1 #1000preduzeca Methodology

METHODOLOGY Fieldwork: Between 6 September and 5 October 2015 Target population: Private business entities in Serbia with 3 or more employees Sample frame: List of all business entities (enterprises and establishments) registered with the Serbian Business Registry (2015) Sample size: 1032 business entities Sample type: Representative, one-stage stratified sample Stratification: By region, economic activity, and size of business entity Data collection method: Face-to-face interviews in company offices Average duration of interview: 50 minutes

BUSINESS DEMOGRAPHICS – WEIGHTED DATA Size Region Industry Form of incorporation

Business demographics 2 Business demographics #1000preduzeca

Item Finding Participating / Invited 1,032 / 4,000 Founded before / after 2000 42% / 58% Profitable / Loss-making 2013-2015 2013: 90% / 8% 2014: 90% / 9% 2015: 92% / 7% Number of employees

Employees Owners / Managers 42% 58% 33% 67%

BUSINESSES SELL 2/3 OF PRODUCTS/SERVICES IN HOMETOWN Collaboration with public sector Base: Privately-held business entities with 3 or more employees 2016 (N=1032)

Transparency, corruption, regulatory framework 3 Transparency, corruption, regulatory framework #1000preduzeca

Partially agree + Agree + Completely agree (3+4+5) TRANSPARENCY To what extent do you agree or disagree with the following statements: 2016: 63% Partially agree + Agree + Completely agree (3+4+5) 2015: 62% 2014: 55% 2013: 45% 2012: 27% 2011: 24% Transparency and predictability of doing business in Serbia have increased over the past 12 months. Base: Privately-held business entities with 3 or more employees 2011 (N=913), 2012 (N=1020), 2013 (N=1029), 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

Partially agree + Agree + Completely agree (3+4+5) PUBLIC DIALOGUE To what extent do you agree or disagree with the following statements: Partially agree + Agree + Completely agree (3+4+5) 2016: 60% 2015: 59% 2014: 58% 2013: 44% 2012: 32% 2011: 26% The quality of public dialogue on macroeconomic and fiscal issues has improved over the past 12 months. Base: Privately-held business entities with 3 or more employees 2011 (N=913), 2012 (N=1020), 2013 (N=1029), 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

REGULATORY FRAMEWORK To what extent do you agree or disagree with the following statements: The burden of laws and regulations decreased in the last 12 months Business ability to participate in reforming laws related to the business environment has improved in the last 12 months Base: Privately-held business entities with 3 or more employees 2011 (N=913), 2012 (N=1020), 2013 (N=1029), 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

Lower awareness of regulatory reforms To what extent do you agree or disagree with the following statements: Total Businesses Sole proprietors Base: Privately-held business entities with 3 or more employees 2011 (N=913), 2012 (N=1020), 2013 (N=1029), 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

Stagnation in recent years During the last 12 months, has your company spent more or less TIME/MONEY dealing with regulatory issues when compared with the year before? 2011 2012 2013 2014 2015 2016 Base: Privately-held business entities with 3 or more employees 2011 (N=913), 2012 (N=1020), 2013 (N=1029), 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

Corruption on the decline To what extent does corruption in public administration affect your business? Blackmail, use of personal connections, and giving of gifts and money have almost disappeared between 2011 and today Impact of corruption on doing business Base: Privately-held business entities with 3 or more employees 2011 (N=913), 2012 (N=1020), 2013 (N=1029), 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

4 #1000preduzeca Regulatory framework

ADVERSE IMPACTS ON BUSINESSES (1) To what extent do the following issues adversely affect your business? Base: Privately-held business entities with 3 or more employees 2011 (N=913), 2012 (N=1020), 2013 (N=1029), 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

ADVERSE IMPACTS ON BUSINESSES (2) To what extent do the following issues adversely affect your business? Base: Privately-held business entities with 3 or more employees 2011 (N=913), 2012 (N=1020), 2013 (N=1029), 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

Construction permitting takes half as long How long did it take to obtain all of the necessary construction permits? AVERAGE TIME NEEDED TO OBTAIN PERMT 2013 9.3 months 2014 8.2 months 2015 7.7 months 2016 4 months Baza: Businesses that constructed buildings over past two years 2013 (N=96), 2014 (N=46), 2015 (N=64) and 2016 (N=69)

Moderate costs, streamlined procedure Do you agree with the following statements? Costs associated with construction permits are moderate (*Further) Simplification of construction permitting would enable me to expand my business Baza: Businesses that constructed buildings over past two years 2013 (N=96), 2014 (N=46), 2015 (N=64) and 2016 (N=69)

Major improvement to inspections Based on your experience with various inspectors, do you agree or disagree with the following statements? Base: Privately-held business entities with 3 or more employees 2013 (N=1029), 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

CONTINUED IMPROVEMENT 2011 2012 2013 2014 2015 2016 Average amount of fines imposed (EUR) 2,128 1,655 868 2,022 1,148 983 Average amount of time (in hours) spent by management 70 34 17 12 15 13 Average number of visits in the year before 5.5 4.8 3.1 2.2 2.8 Average number of visits in the current year 6.0 3.8 2.1 1.6 1.7 From 12 hours per visit on average in 2011 to 5 hours in 2015 and 4 hours in 2016 Base: Privately-held business entities with 3 or more employees 2011 (N=913), 2012 (N=1020), 2013 (N=1029), 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

Enforcement of court decisions How would you rate the efficiency of the enforcement system? By year 2016 * To ensure comparability, only negative and positive extremes are shown due to unequal numbers of missing values Base: Privately-held business entities with 3 or more employees 2011 (N=913), 2012 (N=1020), 2013 (N=1029), 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

Positive perceptions of enforcement officers Do you believe that the introduction of professional enforcement officers has improved the enforcement and collection system? POSITIVE AND NEGATIVE IMPACT OF ENFORCEMENT OFFICERS N=1,032 N=55 N=32 Base: Privately-held business entities with 3 or more employees 2016 (N=1032)

Public procurement: Average rating by year How often do the following factors affect contract awards in public procurement? From 1 to 5, with 1 being “Never”, and 5 “Very often” Base: Business entities with experience in public procurement 2011, 2012 (N varies as firms were not given option to skip), 2013 (N=293), 2014 (N=284), 2015 (N=270) and 2016 (N=288)

5 #1000preduzeca Macroeconomic policy

Shadow economy remains a threat According to your estimate, of the total number of employees working in enterprises that operate in the same industry as your company, for what percentage of employees do enterprises pay full contributions, only partial contributions, or no contributions on salaries at all? No. of respondents who see shadow economy as adverse factor 62% 2014 59% 2015 57% 2016 Base: Privately-held business entities with 3 or more employees 2013 (N=1029), 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

Improved perceptions of macroeconomic indicators How do the following factors affect the competitiveness of your business? Inflation Interest rate volatility Exchange rate volatility VAT rates Base: Privately-held business entities with 3 or more employees 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

Do businesses support lower subsidies? Which budget cuts for government services would you support in order to lower taxes? Base: Privately-held business entities with 3 or more employees 2011 (N=913), 2012 (N=1020), 2013 (N=1029), 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

6 #1000preduzeca Access to finance

Stagnating finance = stagnating growth? Where do you most frequently borrow money from to finance your business? Base: Privately-held business entities with 3 or more employees 2011 (N=913), 2012 (N=1020), 2013 (N=1029), 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

Most finance comes from businesses’ own coffers What percentage of financing for your business comes from the following sources? Irrespective of business size or industry, or whether business is incorporated as an enterprise or sole proprietor Base: Privately-held business entities with 3 or more employees 2012 (N=1020), 2013 (N=1029), 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

Expensive finance remains in demand Please indicate the type of finance you have used and how often. Base: Businesses that borrowed 2011, 2012 (N varies as firms were not given option to skip), 2013 (N=468), 2014 (N=366), 2015 (N=387), 2016 (N=328)

Collateral: Two steps forward, one step back (1) Did the financial institution you borrowed from require collateral (mortgage/pledge), and, if so, what type of asset was required? 2012 2013 2014 2015 2016 Base: Privately-held business entities with 3 or more employees 2012 (N varies as firms were not given option to skip), 2013 (N= 387), 2014 (N=304), 2015 (N=311) and 2016 (N=288)

7 #1000preduzeca Impact of reforms

Government measures seen as most positive Please say how these recent Government measures have affected the business environment Central Registry of Mandatory Social Insurance 62% 56% Simplified KEPU ledger procedures 48% 49% Abolition of employment booklets E-permitting software POSITIVE (4+5) Base: Privately-held business entities with 3 or more employees 2016 (N=328)

Most hoped-for regulatory reforms What change of regulations do you hope most for at this moment? Base: Privately-held business entities with 3 or more employees 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

Changes in 2016 No. of employees Net profits Would you say the following features of your business have increased, decreased or remained the same relative to one year ago? No. of employees Net profits Base: Privately-held business entities with 3 or more employees 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

8 #1000preduzeca How we see the future

FUTURE EXPECTATIONS 2011 2012 2013 2014 2015 2016 INCREASE And now I will ask you about your expectations in the next 12 months regarding various aspects of business, and I kindly ask you to tell me if you expect increase, decrease or no change in that area/aspect. What are your expectations for the next 12 months regarding… 2011 2012 2013 2014 2015 2016 Base: Privately-held business entities with 3 or more employees 2011 (N=913), 2012 (N=1020), 2013 (N=1029), 2014 (N=1009), 2015 (N=1008) and 2016 (N=1032)

Thank you for your attention #1000preduzeca Thank you for your attention