Over the past decade, Serbia’s information and communication technology (ICT) sector has experienced strong and quick growth; a development that has largely occurred under the government’s radar.

The comparatively small ICT sector, which has grown at an annual rate of 25%, and is now responsible for 1.7% of the country’s GDP, is at a crossroads. On the one hand, it needs the government’s attention so that the regulatory framework, tax reforms, and the rule of law could be improved to continue with robust development. On the other hand, the sector must protect itself from the kind of attention that would enable the authorities to exert undue political influence on businesses – a practice well documented in other sectors considered to be profitable.

Impact

  • Relatively small, but very heterogeneous, Serbia’s ICT sector consists of thousands of freelance programmers and small or medium-sized companies. Most entities are subcontractors and outsourcing partners of large software development companies, and their services represent 70-75% of all ICT exports. With an average annual growth of 25% (2010-2015), the ICT sector in Serbia is ranked second in the wider Central and Eastern European region - second only to Lithuania. However, further sectoral development may be hampered by its relatively small size, and poor structural support from the government.
  • The sector has shown resilience in the face of economic crisis, and has successfully overcome Serbia’s negative demographic trends. In part, this is because it has been almost completely ignored by the government and influential oligarchs; as such, it has essentially been shielded from illicit political influence and manipulation – trends seen elsewhere in the country’s economy.
  • Inadequate investments in the education system, and continuous migration of the young and educated, is having an impact on the workforce available to the ICT sector. It is estimated that software development companies in Serbia need between 15,000-20,000 new ICT professionals; it would take ten years for the country’s universities and schools to produce that number of experts. However, excellent working conditions and comparatively good salaries may attract job seekers from neighbouring countries if the government moves to improve the general business environment and enact broader tax reform.
  • However, the government’s newly-discovered interest in the fast-growing sector is, in fact, a double-edged sword: the technology companies need government support to continue developing, but they also need to limit the toxic exposure to undue political (and associated oligarch) influence and manipulation.