Q:
A:
Growing demand for domestic goods
Belgrade,
5 February 2005
Serbian Minister of Trade, Tourism, and Services Bojan Dimitrijevic spoke for today’s issue of daily Vecernje Novosti about the prices of utility services, value added tax, the living standards, and effects of the “Buy Domestic” campaign. The Serbian government’s official website brings excerpts from the interview.
Bojan Dimitrijevic
On the prices of utility services:
Representatives of local self-government and the Serbian government will have to cooperate in the future when it comes to prices of utility services. The government is considering adding a decree to the new law on prices to disallow hikes in utility prices without prior consent of the government. This is the case in almost all the countries in Europe, where specialised regulatory agencies create pricing policies. This is necessary in order to achieve the 9.1 percent inflation target and to prevent monopolistic behaviour of the utility companies.
On the impact of prices of utility services on the living standards:
Utility services have an influence on the overall level of prices. There’s no doubt that it will also affect citizens’ purchasing power. It is possible that wages will grow, which will offset the impact of price hikes.
On VAT and its effects:
Initial reports show that there have not been dramatic price hikes since the VAT took effect and that its impact on prices is neutral. On one hand, oil and oil derivatives are now two percent cheaper and on the other, some prices have gone up. When it comes to services, the increase in prices should not exceed three to five percent because the tax is calculated in the full price and there will also be tax refunds.
On C Market:
When it comes to C Market, the entire affair has been politicised and the government is now in a delicate position. It has to find a balance between efforts to protect a domestic company, privatisation rules, and foreign competition. Perhaps, the government could offer a credit and help the domestic economy to get organised and provide a competitive offer against Mercator or somebody else. This is a policy that, for example, the Slovenian government carried out. But our government, apparently, did not have financial means to react in that way. As this case is currently “frozen” because it is under the jurisdiction of the Commercial Court, the government still has time to change its attitude.
Effects of the “Buy Domestic” campaign:
According to reports by domestic producers and retailers, including a survey of Serbia’s 100 top-selling products, the share of local goods in total sales of retail chains has increased. Demand for domestic products has surged. We have hired a market research agency to create a questionnaire to monitor consumers’ habits on a monthly basis. In spring we will launch a video clip but the problem is that we don’t have any money for this project, which could have many media effects. This is therefore an appeal to all domestic firms to help the campaign with donations.
On possibility to reduce the deficit in foreign trade:
In the last months of 2004 the trade deficit showed a tendency to narrow. That tendency was a result of export incentives and the measures that the government had taken to legalise a portion of hard currency revenue of our construction firms. There are also restrictions, such as that concerning automobile imports, as well as non-tariff protection measures applied on textiles from China, Turkey … Also, there is a slight improvement in our economy’s competitiveness.
Representatives of local self-government and the Serbian government will have to cooperate in the future when it comes to prices of utility services. The government is considering adding a decree to the new law on prices to disallow hikes in utility prices without prior consent of the government. This is the case in almost all the countries in Europe, where specialised regulatory agencies create pricing policies. This is necessary in order to achieve the 9.1 percent inflation target and to prevent monopolistic behaviour of the utility companies.
On the impact of prices of utility services on the living standards:
Utility services have an influence on the overall level of prices. There’s no doubt that it will also affect citizens’ purchasing power. It is possible that wages will grow, which will offset the impact of price hikes.
On VAT and its effects:
Initial reports show that there have not been dramatic price hikes since the VAT took effect and that its impact on prices is neutral. On one hand, oil and oil derivatives are now two percent cheaper and on the other, some prices have gone up. When it comes to services, the increase in prices should not exceed three to five percent because the tax is calculated in the full price and there will also be tax refunds.
On C Market:
When it comes to C Market, the entire affair has been politicised and the government is now in a delicate position. It has to find a balance between efforts to protect a domestic company, privatisation rules, and foreign competition. Perhaps, the government could offer a credit and help the domestic economy to get organised and provide a competitive offer against Mercator or somebody else. This is a policy that, for example, the Slovenian government carried out. But our government, apparently, did not have financial means to react in that way. As this case is currently “frozen” because it is under the jurisdiction of the Commercial Court, the government still has time to change its attitude.
Effects of the “Buy Domestic” campaign:
According to reports by domestic producers and retailers, including a survey of Serbia’s 100 top-selling products, the share of local goods in total sales of retail chains has increased. Demand for domestic products has surged. We have hired a market research agency to create a questionnaire to monitor consumers’ habits on a monthly basis. In spring we will launch a video clip but the problem is that we don’t have any money for this project, which could have many media effects. This is therefore an appeal to all domestic firms to help the campaign with donations.
On possibility to reduce the deficit in foreign trade:
In the last months of 2004 the trade deficit showed a tendency to narrow. That tendency was a result of export incentives and the measures that the government had taken to legalise a portion of hard currency revenue of our construction firms. There are also restrictions, such as that concerning automobile imports, as well as non-tariff protection measures applied on textiles from China, Turkey … Also, there is a slight improvement in our economy’s competitiveness.
