1. Growing Sustainable Business for Poverty Reduction (GSB) in Serbia Stevan Vujasinovic, GSB Broker 27 June 2007, Brussels

2. Why GSB in Serbia?  Underdeveloped or disorganized supply chains to enable higher value- adding investment;  Uneven growth; stagnating rural areas, South and border areas of the country, marginalized populations within the informal sector with no or limited access to finance and know-how  “After-service” for companies already in Serbia looking to expand existing investments;  GSB Opportunities to date: Recycling and Waste Management, Food Processing, Biomass Fuels…

3. A significant business opportunity exists in the Serbian recycling sector… Material Metal scrap (ex Aluminum) * Adding all currently collected scrap and the total potential household scrap Source: IFC: PEP SE: “Assessment of the Recycling Sector in Serbia and Montenegro”, company interviews, GSB analysis. Description (sub-segmentsAvail material*Market size* Industrial/construction metal Vehicles Abandoned metal waste 312 43.0 mm Tons, ‘000Euros, mm PlasticsHDPE LDPE PET bottles 86 37.9 mm PaperPaperboard Office paper Newsprint 207 14.4 mm Aluminum 21 16.9 mm Industrial Aluminum Used Beverage Cans GlassBottles 24 0.5 mm

4. …but opportunity remains largely untapped with low recovery rates… *Given the relative development of the Brazilian Steel industry recovery rates are likely to be comparable to Serbia Source: IFC PEP SE: “Assessment of the Recycling Sector in Serbia and Montenegro”, company interviews, GSB analysis. Paper Ferrous metals Plastics (all types) PET Aluminum cans Glass >65% <10% 15% <5% <1% Current situation in Serbia Recovery Rate, 2006, % Paper Ferrous metals Plastics (all types) PET Aluminum cans Glass ??* 15% 38% 26% 85% 41% Best practice emerging market - Brazil Recovery Rate, 2002, %

5. …due to weaknesses across the supply chain… Households Industrial /commercial Source Separation Individual collectors Collection centers Low-value processors Who’s involved? Recycler Challenges Predominantly Roma and other poor Municipal waste Co’s SME’s MNC’s Local and foreign end users No containers No separation Low awareness No equipment No information Insufficient # Poorly located Limited scale Limited equipment Limited scale Lack consistent/quality feedstock to create end products OutcomesLow recovery rate  Lower quality / value Limited capacity Low value capture Weak economic viability Focus on low value-added activities Investments not sustainable – no investment in this part of chain Source: GSB analysis Key breakages Insufficient / non-existent

6. … and limited competition downstream of individual collectors Source Separation Individual collectors Collection centers Basic processors High value processor Source: GSB analysis Ways to drive additional competition… Natural competition due to fragmentation Competition “As-Is” Geographic monopoly Price information asymmetry Geographic monopoly High barriers to entry due to large asset base Limited number of players Price discovery (SMS) to sell to collection centre with best offer Price discovery Market entry pressure from downstream processors Paying quality/quantity premium to collection centres Buying from cheapest collection centre Creating incentives for additional processors to enter market Integrating upstream to compete against basic processors and collection centres HighLow

7. The supply chain AFTER GSB investments Increased separation Source Separation Individual collectors Small collection centers Large collection centers Improve- ments Recycler Outcomes Better conditions Better organization Increased number / better coverage Better management Appropriate scale Higher value processing Increased interest in final recycling (i.e. manufacturing new materials) Improved quality Higher recovery rates Increased collection Increased profits Sustainable profit Consistent demand for recyclables Increased productivity of existing recyclers (e.g. paper) Potential for large new investments (e.g. in PET) Source: GSB analysis Current GSB investments Creating new GSB opportunity Functioning network to supply large collection center

8. Therefore, work with GSB in:  Greenfield investments in recycling (various materials);  Forthcoming privatization of municipal waste management companies; but also in other sectors where GSB is already minimizing risks and adding value in similar ways:  Food processing (dairy milk, fruit and vegetables, meat processing);  Biomass fuels (sourcing supplies from Bosnia, Montenegro as well as Serbia); or any other sector in which your business can contribute to the achievement of Millennium Development Goals.

9. Further Information: Serbia Investment and Export Promotion Agency Vlajkoviceva 3/V, 11000 Belgrade, Serbia Phone: +381 11 33 98 550 Fax: +381 11 33 98 814 E-mail: office@siepa.sr.gov.yuoffice@siepa.sr.gov.yu www.siepa.sr.gov.yu Stevan Vujasinovic, GSB Broker United Nations Development Programme 69 Internacionalnih brigada, 11000 Belgrade, Serbia Phone: +381 11 204 0421 Fax: +381 11 344 4300 E-mail: stevan.vujasinovic@undp.org stevan.vujasinovic@undp.org