Who will implement the knowledge economy in Serbia?

The embassies of Canada and the Federal Republic of Germany stand almost opposite each other on Belgrade’s Kneza Milosa Boulevard. Almost every day, dozens of young Serbian men and women are waiting in front of their entrances to obtain work or study visas. This scene would seem to contradict Serbia’s economic data, which record a limited impact of the pandemic in 2020 and economic growth of around 7% in 2021. If companies in Belgrade and Novi Sad are competing to offer attractive working conditions and salaries to workers with experience and skills, then emigration, intellectual and other, would today represent more a form of political protest than an economic necessity.

Inevitably, doubts then arise as to whether the ambition of development based on the knowledge economy can be implemented in a country afflicted by a long demographic crisis, significant intellectual emigration, and a fragile and poorly funded education system.

Yet the phenomena are much more complex, starting with emigration, which is no longer a one-way street.

According to official data, between 2011 and 2018, 175,000 people under the age of 30 emigrated from Serbia, of whom 19,000 were young people with university degrees who chose uncertain future mostly in Germany, the United States, Austria, Switzerland and Canada.

This year, the Vienna Institute for International Economic Studies published an in-depth cohort study on emigration in the Western Balkans between 2010 and 2019, showing that between 2015 and 2019, there was a negative migration balance in Serbia of 40,000 people aged between 15 and 39, of whom 18,500 were aged between 25 and 34. However, there is a positive migratory balance among Serbs with a higher level of education. The dynamics are basically as follows: people get their bachelor’s or master’s degrees at foreign universities and, increasingly, after graduating or gaining a few years of experience abroad, they return to their country of origin. Those with a university education tend to stay in the country, while those, sometimes age 35 and over, with a medium or basic education, often try to emigrate later.

From 2010 to 2019, more than 2,000 first visas were issued to allow Serbian students to study at universities in the EU28. In the same period, the number of foreign students in Serbian universities reached almost 12,000. Although 54% of them come from Bosnia-Herzegovina (i.e. they are Bosnian Serbs) and 26% from Montenegro, there is a growing component of students from countries that are neither Slavic nor Balkan, such as Libya, Iran, Syria, Turkey, Saudi Arabia, although still in the order of a few dozen per country.

Of course, many foreign students will return to their country of origin at the end of their university studies, but there is no doubt that an increasing number of young people from the Near East are choosing Serbia for a future perspective or as a stepping stone to the European Union.

In fact, if signals of trust towards Serbia seem to come from young people with higher education and immigrants, the policies of attracting specialised workforce, implemented by some countries such as Canada and Germany, explain our opening statement. In late 2015, Germany launched Germany’s Western Balkan Regulation, a privileged channel for issuing work permits that has certainly reduced the number of illegal entries into this Teutonic country, but it is also part of a “brain and arms scouting” strategy that the Germans implement in the Balkans to meet the needs of their companies in the segments such as construction or personal assistance, as well as the need for doctors, highly qualified professionals and students with high potential.

Canada’s plan is to grant more than 1.2 million permanent residence permits between 2020 and 2022 to cope with an aging population and support the country’s economic growth. Emigration of skilled workers from Serbia is welcome and Toronto is usually their chosen destination. With an average hourly wage of $32, this subarctic country is even more attractive in this respect compared to the €22 you get in Germany.

An endless demographic crisis

While the COVID pandemic curbed emigration in 2020 and made many Serbs who had lost their jobs abroad return to Serbia, the pandemic has not slowed down the country’s demographic crisis, quite the contrary. Between January and October 2021, Serbia recorded a 24.9 per cent increase in the number of deaths compared to the same period last year (108,379 against 86,798), while the birth rate decreased by 1.5 percent over the same period, with an overall decrease in ten months of 57,405. In light of these numbers, which are as indisputable as death, the actual impact of Covid-19 in Serbia should also be weighed.

Between emigration and negative birth rate, the country, which in 2019, had a population of 6,963,764, now has 6,871,547 inhabitants, with a net negative balance of 92,217 people in less than 18 months. As of the first of July this year, the depopulation trend compared to the previous twelve months has increased by 6.7 per thousand.

In the face of these pitiless numbers, the state’s financial help in the amount of 300,000 dinars for the first child has aroused impatience, if not anger. The reduction of social and psychological dynamics to the merely monetary aspect is an indication that the rulers do not understand that the Serbs are not having children, not because they are poorer than before (indeed, the fertility rate is usually higher among poorer countries), but because they are less confident about the country’s social and political future, despite the economic development. This is something the country’s ruling class should reflect on at length – having a child is an act of confidence in the future, not an industrial investment to be subsidized.

Demographics also help us to disentangle the data on the impact of emigration as a whole. While in 2020 there were 13,991 more deaths than in the previous year and 1,791 fewer births, in the first ten months of 2021, there were 21,581 more deaths than in the same period last year and 779 fewer births. Thus, despite the fact that the best-educated Serbs have held out well against the alarms of emigration, and despite the growing influx of foreign workers who settle in the country for medium- to long-period, half of the country’s demographic decline can be attributed to emigration, mainly of people with medium to low levels of education, who do not accept the low wages the country offers for low-skilled jobs.

There is a recent tendency to draw in Asian workers to meet this shortage. Immigration to Serbia for work or family reunification purposes is growing year on year. In 2015, 7,103 first temporary residence visas were issued, rising to as many as 11,119 in 2019. Of these, 42% are work visas (granted mostly to Chinese, Russians, Ukrainians and Turks) while 40% come from family reunification applications, affecting mainly Russian, Chinese and Libyan citizens. These are mostly young people in their 30s. The number of people from India and the Near East who intend to build their lives in Serbia is increasing. This trend will pose unprecedented challenges, in terms of security and social relations, to a country that has so far only known the consequences of emigration.

The demographic crisis also has a strong impact on the country’s ability to cultivate and nurture talent, for the simple reason that the country has lost almost a tenth of its population in twenty years, and thus has consistently fewer young people to train and bring onto the labor market, regardless of their qualifications.

Public schooling in transition

In 2020, the budget of the Ministry of Education and Scientific Research was 226 billion dinars, an increase of 8.34% compared to the previous year, which was subsequently raised to 240 billion. University education saw a very small increase in appropriations, just 1.35%.

The PISA (Programme for International Students Assessment) tests held in 2018 found major shortcomings in the preparation of Serbian students, despite the celebrated successes of individual students in some international competitions. Compared to the OECD countries’ average of 77%, only 62% of Serbian students aged 15 reach a level 2 in reading and comprehension of a medium-length text, while just 3% reach the more complex and implicit levels of text comprehension (OECD average 9%). Maths is no better, with only 60% of Serbian 15-year-olds able to understand trivial logic such as converting between different currencies, compared to 76% of the OECD average or 98% of students in major Chinese cities. Barely 2% of Serbs achieve top marks in science subjects, compared with the OECD average of 7%. More worryingly, results have deteriorated since the last two surveys, especially in the ability to understand texts. The PISA tests estimated that 37.7% of Serbian 15-year-olds were functionally illiterate in 2018.

According to the most recent data presented by the Ministry of Education, out of the approximately 250,000 students enrolled in degree courses or tertiary schools, around 45,000 students acquire a degree each year, 60% of them in public universities, 17% in private universities and 23% in specialist schools. In detail, each year around 1,000 economics graduates from public universities and between 700 and 800 with an economics degree gained at private universities enter the labour market. In 2019, there were about 2,500 science and technology graduates from state universities (excluding medicine, biology and pharmacy), of which about 1,810 graduated in various branches of engineering and just 227 in mathematics and 55 in physics. Specific degree courses in information science are offered by private universities, such as Singidunum, Metropolitan and Union. These numbers are totally inadequate to the ambitions of a country that intends to focus on new technologies and high value-added production.

However, the government must be credited with the fact that the overall allocation for education has been steadily increasing in recent years. In the Law on Budget for 2022, 252.8 billion dinars have been allocated for education, an increase of 12 billion dinars over the amount set aside in last October’s budget maneuver for 2020.

These funds will be invested in three structural reforms that the Serbian education system will undergo over the three-year period, from 2022 to 2024 – the introduction of a ‘Youth Guarantee’ in Serbia to encourage job placement or the acquisition of skills that can be used in the labor market; the design and provision of specific qualifications geared towards the needs of the labor market; and the digitalization of the national education system, with the creation of a single information system for education.

These are ambitious goals, in line with Prime Minister Brnabic’s vision of developing the knowledge economy. But to date, quality education in Serbia is often a bargain for wealthy families, i.e. families who can pay for their children’s education abroad, be it at a university, master’s or doctoral level. It is often the young people who return to the country who set up and develop innovative businesses, especially in the field of ICT. The challenge for the next few years will be to broaden the base of Serbian students having access to higher and post-graduate education, despite the demographic contraction, starting from more inclusive schools and increasing the number and value of state-funded scholarships that allow them to enroll in bachelor and master courses abroad.

In the advanced services sector, as in the ICT sector, the country has almost reached full employment, competition for the best talent is fierce, while for years, many companies in the digital economy have been trying to convince professionals with specific skills from all over the world to move to Belgrade or Novi Sad.

To a certain extent, the country has already run out of skilled resources to fuel the transition to the digital economy and value-added services, and the number of those entering the market for the first time each year is extremely low compared to the demand. In this context, are the successes achieved in recent years by several Serbian companies in the digital sphere replicable? Is it possible to manage this economic transition and attract talent from other countries without also supporting a political and social evolution towards a less authoritarian model? Are the successes of city/states like Singapore and Dubai in decoupling economic development from civil and political freedoms applicable in a country like Serbia? Aren’t the recent protests against the damage to the ecosystem that the Rio Tinto investment will cause also an indication of new expectations in terms of quality of life from the more educated, international and socially advanced stratum of the population?