Serbia's accession to the European Union and business development implications

Business Development in Serbia

Country Report (Serbia)

Accession of Serbia in the European Zone

Ever since the formal emergence of the European Union as a trading bloc across Europe a number of benefits are associated to the membership of the European Union. One of the core benefits that are associated to the membership of European Union is the flexibility and liberal trade policies across the bloc. The European Community that initiated as a trading alliance to safeguard the mutual interest among the five European Countries is now the paragon of trading alliance of about twenty seven European Countries. Many European countries are still a contestant and potential candidates to become a full fledge member of the European Union Zone or precisely the European Union. For example, Turkey has long been a potential candidate to become a full fledge member of the European Union, but the question of it becoming a full member is still a subject of a long debate with many aspects that supports either the joining or the detrainment of turkey from the European Union. Many factors contribute to the controversy that forms the mainstream of the disagreement and Turkey's implied withdrawal from the full membership of the European Union. No matter how easy or difficult it is to get the membership of the European Union; the fact that persists from long is that the membership of the European Union or the Euro gives an ultimate strength to the financial and the worldly standing of a country. Apart from this the membership to trading blocs and alliances also serves the purpose of reducing the country's risk of standing alone in the intense and fluctuating markets of the world. The paper shall focus on the impact on the business activities of the country that has just become the full member of the Euro or the European Union. The country under consideration is the Republic of Serbia (Haughton, 2007).

Serbia

Serbia is located at the junction of the central and the southeastern Europe. Serbia is regarded as a non-coastal region of Europe that covers the Carpathian Basin in the southern part and the Balkans in its central part. Serbia can be regarded as an important European country due to is neighboring countries, as it shares its northern border with Hungary, and its eastern border with Romania and Bulgaria, similarly it shares its western border with Bosnia and Herzegovina, and Montenegro. Apart from its immediate neighbors Albania and Kosovo are included and regarded as the undecided portion of Serbia. Belgrade is the capital city of Serbia and is one the largest cities of the Southeast Europe (Bieber, 2003).

Serbia is regarded as a developed and economically stable European country, whose economy relies mainly on the telecommunication, effective transportation, energy and tourism. Hence the republic of Serbia is rich demographically, geographically and with respect to arts, culture as well as education (Tulmets, 2005).

The Impact on Business Activities after Joining European Union

From the business analyst point-of-view there are many reasons that can be regarded as the basic factors that tilted in the Serbian economy and financial standing after it joined European Union on its full membership (Nathalie, 2004). Trade has been the mainstream of the European trading bloc and at large the only factor that tied up the knot among the European nations in the Paris treaty. For a country like Serbia that has just attained the membership of the European Union the euro membership will yield them many profitable earnings after this accession a few of them are discussed below.

The customers

The debt financing

Monetary empowerment

Direct positive impact on investments

Business risks

Profitable currency conversion

Prosperity

Pensions

Strength of Euro

Influence of Europe

Wide area works and interest rates

The European superiority

The Customers

By joining the European Union Serbia gained an edge for its customers that were initially under the fold of dollars. The point of argument elevates with the aspect that euro is the recognized and benevolent currency of the European Union, it has been for this reason that by joining European Union Serbia got a chance to expand its business activities in euro a currency powerful than dollar, and as a consequence the euro stands firm against dollar in the strong and much larger market of Europe. With the advancement in the size the markets empower the customer with complementary as well as substitute goods. So for a highly dense populated region of Serbia as the customers after joining European Union were not just the customers of Serbian markets but were rater the customer of the entire European market (Dvorsky, 2004).

Debt Financing

The cost of debt that is the interest automatically reduced once Serbia joined the European Union as a full member. In the Euro zone the rate of interest that is the cost of debt for individual, small and medium business is lesser than as compared to the rate of dollars, which Serbia has to use before its accession to the European Union.

Monetary Empowerment

With the formal accession in to the European Union the monetary empowerment was an ultimate outcome for Serbia. By the monetary empowerment it is meant that by adapting a fixed currency standard Serbia got a real control over its economic environment. This also generates a new avenue for the independent investors as well as the small and medium sized businesses. By controlling the economic environment of Serbia it is implied that business activities will now boost after the accession of Serbia in the European Union, this is mainly because the interest rates and the exchange rates will be held in the control of the alliance itself (Pridham, 2006).

Direct Positive Impact on Investments

By becoming the full member of the European Union rather the Euro Zone the businesses of Serbia will now be in a position to invest more and more owing to the fact that there are reduced chances of random exchange rate fluctuations. As a matter of common perception the rate of the foreign direct investment is observed to be at a higher rate and it is anticipated that the time is approaching when the Britain will also become the member of Euro zone, but this will result in plunge of the investments at large. The stance of Serbia has been powerful enough to cater this random fluctuation. As the factor of exchange rate remains inevitably the enigma.

Business Risks

The euro zone operates in a far more predictable setting as compared to the other business domains of the world. It has therefore been predicted that with the formal entry of Serbia in the European Union the fact can be claimed that the Serbian market is now operating in a subtle and to a great extent in a risk free market.

Profitable Currency Conversion

As it has been mentioned that one of the basic economic breeder of the Serbia is the tourism industry, so the fact automatically elevates that by adapting the euro zone Serbia will enjoy higher returns on the currency exchange by the tourists and this additional return will be used to enhance the same industry.

Prosperity

After becoming a full member of the European Union Serbia can become the potential center of the European finances, since the outrageous growth of the European Eurobond market it has been noted that these bonds are yielding higher returns to the Eurobond holders and as a consequence they are likely to withstand the changes and the prosperity becomes the ultimate paradigm.

Pensions

With the adaptation of Euro that is by joining the European zone Serbia gained an advantage for the old age citizens as well. It was initially considered that the lower rate of the interest will impact the pensioners. Irrespective of the low interest rate the pensioners will be benefited in the following by initially the value of the pension funds of the primary and secondary shareholders will increase with a fall in the interest rate ratio. And secondly the pension fund once a part of the European zone will have a broader range of existence, in a way that the risk associated with these funds will be broadened across the euro zone and this will ultimately result in the creation of a larger than ever portfolio for the Serbian economy.

Strength of Euro

The fact needs to be acknowledged that euro is now one o the major hard currencies across the world. If the Serbian government holds this currency than the economy may become a loan free European entity and on the other hand the Serbian government can also borrow and lend money using euro and can generate high returns.

Influence of Europe

The real essences of being a European country can be actually cashed by the states once they become the formal member of the European Union, because the membership to the European zone in profitable in many rather all ways. Euro was not the chief currency for trading across the European Bloc when the European Union was incepted. With the accession on Serbia to the European Union it has adapted euro as the trading tools across the globe and chiefly across the bloc. This can yield direct and high profits for Serbia as the full member of the European Union.

European Superiority

With the dissolution of the gold standards across the world dollar was the only hard currency that came to power as a consequence of Breton Woods Agreement. Ever since the world crises and the crisis pertaining to the loans of the Less Developed Countries many countries begin to over value and devalue themselves to meet the international structure of monetary system. With respect to the same incident the Euro also developed to facilitate the European countries and over a period of time the currency has gained a significant worth over the domestic and weak currencies. Hen the most sophisticated aggregation of the European countries is headed under the superiority of European union and by getting the full membership of the EU Serbia has actually fasten the pace of its growth and global recognition as a strategic country.

Wide Area Works and Interest Rate Ease

Serbia as an individual European country was never in a position to exploit all the possible thresholds of profitability in business activities and economic developments, but with its formal accession as a full member of the European Union Serbia can now trade across the block on no tariff. With the ease of tariff Serbia may find itself in a profitable position in the times to come. Besides the ease to trade the Serbia can also avail the services of skilled labor of the bloc and attain economies of scale (Yigit, 2005).

The Observation

It has been expected from the membership of Serbia to the European Union. That this membership will yield Serbia huge profits and will reduce the risk of standalone of this landlocked country. To observe the consequences of European Union membership on Serbia we need to at least consider one fiscal cycle and economic cycle of the country and compare the new statistics with the older ones, in the course of this action. The above discussed factors are the assumption that will boost the aspects of trade and economic development in Serbia. The actual consequences of the Serbian economy and the affects of the European Union accession can only be discussed once the country completes at least the prescribed period of time to observe and deduct changes.

Data Selection and Analysis

The major concern at this point of time is to investigate the impact of Serbia accession to the European Union the data in focus is indeed the business activities.

The data from the following areas will be collected

The imports to export ratio

The number and quantity of skilled labor employed in the Serbian economy

The duration of economic expansion in the Serbian economy

The consequences and duration of recession in the Serbian economy

The fiscal and monetary policies adapted to adjust in the European Union

The fluctuations in the business cycle and degree of these fluctuations

Findings

The findings of the data selected will be compared first within the country than is the economic performance of Serbia before and after the accession will be compared. And secondly the findings will be deducted on the basis of the comparison of Serbian economy with the other economies existing within the European Union.

Conclusion

From the business analyst point-of-view there are many reasons that can be regarded as the basic factors that tilted in the Serbian economy and financial standing after it joined European Union on its full membership. Trade has been the mainstream of the European trading bloc and at large the only factor that tied up the knot among the European nations in the Paris treaty. For a country like Serbia that has just attained the membership of the European Union the euro membership will yield them many profitable earnings after this accession.