Why the former Yugoslavia lags behind the CEECs in entrepreneurship – An expert steps in

Armin Konjalic (Image source: LinkedIn)


While entrepreneurship has taken a giant leap forward in most Central and Eastern European countries in recent years, the region of the former Yugoslavia continues to take small steps towards developing a vibrant startup ecosystem. .

Yugoslavia was one of the most connected countries in the world at the height of its power, but long years of war and destruction shattered it, plunging it into global isolation and leaving it out of the picture of the growing entrepreneurial scene in neighboring countries. Regions.

With the exception of Slovenia, which was the first country from the former Yugoslavia to join the European Union in 2004, the economies of the former Yugoslavia still have a long way to go to be recognized as powerful startup hubs around the world despite their recent achievements.

Armin Konjalic, a leading expert who has been involved for years in building startup ecosystems and supporting entrepreneurship in Central and Eastern Europe, explains that this slow progression has its roots in a combination of factors inherited from the era of war.

Konjalic, originally from Bosnia and Herzegovina, believes that the brain drain that took place during and after the war was a blow as it emptied this specific region of the “exceptional” professionals and intellectuals it had in a wide range. industries.

Speaking to 150sec, he said that another reason the countries of the former Yugoslavia are lagging behind the CEECs in adopting entrepreneurship is that war profiteers have become the elite of entrepreneurship. post-war years and promoted the kind of mindset and regulations that opposed the spirit of entrepreneurship and self-reliance. use.

“Working for government organizations was glorified and seen as the best path to financial security and stability, and this way of thinking got deep into the minds of parents who continued to encourage their children to work in the community. public sector. Entrepreneurship was in fact despised and frowned upon, ”he explained.

And while the countries of Central and Eastern Europe began to take the path of privatization, the private sector had a negative connotation in the former Yugoslavia as it was associated with the black economy and the exploitation of the workforce, he added.

Konjalic argues that another issue that kept the entrepreneurial scene in this part of the world from flourishing was the fact that a large portion of the people living in post-war Yugoslavia got used to living on donations from national NGOs. , international organizations and diaspora parents.

“This mindset still prevails, and many people think that they are not able to start a business and make a living,” he said, adding that this pessimistic attitude and a lack of aspiration cast a shadow over the landscape of startups in the area.

The limited exposure to ongoing developments in the startup world in Central and Eastern Europe and the near non-existence of important role models that could inspire a generation of entrepreneurs have also played a role in shaping the current situation, a noted Konjalic.

However, he believes progress is being made towards strengthening the culture of entrepreneurship in the region of the former Yugoslavia as more successful business owners and innovators emerge, with Mate Rimac being one of the greatest successes.

The expert was referring to the 33-year-old Croatian founder of electric hypercar company Rimac Automobili and Greyp Bikes, a high-tech electric bicycle company.

In July, VW Group’s Porsche and Rimac announced their agreement to form a joint venture that will incorporate Volkswagen’s high-performance Bugatti brand. Rimac will own a 55% stake in the joint venture, while Porsche will own a 45% stake in the company.

What makes Rimac a great model is that it has previously turned down many offers to move its business out of Croatia and has repeatedly stated that its goal is to bring car manufacturers to the country, said Konjalic.

“About ten years ago, I couldn’t convince my friends or the people I sponsored to start their own businesses because I couldn’t find any local entrepreneurial success story that they could relate to. But things are changing thanks to Rimac. The infrastructure is also improving and venture capitalists who were reluctant to invest in the Western Balkans are now actively seeking entrepreneurs here, ”added the expert, who was instrumental in bringing the first VCs to the market. the region.

The limited exposure to ongoing developments in the startup world in Central and Eastern Europe and the near non-existence of important role models that could inspire a generation of entrepreneurs have also played a role in shaping the current situation.

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Armin Konjalic, expert in entrepreneurship and digital economy

What can be done to change the status quo?

Konjalic has published several articles on the latest entrepreneurship developments in the former Yugoslavia, including a 500-page report showcasing key players, investment data, ideas and success stories of entrepreneurial renaissance in 24 countries around the world. post-communist.

In one of his articles titled “How Policymakers Can Support the Startup Ecosystem: Policy Recommendations for the Western Balkans”, he presented a proposal to increase the chances of success for startups in Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia. , and Serbia.

He divided his suggestions into six categories, including politics, finance, markets, business support, human capital and culture.

In the area of ​​policy and legislative development, Konjalic recommends that organizations representing local startups, venture capitalists and business angels be included in a government-initiated expert working group to help develop national strategies to support and promote the emerging startup industry.

Finance is another area where he sees room for improvement. In his article, he suggests that access to capital for entrepreneurs be facilitated, that a law on business angels and venture capital be introduced and that tax advantages be offered for the reinvestment of capital in startups, l innovation and R&D.

In the section on markets, Konjalic states that access to international markets should be facilitated, regional markets should be strengthened, and diaspora networks should be leveraged.

“The Western Balkan region is severely affected by the brain drain with thousands of young and educated people leaving their home countries every year,” he wrote, adding that local businesses could benefit from the networks the diaspora to find investors, co-founders, export partners and brand ambassadors. .

“There is a need to create a set of collaborative tools to improve the relationship between diaspora networks and local businesses,” he noted.

Regarding business support, Konjalic believes that it is absolutely necessary to support incubators and accelerators and states that government development agencies should use business incubators as a model to provide financial and non-financial support to people. entrepreneurs, especially in less developed areas, where such programs do not exist and unemployment is high.

In his comments to 150sec, the expert said that one thing that needs to be changed in this space is the fact that many of the current “so-called incubators and accelerators” are run by NGOs that previously dealt with issues. social and have no entrepreneurial knowledge.

“So these funds should be allocated to people who have had experience of running successful startups, because they are the ones who can mentor aspiring entrepreneurs. “

In his study, Konjalic also stressed the importance of improving access to information for legal investigations and of developing e-government services for entrepreneurs.

Regarding human capital, he argues that the introduction of entrepreneurship through education, the removal of administrative barriers to hiring foreign talent, and the introduction of the right to grant equity capital employees can do a lot.

The main steps that he believes should be taken to change the existing culture include promoting self-employment and starting a business and developing pragmatic legislation flexible to new industry trends.

“A new generation of entrepreneurs might hesitate to pursue their own innovative ideas if their environment is reluctant to accept new innovations,” he wrote.

Still, Konjalic sees a very bright future for the startup ecosystem in the former Yugoslavia region, saying its growth will be largely driven by a new, more optimistic talent pool, legislative reforms, infrastructure investments. , as well as feedback and support. of the highly skilled diaspora.

About Eleanor Blackburn

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