovative capacity of enterprises, a significantly degraded environment and resultant low investment attractiveness of territories.

Disparities have significantly increased during the socioeconomic transformation to the market economy, when territories with low level of competitive and comparative advantage did not manage to catch up with leading growth poles of the country.

Serbia is attempting to challenge unemployment through attraction of investors and through different approaches, all in the aim to improve the living conditions and to motivate young people to remain in Serbia. As a country on its accession road to the EU, Serbia must be prepared for that membership.

The European Union has set itself a new strategic goal for the next decade: to become the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion. Achieving this goal requires an overall strategy aimed at:  preparing the transition to a knowledge-based economy and society by better policies for the information society and research and development, as well as by stepping up the process of structural reform for competitiveness and innovation and by completing the internal market;

 modernising EU social model, investing in people and combating social exclusion;
 sustaining the healthy economic outlook and favourable growth prospects by applying an appropriate macro-economic policy mix.

The Republic of Serbia has entered the accession processes into the EU and faces many challenges along the way. One of the biggest is the difficult economic situation in the country. The labour supply in Serbia is high, which is shown by high rate of unemployment.

On the other hand, the demand for work is also growing. This should be resulting in a fall in the unemployment rate. However, this is not happening, because of a big discrepancy between the supply and demand of the workforce, which is probably, in addition to insufficient level of economic activity, the biggest problem for a significant reduction in unemployment. The main cause of the big gap is insufficient and obsolete knowledge between supply and demand of the unemployed. Knowledge of employees, and especially the unemployed, is often outdated, because they are related to obsolete technologies, which is a consequence of Serbia’s great technological lagging behind. That is why education reform, especially the secondary education, is very important and urgent, in order to adapt labour supply to demand. In addition to these circumstances, it is necessary to have a clear direction for an efficient labour market. The fact that during the 1990s there was a turning point and increasing poverty and changing the structure of the population, because of the great influx of refugees and internally displaced persons, and the large outflow of young people abroad and increasing participation of elderly, the ill and dependent persons. All these changes greatly affect the supply of labour and work force, both quantitatively both qualitatively, and that is why it is necessary to adjust the strategy for increasing employment.

The labour market situation in Serbia remains critical. Low labour market participation and low employment rates – especially among women - as well as a high level of informal employment, together with substantial skills mismatch and inadequacies of human capital development represent considerable challenges for the Serbian labour market as the economic restructuring continues. Recent increases in employment and in the employment rate should be further analysed. Very high youth unemployment and high NEET (not in employment, education, or training) rates are serious concerns. The budget earmarked for active labour market measures is insufficient to address the high level of unemployment, notably long-term unemployment, informal work and youth unemployment and to face future challenges, notably the large employee redundancies. Sufficient attention should also be paid to adult education and training.

Cooperation between the employment offices and training institutions should be strengthened. Measures need to be taken to tackle informal work which continues to be an obstacle to increasing regular employment. Also a thorough analysis of the underlying causes of informal employment is needed urgently. As regards administrative capacity, while the NES staff are generally competent, its capacity is curbed by its increased workload and limited new recruitment.