Apples in an orchid in Serbia
Serbian apples: unity would bear regional fruit

One in every six apples grown in Serbia that is not exported is processed by Nectar Group, Serbia’s leading fruit juice producer. Established in the late 1990s — a tumultuous time in the region — its first product was apple cider vinegar.

Now it generates revenue of more than €100m a year. It has 30 per cent of Serbian market share and more than 20 per cent in the western Balkans region, with its population of about 18m.

The company’s biggest processing plant is in the south of Serbia and handles 120,000 tonnes of fruit every year. Nectar also has operations in neighbouring North Macedonia and in Slovenia. The three countries were formerly part of Yugoslavia, where one of Nectar’s best-known brands, Fructal — a Slovenian business it bought in 2011 — was a household name.

Yugoslavia’s wars and collapse in the 1990s created a set of borders that Nectar, in common with many other businesses, had not had to contend with before. Now its trucks of fruit coming from North Macedonia to Serbia are subject to customs and sanitary checks, and long wait times at the border.

“Fruits lose their freshness and quality if they are transported for too long,” says Mihailo Jankovic, Nectar’s general director. A vertically integrated company, Nectar controls all aspects of its products’ quality, from working with local farmers, who grow the fruit, to its processing, packaging and sale as juice or jam. “The only part of the process we don’t control is how long it takes at the borders,” Mr Jankovic says ruefully.

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In the western Balkans, trucks spend an estimated 28m-30m hours waiting on the border every year. A recent IMF study found that the long wait times cost the region an estimated €800m annually, equivalent to 1 per cent of its GDP.

“When you look at each of the countries in terms of number of people and consumption, honestly we are not that big and significant,” says Mr Jankovic. “Even the whole of former Yugoslavia is not that big,” he adds. “There needs to be better connectivity and integration between the countries.”

Slovenia and Croatia joined the EU in 2004 and 2013, respectively. All non-EU countries in the region — Albania, Serbia, Montenegro, North Macedonia, Kosovo and Bosnia-Herzegovina — are in the Central European Free Trade Agreement (Cefta) but disputes among them deter investors and complicate trade, says Mr Jankovic.

Non-tariff barriers such as customs procedures, sanitary certificates and disparate investment policies also impede better commercial ties. Frequent calls are heard for a “mini-Schengen”, a zone free of border controls, to ease the flow of people and goods across the region.

A truck driver walks on July 3, 2013 as he waits with colleagues near the Batrovci border crossing between Serbia and Croatia. Trucks were backed up for 15-kilometres (nine-miles) at Serbia's border with Croatia on July 2 as Croatian customs officers struggled with technical problems linked to the country joining the EU on July 1. Some 1,200 drivers from Balkan countries and beyond were stuck at the Batrovci border crossing, waiting for the Croatian customs system to be successfully synchronized with the European Union network. AFP PHOTO / ANDREJ ISAKOVIC (Photo credit should read ANDREJ ISAKOVIC/AFP via Getty Images)
Trucks were backed up for 15 km at Serbia's border with Croatia, July 2013 © AFP via Getty Images

The EU, which all aspire to join, proposed a “Regional Economic Area” in 2017. Albania, Serbia and North Macedonia committed to creating a mini-Schengen in 2019, inviting the others to join, though bilateral disputes and other anxieties are holding them back.

Many in Kosovo fear joining because Serbia and Bosnia-Herzegovina do not recognise its 2008 declaration of independence. Some observers say that smaller economies such as Kosovo and Bosnia-Herzegovina would lose out because of Serbia’s potential dominance.

Kosovo and Bosnia-Herzegovina have the region’s highest trade deficits, notes Majda Ruge of the European Council on Foreign Relations think-tank. “Some sort of agreement with these states which would involve ‘infant industry protection’ arrangements would perhaps be desirable until their competitiveness has improved,” she says.

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As far as businesses are concerned, regional co-operation is the only way for its economies to make lasting improvements, create a new market and attract foreign investment, says Safet Gerxhaliu, head of the Chamber Investment Forum, which represents all six Cefta countries’ chambers of commerce.

Mr Gerxhaliu, former president of Kosovo chamber of commerce, compares Serbia’s economic dominance in the west Balkans region with Germany’s in Europe.

“Imagine if you heard from people in Switzerland, Austria, or Italy . . . that they did not want to co-operate with Germany,” he says. “We should not be afraid of economic potential in Serbia, we should rather find a way together to increase our attractiveness.”

Other observers say that without a regional security umbrella, the countries will lack the trust to integrate more deeply.

Until there is such a “framework accepted by all western Balkan countries that will provide shared security for all of them, the plan for a fully integrated regional economic zone is not truly feasible,” says Dusan Janjic of the Forum for Ethnic Relations, a Belgrade-based non-government organisation dealing with interethnic dialogue.

Since North Macedonia joined Nato in March, only Bosnia-Herzegovina, Kosovo and Serbia remain non-members. Kosovo, however, does host a large contingent of Nato troops following the 1999 Kosovo war.

Nato membership is not politically feasible for Serbia given the memories of that war, not least Nato’s bombing campaign against forces loyal to former Serbian strongman Slobodan Milosevic.

Ms Ruge comments that even if governments agreed progress on an economic zone, the benefits will depend on whether they create a regulatory framework to boost private sector competitiveness.

“In that respect, we come back to the main issue,” she adds. “Strengthening the rule of law to ensure predictability for investors.”

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