Domestic Investment is a Key Factor for Economic Growth

Interview with Mihailo Janković, CEO of MK Group for Blic

1. Business operations all over the world, including Serbia, last year and this year, took place in the conditions of the Chovid-19 pandemic. Therefore, this year’s Business Forum was not held in the usual time and in the usual place, i.e. Kopaonik, but was moved to May 24, and the topic was”The World After Covid-19: New Sources of Growth in Changing Business Conditions”. So what are the consequences of Covid on the economy?

During the pandemic, the balance of forces changed globally. Developed western countries also fell into recession in 2020, the biggest since the Great Depression of the 1930s. The gross domestic product of the whole world fell by 3.3 percent, in the USA that decline was 3.4 percent, and in the Eurozone even 6.6 percent. The good news is that this year, the IMF is adjusting all its estimates upwards, and it is expected that the rate of economic growth worldwide will be six percent in 2021, with growth in the Eurozone being slower, which signals that economic flows are slowly recovering. Honestly, last year at this time few people hoped for such a quick turnaround. The question is, however, how everything would end if the governments of many countries, including the Government of Serbia, did not react with significant packages of assistance to the economy and the population. Now we need to be careful, because precisely because of the expansionary monetary and fiscal policy in some countries, inflation is rising, which no one had to think about for years.

What is quite certain is that the explosive development of new digital services of the widest spectrum awaits us, but also the digitalization of traditional economic branches. Although we have been witnessing this phenomenon for a long time, it is realistic to expect additional acceleration in this area. Not to mention trends that indirectly affect the economy such as changed consumer habits, flexible work models and work from home.

2. How will Serbia cope in that world and conditions?

This year, the IMF forecasts a GDP growth of five percent for Serbia, and the Serbian government has projected a growth of six percent, which would be an excellent result. Last year, Serbia was among the five European countries with the smallest drop in GDP of only one percent. We must not forget, however, that this decline was significantly amortized by excellent yields in agriculture, and on the other hand, tourism and some other services in our country have a smaller impact on GDP creation than in some other countries. This crisis has also shown how important industry is, as countries whose economy is predominantly based on the services sector have „sunk“ much deeper.

The state reacted in time and with a package of measures provided support primarily to micro, small and medium enterprises, but that help cannot be given indefinitely. Now is the right time for every business to prove whether it is sustainable or not. Today, there is no place for those who cannot react quickly to change and adapt. Raising competitiveness, efficiency and productivity, constant modernization and innovation – this is the path that must be followed even when the pandemic is behind us.

3. How did MK Group cope with such business conditions and how much and in what direction did it have to change its business strategy? Did you use the aid that the state provided for the economy??

MK Group proved to be an extremely important factor in the economic stability of Serbia in the crisis of 2020 as well. Our company is a flexible and dynamic system that quickly adapts to changes and responds to market trends. A clear vision, strategic planning, staff quality, but also optimal corporate governance, are the foundations that allow us to successfully deal with all challenges.

Of course, at first we were focused on ensuring the safety of our employees and organizing processes in accordance with epidemiological measures, but we did not deviate from our strategic plans. Our goal is clear – leadership position and growth in the areas in which we operate. We are constantly monitoring market opportunities, promising new investments and industries with the greatest potential for growth. MK Group is recognized for its diversified business, which is also one of the greatest strengths of our Group. The fact that we did not use the package of measures that the state intended for the economy last year also speaks about the stability of the company. The effect of our decision is about five million euros more in the state budget. This is our contribution to the stability of public finances and the fight against the pandemic, because as a responsible company we were aware that such assistance was more necessary for a large number of companies.

4. Many experts tend to claim that the state gives preference to foreign instead of domestic businessmen and support the thesis with large subsidies that it gives them for new investments. How do you comment on that?
   

It is true that in the year of the pandemic, Serbia attracted almost three billion euros of direct foreign investments, more than all other countries in the Western Balkans together. Although we understand the importance of attracting foreign capital, nevertheless, no country should base its growth only on foreign investments, but must also rely on domestic, primarily private investments. This is necessary for our economy in terms of recording higher rates of economic growth.

It is true that the subsidies given by the state to foreign investors were not available to the domestic economy, but fortunately we are a strong company and we are trying to ensure competitiveness on the market with our resources. What is important to both foreign and domestic investors is economic stability, a predictable business environment, legal security, and for us that is crucial. And let’s be clear, we have nothing against foreign investors, because MK Group in Slovenia, Croatia and Montenegro is also a foreign investor. It is only important that all participants in the market competition have the same treatment, and then let the better one win. These are our expectations.

5. Despite the pandemic, MK Group invested 30 million euros in agriculture last year. Then you announced new investments for this year. Where will you invest, in your already recognizable activities, or will part of the money go to some new programs? Can the coronavirus disrupt these plans you have?

Constant investment in development is part of our business philosophy, and it is not affected by the coronavirus. Because, it is strong companies that are recognized by their willingness to invest even in a crisis. This year, MK Group is embarking on a new investment cycle of 300 million euros, which we will realize in the next three years. The goal is further growth in businesses in which we have been operating successfully for 38 years.

The precondition for new investments of this volume are certainly the excellent business results we achieved last year, despite the global stagnation of the economy. We will invest in various business segments, from agriculture to green energy, and thus increase existing capacities and expand the portfolio, in order to achieve the highest level of quality and efficiency of business. Among the planned investments are an alcohol factory, expansion of soybean processing capacity, digitalization of agriculture, improvement of production processes in the meat industry, as well as investments in renewable energy sources – wind farms and biogas plants. A special focus will be on development investments in tourism. As something current, I would like to single out an investment worth 20 million euros in the Grand Hotel in Kopaonik. Thus, our hotel will welcome the new winter season in a new look, in the year when it celebrates 40 years of existence.

6. You also entered the Croatian market, by which means have you managed to eliminate the resistance to Serbian capital in Croatia?

For a company for which tourism is one of the priorities, Croatia was a logical choice for expansion, because it is an area with great potential for further growth. It is natural that every successful company wants to go beyond the borders of its country and expand its presence in the region, after all, as do many Croatian companies operating in our market. Resistance decreases over time thanks to the results you leave behind and the way you behave and do business. If you adhere to high professional standards and offer quality, there should be no problems. They say that capital has no color, no smell, no nationality, and I hope that soon it will not matter in the region who comes from which country. MK Group implements expert knowledge, international experience, fair and transparent approach. In addition, our projects and investments generate strong value for the local economies and communities in which we operate. I believe that many would like such an investor.