Gallo ECF S.p.A.
REPUBLIC OF SERBIA
Investing in Serbia's Internet and IT sector: Challenges and
Opportunities
Public Report
Extracted from the assessment made June-December 2003
Prepared by Giovanni Maruzzelli
ICT Expert - Gallo ECF
serbiait@yahoo.com
Belgrade, May 2004
FOREWORD – ORIGIN OF THIS DOCUMENT ............................................................................................... 5
EXECUTIVE SUMMARY ................................................................................................................................... 6
1 MACRO ECONOMIC DATA ON SERBIA & MONTENEGRO .................................................................... 14
1.1 OVERVIEW OF SERBIA & MONTENEGRO .................................................................................................... 14
1.2 EVENTS SINCE 1991 ................................................................................................................................ 15
1.3 RECENT ECONOMIC PROGRESS ................................................................................................................ 15
2 STATUS OF SERBIA & MONTENEGRO, WHY A STUDY ON SERBIA ALONE...................................... 16
3 GENERAL BUSINESS FRAMEWORK ....................................................................................................... 17
3.1 ECONOMY ............................................................................................................................................... 17
3.2 INVESTMENT CLIMATE AND FOREIGN TRADE.............................................................................................. 17
3.3 COMPANIES ............................................................................................................................................. 18
3.4 CORPORATE PROFITS TAX ....................................................................................................................... 20
3.5 LABOR FORCE ......................................................................................................................................... 23
4 INTERNET USAGE ...................................................................................................................................... 24
4.1 INTERNET ACCESS HISTORY ..................................................................................................................... 24
4.2 INTERNET ACCESS AVAILABILITY AND PRICING ............................................................................................ 24
4.2.1 DialUp Internet access ................................................................................................................... 24
4.2.2 Cable TV Internet access............................................................................................................... 25
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4.2.3 Digital Lines Internet access .......................................................................................................... 25
4.2.4 Wireless Internet Access ............................................................................................................... 25
4.3 SERBIAN CONSUMERS AND ICT ................................................................................................................ 26
4.4 CONSUMER’S USAGE OF INTERNET ACCESS............................................................................................... 26
4.5 COMPANY’S USAGE OF ICT AND INTERNET ACCESS ................................................................................... 26
4.6 E-GOVERNMENT ...................................................................................................................................... 27
4.7 STATISTICS.............................................................................................................................................. 27
4.7.1 Statistics on Internet usage from ITU ............................................................................................ 27
4.7.2 Statistics on Serbian Hosts, Websites, Domains from RIPE NCC ................................................ 28
5 INTERNET RELATED REGULATIONS ...................................................................................................... 33
5.1 DOMAINS ................................................................................................................................................. 33
5.2 TELECOMMUNICATIONS AND INTERNET...................................................................................................... 33
5.3 PUBLIC INFORMATION AND INTERNET ........................................................................................................ 34
5.4 COPYRIGHT ............................................................................................................................................. 34
5.5 PRIVACY.................................................................................................................................................. 34
5.6 DIGITAL SIGNATURE, ELECTRONIC COMMERCE, CYBER CRIME .................................................................. 34
6 FAST GROWING INTERNET BUSINESSES AREAS ................................................................................ 35
6.1 INTERNET ACCESS DISTRIBUTION ............................................................................................................. 35
6.1.1 Wireless ......................................................................................................................................... 35
6.1.2 Cable TV ........................................................................................................................................ 36
6.1.3 DialUp and SMIN ........................................................................................................................... 36
6.2 EBANKING- MBANKING ............................................................................................................................. 37
6.3 SERVICES TO THE SERBIAN DIASPORA ...................................................................................................... 37
6.4 OPEN SOURCE SOFTWARE IN SERBIA ....................................................................................................... 38
7 KEY INTERNET BUSINESS PLAYERS ..................................................................................................... 39
7.1 MINISTRIES, AGENCY FOR IT AND INTERNET DEVELOPMENT....................................................................... 39
7.2 PTT SERBIA ............................................................................................................................................ 39
7.2.1 PTTNet - PostNet ........................................................................................................................... 40
7.2.2 KDS ................................................................................................................................................ 41
7.2.3 Cepp............................................................................................................................................... 41
7.3 TELECOM SERBIA .................................................................................................................................... 42
7.3.1 Official data as of June 2003 ..................................................................................................... 43
7.3.2 SMIN, T-Net and Telecom Serbia policies ..................................................................................... 43
7.4 MOBTEL .................................................................................................................................................. 44
7.4.1 Official Mobtel’s 2002 Data ............................................................................................................ 45
7.5 INTERNET SERVICE PROVIDERS (ISPS) ..................................................................................................... 46
7.5.1 Verat............................................................................................................................................... 46
7.5.2 YUBC ............................................................................................................................................. 47
7.5.3 ISP Association .............................................................................................................................. 47
7.6 CABLE TV ............................................................................................................................................... 47
7.6.1 SBB ................................................................................................................................................ 48
7.6.2 KDS PTT ........................................................................................................................................ 48
7.7 E-BANKING .............................................................................................................................................. 48
7.7.1 Zepter Bank.................................................................................................................................... 48
7.8 SERBIAN LANGUAGE CONTENTS, PORTALS................................................................................................ 49
7.8.1 Serbian Language Contents .......................................................................................................... 49
7.8.2 Radio B92, Contents and Ecommerce .......................................................................................... 50
7.9 SME SERVICES ....................................................................................................................................... 50
7.9.1 Telecom Serbia Yellow Pages ....................................................................................................... 50
7.9.2 PTT-Cepp....................................................................................................................................... 50
7.9.4 VEZA .............................................................................................................................................. 51
7.10 ECOMMERCE ......................................................................................................................................... 51
7.11 INFORMATION TECHNOLOGY ASSOCIATION OF CHAMBER OF COMMERCE.................................................. 52
8 INTERNET RELATED METHODS OF PAYMENTS ................................................................................... 53
8.1 CREDIT CARDS ........................................................................................................................................ 53
8.2 MONEY TRANSFERS ................................................................................................................................. 53
8.3 SPECIAL FOR PAY TELEPHONE NUMBERS ................................................................................................... 53
9 INTERNET CONSUMER PORTALS AND ADVERTISING ......................................................................... 54
9.1 PORTALS MARKET ................................................................................................................................... 54
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9.1.1 History of the Portal development and important historical events ............................................... 54
9.1.2 Telecom Serbia .............................................................................................................................. 55
9.1.3 Private initiatives in Portal development ........................................................................................ 55
9.1.4 Revenue from portals ..................................................................................................................... 55
9.2 PORTAL PLAYERS .................................................................................................................................... 56
9.2.1 Showcase of viable Portal sites ..................................................................................................... 56
9.2.2 Main players in domestic portal Industry ....................................................................................... 56
9.3 PORTAL TECHNOLOGY ............................................................................................................................. 57
9.3.1 Web Technology in Portal Development ....................................................................................... 57
9.3.2 Portals' Popularity and Number of Visitors .................................................................................... 57
9.4 ONLINE ADVERTISING MARKET ................................................................................................................. 58
9.4.1 Online advertising history ............................................................................................................... 58
9.4.2 Online advertising market characteristics ...................................................................................... 59
9.4.3 Online advertising revenue structure ............................................................................................. 59
9.5 ONLINE ADVERTISING TECHNOLOGY ......................................................................................................... 59
10 INTERNET CONSUMER SERVICES (B2C) .............................................................................................. 61
10.1 HISTORY OF INTERNET CONSUMER SERVICES ......................................................................................... 61
10.2 MAIN E-COMMERCE B2C PLAYERS ......................................................................................................... 62
10.3 MAIN B2C SECTORS .............................................................................................................................. 63
11 INTERNET SME SERVICES ...................................................................................................................... 64
11.1 INTERNET SME SERVICES MARKET ........................................................................................................ 64
11.2 INTERNET SME SERVICES PLAYERS ....................................................................................................... 64
11.2.1 Official government web sites – services for SME ...................................................................... 64
11.2.2 Telecom Serbia Yellow Pages ..................................................................................................... 65
11.2.3 Relevant agencies ....................................................................................................................... 65
11.2.4 Private initiatives .......................................................................................................................... 65
11.2.5 Web sites providing information to SME: ..................................................................................... 66
12 SOFTWARE DEVELOPMENT / SYSTEM INTEGRATION, A FIRST OVERVIEW .................................. 68
12.1 SOFTWARE DEVELOPMENT / SYSTEM INTEGRATION MARKET ................................................................... 68
12.1.1 Banking sector ............................................................................................................................. 68
12.1.2 Ebusiness sector .......................................................................................................................... 69
12.1.3 Government initiatives ................................................................................................................. 69
12.1.4 Retail software ............................................................................................................................. 70
12.1.5 Software Piracy ............................................................................................................................ 70
12.2 PROVISIONAL CONCLUSIONS .................................................................................................................. 70
ANNEXES ....................................................................................................................................................... 71
I - NET SOCIOLOGY ........................................................................................................................................ 71
II - OPEN SOURCE SOFTWARE ........................................................................................................................ 80
SOURCES AND CREDITS ............................................................................................................................. 82
Investing in Serbia’s Internet and IT sector: Challenges and Opportunities (public report)
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About IFC:
The International Finance Corporation (IFC), the private sector arm of the World Bank Group.
IFC's mission www.ifc.org is promoting sustainable private sector investment in developing
countries, helping to reduce poverty and improve people's lives. IFC finances private sector
investments in the developing world, mobilizes capital in the international financial markets, helps
clients improve social and environmental sustainability, and provides technical assistance and
advice to governments and businesses. From its founding in 1956 through FY03, IFC has
committed more than $37 billion of its own funds and arranged $22 billion in syndications for
2,990 companies in 140 developing countries.
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4
Foreword – Origin of this Document
This document is based on excerpts from a study that was commissioned by IFC to Gallo
ECF during 2003.
The study was articulated in three reports, each one of them covering different issues, and
was aimed at the individuation of opportunities for international investors in the Serbian
Internet related sector. The study was not meant to be an academic comprehensive
description of the state of ICT in the Country. It is on the contrary a tool in the hands of
International Financial Institutions, private investors and professionals.
The first two reports, that are the basis for most of this document, were composed
between July and October 2003.
In this fast pacing industry, and in the thriving environment of the Serbian society, many
things change in just a couple of quarters and many others will change in the near future.
There are as expected many imprecisions, omissions, missing information or plain errors I
hope to rectify in my ongoing work on the sector.
I bear responsibility for any such misfeatures, because all the professionals I worked with
have done a great job.
Dejan Nikolic, Lela Sakovic, Dragan Varagic have made available their deep knowledge of
the Serbian Internet and IT industry.
Giovanni Cappe’, Vincenzo Bruno (traveling back and forth Serbia) and all the Gallo ECF
staff from Italy have provided valid contribution, counseling, experience and support.
I would like to thank the most Ivana Jelisavcic, which is now working in USA, for the great
results and for the ability to introduce me in the Serbian Community. She has been the
main force in organizing, researching, tying together our efforts.
Please write me with any correction, additional information and comments you may have
about this document.
Giovanni Maruzzelli
serbiait@yahoo.com
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Executive Summary
This document is prepared based on the results of the study: “Investing in Serbia’s Internet and IT
sector: Challenges and Opportunities”, funded by IFC and made by Gallo ECF.
First three chapters of this document are aimed to provide potential investors with information on
Serbian economy and business regulation.
In the “Internet Usage” chapter we show the growing trend. The Country is in the early phase of
Internet adoption, and the pace of growth regularly increases from year to year. In 2002 individual
users were estimated 640,000, and the number of hosts was 17,000. In August 2003 there were
roughly 20,000 hosts. Websites increased from 2,550 in August 2000 to 9,537 in August 2003.
Domains climbed from 5,860 in August 2000 to 16,081 in August 2003. This fast year-on-year
growth is similar to Western Europe experience during the central part of the ‘90s, leading to
market explosion when critical mass was reached and telecommunication monopolies were lifted.
The “Internet related regulations” chapter describes how regulations are converging to Western
standards. However, the monopoly on telecommunications by Telecom Serbia (to be lifted in June
2005) is still in place. Domains regulation needs to be adapted to the business usage of Internet.
The “Fast growing Internet business Areas” chapter describes how Serbia is still in the phase of
building infrastructure for distributing Internet access. Methods for Internet payments are in infancy,
credit cards are not yet acceptable through the Internet due to a lack of local gateway processors,
and the investments in services are waiting for the infrastructure buildup. There is wide expectation
that the boom for Internet services, e-commerce, marketplaces and value added applications will
begin in 2005, after the completion of the most part of spending in equipment and infrastructure
and in parallel with the end of Telecom Serbia monopoly.
Present growth is concentrated in the Internet access distribution that, due to the prohibition to lay
down fiber optics (only recently lifted), has grown through wireless and cable TV technologies.
However, fiber optics, a superior technology, is considered to be the next area of investments,
following de-monopolization, to support Internet market growth and voice market. Railways, utilities
companies (EPS), and some cable TV operator had yet deployed fiber optics infrastructure, that in
the future can be utilized also by Internet, voice, data transport. Dialup access continues to grow
fast and to make profit, reaching the non urban areas through the SMIN initiative of Telecom
Serbia. It is very important to note that in various European countries dialup access is now
distributed for free by Telco operators, and that an evolution in this direction can be taken by
competing Telecom Operators following the June 2005 end of Telecom Serbia monopoly on voice
traffic. Ebanking and Mbanking are also growing areas because they save costs both to banks and
to their customers. Open Source software is seen as a viable alternative to proprietary software
and a base to build an inexpensive informatization of the Country.
In “Key Internet business players” chapter a number of private and State owned players are
identified and shortly described.
The Internet and Ebusiness Serbian landscape is articulated around these diversified and
interrelated actors in a complex architecture. A strong legacy from the past is the overwhelming
weight that State owned monopolist companies have on the market. However, convergence
towards Europe and free market orientation are leading to rapid growth of private emerging
players, which are at the same time competing and cooperating with the State owned companies.
State owned companies are to be progressively privatized, and this will include a number of
Internet services, also in the form of spin offs.
Major actors and provisional findings:

PTT is a State owned holding that owns 80% of Telecom Serbia, 100% of Post Serbia and
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49% of Mobtel cellular company. In PTT the major components of an Ebusiness
powerhouse are found: the most important retail ISP (PTTNet), the second Cable TV
operator (KDS), the only Ebusiness enabler (Cepp), logistics and delivery (Post itself), an
internal data network with nation wide coverage (PostNet), banking and payment systems
(Post Savings Bank and Cepp). Serbian population trusts Post much more than other
financial institutions, and relies on Post for payments and items delivery. The Post’s
operations related to Ebusiness are likely to be privatized in the next coming years, notably
PTTNet, KDS, and Cepp. PTT is already working in partnership with private companies in
this sector, for instance in Cepp. The form of agreement with current private partners is the
sharing of revenues.

Telecom Serbia is partially privatized with 20% participation of the Greek OTE Telecom and
will be monopolist on voice traffic until June 2005. Telecom Serbia has built the only
Internet and data backbone in Serbia, called SMIN, and is offering it to other ISPs as a cost
effective alternative to leased lines and to building alternative backbones. Total capacity
deployed is 622 Mb/s, with other additional 622 Mb/s planned for 2004. Telecom is very
focused in bringing the voice network technologically up to date and on being able to satisfy
the growing needs, i.e. a very big project calling for major investments. Telecom Serbia
owns MTS, the second mobile operator, to be spun off. Telecom is in the process of
bringing to the outsourcing market its internal IT capabilities, both as Ebusiness enabler,
payment collector, Call Center and CRM provider.

Mobtel is the first cellular phone company, owned 51% by the private BK Group and 49%
by PTT Serbia. The ownership structure is reported to be contested by Serbian
Government, which seeks to obtain majority as compensation for illicit favors BK Group
obtained from Milosevic’s Government. Mobtel was the first to introduce GPRS in Serbia,
allowing Internet access through the cellphone, and is deploying an array of multimedia
services, including mobile payments and mobile banking, in collaboration with Post and
banks.

Internet Service Providers: while there are more than fifty ISPs on the Serbian market, only
few really own Internet international bandwidth, most ISPs are small private companies that
resell access to bigger ISPs. Major ISPs are: Eunet, BeoTel, Verat and YUBC (private),
and, as seen before, PTT (State owned) and Telecom Serbia (80% State owned). Based
on information collected up to October 2003 in the opinion of the consultant the ISPs which
are actively pursuing development outside the infrastructure of Telecom Serbia are Verat
and YUBC. Verat is the only provider in Serbia independent from Telecom for its own
international connectivity and distribution backbone, both realized with wireless links. Verat
plans to expand its wireless infrastructure to cover Central and South Serbia, and is
seeking for investors. YUBC has completed the feasibility study and is ready to begin
building its own fiber optic backbone, which will cover Serbia connecting Hungary, Bulgaria
and Macedonia. This backbone would be the first to compete with the backbone of Telecom
Serbia, without the limitations of wireless technology. YUBC is seeking for investments.

Cable TV distribution is interesting because companies that lay down and operate state of
art networks for distributing TV programs, can use the same cabling and devices for
distributing Internet access and even telephony (Voice over IP). The private company SBB
is the most important player; it has bought a large number of smaller companies and is
planning to bring up all these networks to state of art. SBB received a grant from US TDA
for a feasibility study of an Internet-Voice national fiber optic backbone connecting its
networks, and is actively seeking for investors. The other strong competitor is KDS, owned
by PTT and likely to be spun off and privatized, is also deploying modern fiber optic
infrastructure.

Ebanking is one of the driving forces of Internet technology adoption among Serbian
companies. Eservices as balance check and tax reports are not yet seen as profit centers,
but they offer time and costs savings both to banks and to their customers, and are quickly
becoming popular.
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
Serbia is in the early phase of content production. The infancy state of Ecommerce is not
able to support a viable development of Serbian language content. Press magazines and
newspapers are leading the way. B92, one of the most famous Radio, TV and music
production groups owns the most visited Serbian website, and is developing its own
Electronic Commerce initiative.

Online services, except Ebanking (see before), are not yet developed in Serbia. The lack of
IT equipment in SMEs and the general economic situation in the last decade has slowed
down investments in Electronic Services. With the notable exception of Cepp (Post
department for Electronic Business) there are no significant operations. There are at least
two interesting projects in the area of SMEs Internet services, BBNet and VEZA.

There are not yet significant Ecommerce initiatives in Serbia. The lack of Internet
infrastructure and Ecommerce regulations for processing credit card payments has
impeded Ecommerce. This should change in the near future.
The “Internet related methods of Payments” chapter describes the present situation and trend of
supporting services for electronic transactions. Serbia is the fastest growing market for credit cards
in the Balkan region. Banks have just begun to offer credit cards to customers, so the total number
of cards is small, around 400,000, but is growing very fast. In 2004 the banking system will begin
online credit card transactions, paving the way for Ecommerce development. In this chapter money
transfers and special for-pay telephone numbers are shortly described.
Internet Consumer Portals, Advertising and Consumer Services (B2C) chapters describes the
current situation of those sectors in Serbia, with background history, estimates of the number of
unique visitor of major portals (50,000 day for B92), of the online advertising market (roughly
250,000 euros for 2003), description of typical advertising campaigns structures, landscape of Ecommerce players and related problems (lack of local credit card online processing, difficulties in
affordable and reliable delivery of purchased goods). It is a growing market, expected to boom in
the next years (availability of online credit cards and cheap/fast Internet connections).
Internet SME Services chapter describes the strategic position SMEs have in the current
government plans for the development of Serbia, and the need of Information and Communication
services that can help SMEs integration in the European market. No major private initiatives are
active to date, while some are in the planning phase.
In Software Development / System Integration, a First Overview chapters (that were not required
by the original Terms of Reference for the study) the consultant aims to give some introductory
information about this market in Serbia, and the interesting possibilities that may be found.
Software Development industry (the big companies in this sector are also the major Serbian
System Integrators) seems to be in good and smart shape; however wages are not so low as in
Ukraine or India. The structure of wages is at bottom in the state owned companies, around 250
euros net month for a software engineer and is higher in the growing private enterprises, to reach
700/1000 euros net month for a very skilled software developer. Therefore business in this area
has to be carefully identified and matched.
Business in this sector may be identified around a twofold approach: possible delocalization of
software development from Europe using local high skills and possible penetration in the Serbian
software market of European products complementing local software.
Moreover the Serbian market is more advanced in some areas (particularly in the banking, ebusiness and communication), and seems possible to export some local software solution,
particularly in the mobile and user interaction areas, because local banks and businesses easily
accept innovation and are used as beta tester from the local software companies.
Given the relative high cost of software manpower the business identification may be not as
straightforward. What is requested is a detailed identification of the complementarity among
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Serbian and European software and system integration actors.
The most important issue to be documented in the study would be the Regional and European
positioning of the Serbian sectors in the more wide International market, in relation with Regional
players, particularly Croatia, Bulgaria and Romania. This will require a broad exploration of the
Regional Players’ sectors, including an overview of the most interesting trends, products and
companies in those Countries.
In “Annexes” we provide a sociological overview of the Serbian Internet users and a description of
the Open Source software development and business model, instrumental to the understanding of
the potential role of Open Source in Serbia.
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Acronyms and Glossary
041 – non geographical Serbian telephone prefix, special tariff
AD – (akcionarsko drustvo) - Joint Stock Company
ASP – active server page
ATM – asynchronous transfer mode
B2B – business to business
B2C – business to costumer
Backbone – a high-speed line or series of connections that forms a major pathway within a
network
Bandwidth - the maximum amount of data that can travel a communications path in a given time,
usually measured in seconds
Bit – short for binary digit, the smallest unit of data a computer can handle
BK – (braca Karic) Karic brothers
Byte – a series of bits of a particular length, usually eight
CA – certification authority
CEPP – (Centar za Elektronsko Poslovanje Poste) Center for electronic business of Post
CIR – committed information rate
DECT standards – Digital Enhanced Cordless Telecommunications
DEM – deutsche mark
DHTML – dynamic HTML
Digital line – see leased line
DivX – coded pirated copy of DVD movie
DOO – (drustvo ogranicene odgovornosti) Limited Liability Company
DSL – Digital Subscriber Line
DVD – digital video disc
EAR – European Agency for Reconstruction
Gb – (gigabit) 1024 megabits or billion informational bits
GB – (gigabyte) - 1024 megabytes or billion informational characters
GDP – gross domestic product
GHz – gigahertz, a unit of frequency equal to one billion Hertz per second
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GIPI – Global Internet Policy Initiative
GNI – gross national income
GSM – global system for mobile communications
HTML – hyper text markup language
ICANN-IANA – the Internet Authority on Domain-names
ICT – information and communication technologies
IFC-SEED – International finance corporation - Southeast Europe enterprise development
IFS – industrial and financial system
IMF – International monetary fond
IP – Internet Protocol
IPR – Intellectual Property Rights
ISDN – Integrated Services Digital Network
ISDN BRI – ISDN Basic Rate
ISDN PRI – ISDN Primary Rate Interface
ISP – Internet Service Provider
IT – Information Technology
ITU – International Telecommunications Union
JP PTT saobracaja “Srbija” – (Javno preduzece post telefon telegraf) Public enterprise PTT
Kb/s – kilobyte per second
KDS – (Kablovski distributivni centar) Cable Distribution System
Leased line – A dedicated communications line that is usually leased from a public data networks
(PDN) vendor on a monthly basis
Mb – (megabit) 1,048,576 bits or 1,024 kilobits of data
MB – (megabyte) 1,048,576 bytes or 1,024 kilobytes of data
MMS – Multimedia Messaging Service
Modem – modulator, demodulator
MTS – (Mobilna telefonija Srbije) Serbian mobile telephony
OECD – Organization for economic co-operation and development
OEM – Original Equipment Manufacturer
OSCE – Organization for Security and Co-Operation in Europe
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PC – personal computer
PE PTT – Public enterprise PTT
POPs – Points of Presence, modem pool
PSTN – Public Switched Telephone Network
PTT – (post telefon telegraf) post, telephone, telegraph
RAID – Redundant Array of Inexpensive Disks
RIPE NCC – Réseaux IP Européens Network Coordination Centre
SBB – Serbia Broadband
SCEPP – (Savetodavni centar za ekonomska i pravna pitanja) Advising centre for legal and
economic issues
SEEF – a George Soros’s investment fund
SME – Small and Medium-sized Enterprise
SMIN – Serbian Multiservice Information Network
SMMRI – Strategic marketing and media research institute
SMS – Short Message Service
TCP – Transmission Control Protocol (with Internet Protocol [IP], the main protocol of the Internet)
Telco – Telecommunications operator or carrier
TLD – Top-Level Domain
TS – (Telekom Srbije) Serbian Telecom
UN – United Nations
UN ECE – United Nations Economic Commission for Europe
UNMIK – United Nations Interim Administration Mission in Kosovo
VPDN – VPN over Dialup
VoIP – Voice over Internet Protocol
VPN – Virtual Private Network
WAP – Wireless Access Protocol
WTO – World Trade Organization
TRIPS – Trade-Related Aspects of Intellectual Property Rights
xDSL – A generic term for the suite of digital subscriber line (DSL) services, where the "x" can be
replaced with any of a number of letters (ADSL, HDSL, IDSL, MDSL, RADSL, SDSL, VDSL).
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YUD – Yugoslavian dinar
YuISPA – Yugoslavian Internet service provider association
ZOP – (Zavod za Obracune i Placanja) Bureau for Accounting and Payments of the National Bank
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1 Macro Economic Data on Serbia & Montenegro
1.1 Overview of Serbia & Montenegro
Population
8.15 million (without Kosovo)
Population growth
0.1 %
Life expectancy
72 years
Population below national poverty line
10 %
GNI per capita
US$ 1,400
GDP
US$ 15.6 billion
GDP Growth
4.0 %
Population distribution:
Serbia without Kosovo:
Kosovo:
Montenegro:
7.500.000
1.900.000
650.000
Population of major Serbian towns:
Beograd
Novi Sad
Nis
Kragujevac
Subotica
Zrenjanin
Pancevo
Cacak
Leskovac
Smederevo
1,574,000
190,600
173,400
146,000
99,500
79,500
76,100
73,200
63,100
62,700
2002 data
Sources: Gov. of SCG, Serbian National Statistical Office,
IMF, IFS, WDI 2002 and World Bank Staff estimates.
Serbia & Montenegro is a lower middle income country with Gross National Income (GNI) per
capita of US$ 1,400. Agricultural land is fertile and arable, and the country is rich in natural and
mineral waters. Serbia & Montenegro is also well positioned for development as a transportation
hub due to its position on the crossroads of land and air routes linking Europe from North to South
and West to East. In 2002, services accounted for 40 percent of GDP, industry for 36 percent, and
agriculture for 24 percent.
After a delayed transition, Serbia & Montenegro is steadily progressing towards market economy
despite the political turmoil of the past two years which includes the assassination of Serbian Prime
Minister Zoran Djindjic, and the change of country’s name from the Federal Republic of
Yugoslavia. Macroeconomic stability, achieved swiftly two years ago, has been maintained. The
economy grew at 5.5 percent in 2001 and 4 percent in 2002, growth is now slowing down though.
Poverty remains a major concern. During the past decade, a long period of instability, international
isolation, and economic turmoil adversely affected the living standards of a vast majority of the
population. The country’s poor economic performance led to a decrease in real earnings and was
accompanied by deterioration in the social protection and health services. As a result, poverty rose
sharply in the 1990s and remains widespread in both republics. Although 10 percent of the
population falls below the poverty line (10.6 percent in Serbia and 9.4 percent in Montenegro), one
Investing in Serbia’s Internet and IT sector: Challenges and Opportunities (public report)
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third of the population is precariously above the line, and remain in danger of slipping into absolute
poverty should any adverse economic developments occur.
1.2 Events since 1991
Between 1991 and 1999, the country suffered a severe economic decline, due to external as well
as domestic factors. The decade of decline left a daunting economic and human legacy with a
collapsed economy, fragile institutions and increased vulnerability. In 1993, hyperinflation was
acute, and one of the severest cases in the world. GDP declined by 16 percent in 1999 alone. By
2000, when the country began its transition to democracy and a market economy, GDP had fallen
to less than half of its 1989 level. Foreign trade volumes had fallen even more, with exports in 2000
down by 61 percent and imports down by 31 percent from 1989 levels. Debt climbed to
unsustainable levels -- the foreign debt of around $12.2 billion represented 136 percent of GDP in
2000. The financial sector was in total ruin. In addition, the wars in Bosnia and Croatia, as well as
the Kosovo conflict, that followed the break up of the Socialistic Federal Republic of Yugoslavia left
Serbia & Montenegro with 450,000 refugees and 240,000 internally displaced persons, as well as
other economically and socially vulnerable groups.
1.3 Recent economic progress
Since 2000, good progress has been achieved. In July 2001, a US $4 billion, four-year
comprehensive economic recovery and transition program was supported at a Donors’ Conference
in Brussels, co-organized by the World Bank and the European Commission. Close to US$ 2 billion
has been disbursed since, with a further US$ 1 billion expected to be disbursed by the end of
2003. In 2001, an agreement was reached with the Paris Club that resulted in a 51 percent
reduction in outstanding debt to Paris Club creditors. A further 15 percent is to be reduced upon
completion of a three year arrangement with the IMF.
In 2002, inflation fell to 14 percent, down from 113 percent in 2000, and 39 percent in 2001. The
exchange rate remained stable for three consecutive years after many years of volatility. Banking
sector reforms, initiated with the closure of the four largest banks, restored credibility and domestic
private savings rose from almost none to $1.06 billion. Official foreign currency reserves reached
$2.5 billion in 2003 from a mere $360 million in 2000.
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2 Status of Serbia & Montenegro, why a study on
Serbia alone
Serbia & Montenegro consists of two Republics, Serbia and Montenegro, that are very much
independent one from another, particularly on economic level. This entity, with a not yet
implemented new Constitutional Charter, is the heir of the Yugoslav Federation.
Public opinion seems to agree that in the not so far future the right to split will be called to create
two completely independent internationally recognized States, but European Union’s requirements
for Accession is holding the two Governments from taking this direction. Two different currencies
are used, the Euro in Montenegro and the Dinar in Serbia. Although there are efforts to harmonize
the economic regulations and tariffs at the Serbia & Montenegro level, Serbia and Montenegro
today strongly differs in their actual landscape.
In the Telecommunication (and Internet) sector all responsibility are at the Republics level, leaving
at the Union level only the responsibility to define how to continue the memberships in international
bodies and how to face the international obligations legacy of the former Yugoslav Federation.
Following the NATO intervention in 2000, Kosovo is under the government of UNMIK, not subject
to the Serbia & Montenegro laws and regulations. It is waiting for its status to be defined by the
international community; bilateral talks are to begin between the parties involved (Serbian
Government and Kosovo Administration).
Therefore this report will cover only the Republic of Serbia, without Kosovo.
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3 General Business Framework
This chapter is made of selected excerpts from “Doing Business in Union of Serbia and
Montenegro”, April 2003, a free publication of Ernst & Young.
3.1 Economy
Business and Investment Environment
The political changes in Serbia of October 2000, after a decade of stagnation and isolation, have
opened up the way for the reconstruction of the economy and its reintegration into the global
market. Since coming to office in January 2001, the new leadership in Serbia has been actively
pursuing policies aimed at creating a business-friendly environment both for domestic companies
and foreign investors. The Government has placed an emphasis on the country’s reintegration into
the international business community, reconstruction of the infrastructure, revival of institutions and
stabilization. The achieved results are significant, especially with the privatization program.
Economic Trends and performance: The forecast of GDP growth in Serbia (without Kosovo) for
2002 is 4%, with GDP per capita of 1,831 USD. The average salary in 2002 was 151 EUR and the
rate of registered unemployment was 28.6%. The inflation rate as of end of the year 2002 was
14.8% (growth rate).
3.2 Investment Climate and Foreign Trade
General
In accordance with the Foreign Investment Law, foreign parties may invest in local enterprises and
other entities carrying out profit oriented activities in Serbia.
Since the new Law on Foreign Investment came into force in January 2002, there is no longer any
obligation for a foreign investor to disclose to the Federal Ministry of International Economic
Relationships an investment contract, concession agreement or share holding. The Law provides
foreign investors with guarantees and assurance against expropriation of assets, transfer
restrictions and non-commercial risks.
Types of Foreign investments:
A foreign entity, either itself or in conjunction with another local or foreign entity, may:


establish an enterprise;
purchase shares or stakes in a local enterprise.
A share capital contribution made by foreign investors may consist of:





foreign currency;
goods – including equipment, spare parts, means of transport and other assets;
property rights – including patents, licenses, know how, trade marks, etc.;
local currency already realized through a separate local source, including re-investment of
profit;
claims from a debtor converted into shares.
Investment Incentives
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Equipment constituting foreign investments (except cars and gambling machines) is exempted
from all customs import duties and charges. In addition, equipment (with the exception of cars,
furniture, carpets, works of fine and applied arts and other decorative items for office premise
furnishing, household electric appliances, TV and radio receivers and video/audio appliances etc.)
is also exempt from Sales Tax.
A foreign investor is entitled to transfer freely in hard currency any income it has derived, after
paying local liabilities and equity related to its investment. Amounts which can be transferred by a
Company specifically include:
the profit accruing from its investment;
the share of equity upon dissolution of the enterprise or cancellation of a investment contract;
funds from sale of shares and stakes;
restitution of invested amounts, pursuant to the investment contract or founding contract or
decision;
additional payments in accordance with Law on Enterprises;
remuneration in case of expropriation (foreign investor’s assets cannot be expropriated, except in
case when public interest is defined by law, providing appropriate remuneration, as well).
Pursuant to the investment contract or the founding contract decision, a foreign entity also has the
right to inspect the books and current operations of the enterprise in which it has invested, as well
as the right to audit the interim and annual financial statements. In the event of there being a
change in the law, investor’s rights previously established by the registration cannot be diminished
by the given change.
3.3 Companies
Limited Liability Company
A limited liability company (“DOO”) is established by the drawing up of a memorandum of
association or, if the company is founded by one person, by a decision on the establishment of the
company. A DOO can generally have up to 30 members, although this total can be greater if
members are employed with the company and have purchased equity under privileged terms in
accordance with the terms of privatization legislation.
The initial share capital invested in DOO should not be less than US$ 5,000 and the initial
investment made by each of its individual members should not be less than the YUD equivalent of
US$ 500 at rate of exchange on the date of payment. Capital investments can not be made in the
form of labor or services provided. The investments of members of DOO should be fully subscribed
prior to application for entry into the Company Register and at least 50% of the initial capital or
50% of the investment of each member should be paid up prior this registration into a temporary
account with an authorized bank. The remaining balance should be paid within two years from the
date of registration of the DOO as stipulated in the company’s memorandum of association.
The bodies which govern a DOO are the managing director, board of directors, supervisory board
(in cases prescribed by Law), ant the General Meeting, if so provided by the company
memorandum of association.
Most privately owned, small and medium-sized companies in Serbia are DOOs, because the initial
capital requirement is less than for joint stock companies. DOOs are also the preferred legal form
for most foreign investors. It should be noted that because the Stock Exchanges are in their initial
stages of development, it is difficult to increase equity in quoted companies through the sale of new
shares.
Joint Stock Company
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A joint stock company (“AD”) is founded through a contrast establishing the memorandum of
association, or, if founded by one person, by a decision on establishment of the company.
Investments of shareholders in an AD can be made in cash, goods, or in rights expressed in
monetary value terms. Investment in goods and rights should usually be valued by an authorized
appraiser.
The founding parties can establish an AD through either:
1. purchasing and paying up all the shares at the founding meeting without issuing a public
call for subscriptions, or;
2. issuing a public call to third parties for subscription and payment of shares.
A joint stock company established without a public call for subscription in shares can be founded
by only one founder and the monetary portion of the initial paid-up capital should not be less than
the equivalent of US$ 10,000 at the YUD exchange rate on the date of the payment. A joint stock
company founded through a public call for subscription in shares should be founded by at least two
parties and the monetary portion of the initial paid-up capital should not be less than the equivalent
of US$ 20,000 at the YUD exchange rate on the date of the payment. At least 50% of the initial
share capital to be contributed into an AD by each shareholder should be paid into a temporary
bank account at the time of inclusion of that AD into the Company Register, and the remaining
amount is payable within period of two years from the registration of the company, in accordance
with the memorandum of association. If the initial share capital in an AD should exceed the YUD
equivalent of US$ 25,000, at least 20% of that amount should be paid by the time that AD is
submitted for inclusion in the Company Register. Investments to be made in the form of rights or
similar intangible assets should also be entered in full before the date of inclusion in the Company
Register.
The governing bodies of an AD are the Assembly, the Board of Directors, appointed Directors, and
in cases prescribed by Law, the Supervisory Board. The Board of Directors should consist of at
least three members and they can be selected from the ranks of the Ads shareholders and
employees, as well as from other person outside the company. The management of the company
may be either Yugoslav or foreign.
Most enterprises which were recently privatized, as well as all banks, financial institutions,
insurance companies and stock exchanges are ADs.
Representative offices can be formed by foreign companies in Serbia which are carrying out nonincome generating activities such as advertising or market research on behalf of their parent
organization. Such representative offices can not carry out commercial operations or receive
funding from any third party organization. All funding should come from the head office or another
office of the same company located abroad.
In order to establish a representative office, it is necessary to present the Ministry of Commerce
with the following details:





Representative’s office’s program activity;
Foreign person’s certificate of registration issued by authorities of domicile country;
Foreign person’s statement assuming liability for any claim arising from representatives
office’s operations;
Permanent or temporary residence permits for foreign nationals that are to be employed in
the representative office;
Decision appointing the manager of the representative office.
Branches
Only a company incorporated in Serbia or a subsidiary of a foreign company established on the
territory of Serbia can establish a branch in Serbia. Generally, it is not possible for a foreign
company to establish directly a branch in Serbia. However, this general rule does not apply to
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foreign banks which can establish a branch with the status of a legal entity in Serbia.
3.4 Corporate Profits Tax
Taxpayers
A resident of Serbia is defined for Corporate Profits Tax purposes as being a company, which was
founded in or has a seat of actual management and control in Serbia. A resident company is
taxable on its world-wide income, whereas a non-resident company is taxable only on income
earned in Serbia. A non-resident company is defined as being a company which was founded or
has a seat of actual management and control outside Serbia, but which carries on business in
Serbia, with a permanent establishment located on Serbian territory.
Tax Rate
Taxable income is subject to tax a rate of 14%.
Calculation of Taxable Income
The amount of taxable income is arrived at by deducting allowable expenses from income
received. Most expenses, including costs of material used in production and related production
services are fully allowable and deductible for tax purposes. In addition, interest, taxes paid on
property, contributions for mandatory social insurance paid by an employer, fees and other public
charges and contributions with the exception of penalties are all recognized as allowable
expenses. For example, the following classes of expenses are limited in the amount that they are
considered to de deductible up to the following maximum percentages of total taxable income:



3.5% for medical, cultural, educational, scientific, ecological and sports related expenses;
3% of advertising and promotion expenditures as well as “protocol” expenditures (clientrelated entertainment expenses and gifts);
0.1% of amounts paid for membership fees for chambers and unions.
Depreciation
Assets can be depreciated over the period of their useful lives using either a straight-line or
declining balance method and a deduction can be taken for corporate profits tax purposes. By way
of example, depreciation rates range from 1.5% for buildings up to a maximum of 20% for
computers and intangible assets. Accelerated depreciation is permitted for fixed assets used in
protection of environment, scientific research, staff training and education. Accelerated
depreciation is also permitted for computers. The amount of accelerated depreciation is calculated
using rates which are up to 25% higher than the usual standard depreciation rates for the assets in
question.
Tax Incentives
In the latest changes to the Corporate Profits Tax Law, some new tax exemptions are introduces
and some existing incentives are significantly increased as follows:

A ten years tax exemption is introduced for a company that invests 600 million YUD (or
approximately EUR 9.37 million) in its own fixed assets and employs at least 100 new
workers in the period of investment. Detailed instructions concerning the implementation of
this incentive have yet to be introduced;

A five year tax exemption can be applied for (under certain conditions) by a company that
performs activities in a region of “extraordinary importance” (yet to be defined in more
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detail) which invests 6 million YUD and employs five new workers in such regions;

Investments made in fixed assets (except cars, furniture, carpets, works of fine and applied
arts and other decorative items for office premise furnishing) entitle the investor to a
reduction of Corporate Profits Tax by 20% (previously 10%) of the investment made in that
year, but no more that 50% of calculated tax. For small-sized enterprises the tax reduction
is 40% (previously 30%) of the investment made in that year, but no more that 70% of
calculated tax. Unused tax credit can be carried forward for a period of 10 years (previously
5 years). If a company sells those assets within a period of three tears after the original
purchase, then any tax relief given becomes payable in full increased by the inflation rate;

A company which employs new workers is entitled to decrease the calculated corporate
income tax in an amount equal to 100% (previously 40%) of the newly employed workers
gross salaries, for a period of two years. In order to qualify for this relief, the employer
should not have decrease the number of employees during the preceding 12 month period.
In case the employer concerned reduces the number of employees within this two year
period ( the resignation of an employee is no longer considered to be a reduction of the
number of employees), the tax relief given becomes payable in full increased by the
inflation rate;

Non-profit organizations have their own special rules for tax exemption;

A tax credit is granted to any company having its newly established business unit in a nondeveloped region. The amount of the credit is achieved by pro-rating the contribution of that
unit against the entire company profit. The incentive is available for a period of two years.
Losses
Losses generated from business, financial and non-business activities are determined in the tax
return, with the exception of capital losses, may be carried forward for a period of up to ten years
(previously five years) for offsetting against future taxable income. In instances where a company
changes its status, for example through a merger or takeover, losses can also be carried forward.
Capital Gains and Losses
Capital Gains can arise in a company on the difference between the sale and purchase prices of
assets, shares, long term securities, real estate, royalties, industrial property rights and rights to
use and built on land. If a capital gain should arise, then 100% of the said gain should be included
as taxable income, which would be potentially subject to profits tax. If a capital loss arises on a
transaction, then such loss can be offset against capital gains arising on other transactions. If a
capital loss exists at the end of a fiscal year, this loss can be carried forward for a period of up to
ten years (previously five years) for offset against future capital gains.
Purchases of bonds on the Loan for the economic rebirth of Serbia and Republic bonds on “old”
foreign currency savings are exempt from withholding tax on capital gains.
Sales tax
Presently, there is no Value Added Tax in Serbia (the Law was introduced but its application is
suspended). However, it is expected that a new law on Value Added Tax will be introduced which
will be in effect from the year 2004. Meanwhile, Sales Tax applies on the value of goods and
services aimed for final consumption or on the import of a product for final consumption. In
particular, Sales Tax is applicable on the turnover or value of:




product which are sold by retailer;
products which are imported for final consumption;
products given without compensation;
products in short supply;
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

spoiled products;
use of own company’s product for final consumption.
The taxable base is the sales price of a product, or its import value. Any related custom duties,
import charges or any excise duties which are levied on the product are also included in the
taxable base.
Sales tax is levied at rate of 20% unless a product or service is specially exempted.
Goods which are exempted include:


purchase of computers, computer equipment and software;
purchases of goods and services financed by international financing organizations (e.g.,
EBRD, IFC, World Bank etc. and not commercial banks) and institutions or purchase of
goods and services on the basis of signed donation contracts.
Withholding Taxes
Tax should be withheld at the rate of 20% on dividends, interest or royalty payments in accordance
with domestic regulations. Serbia does not currently apply withholding tax on payments to nonresident service providers.
Social Security Contributions
Serbian legislation requires that both employers and employees should pay social security
contributions. Social security contributions are payable with respect to expatriate employees, but
only for salaries generated in Serbia.
Social security contributions should be paid by the employer on his own behalf and by the
employer on behalf of employee at the time when an employee receives his net salary.
The Calculation Base
The social contribution calculation base is gross salary, except for salaries which are lower or
higher than prescribed thresholds.
The minimum base for the calculation of social security contributions will depend upon the level of
the employee’s qualifications and rises in tiered levels in respect of a position in which training of
between nought and two years is require up to a maximum for a position which requires a research
Ph.D., and is adjusted quarterly in accordance with the growth of average salaries.
The maximum base for the calculation of social security contributions is five times the average
gross salary in Serbia. The maximum base in March 2003 was YUD 74,625 or approximately 1,156
EUR.
The Rates
Once the basis of assessment has been determined, social security contributions are calculated by
applying the following rates to the gross salary amount:



contributions to the pension and disability fund at rate of 9.8%,
contributions to the health care fund at a rate of 5.95%,
contributions to the unemployment fund of 0.55%.
The above cumulative contributions of 16.3% are payable by both the employer (in addition to the
gross salary) and the employee (from the gross salary).
In addition to an employee’s gross salary, the following amounts are also payable by an employer
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for each employee as a percentage of gross salary as follows:


Tax on the total sum of salaries 3.5%
Contribution to Chambers of Commerce (Federal, Republic and Municipal) ranging from
0.120% to 0.255%
3.5 Labor Force
An individual can be employed for a limited or unlimited period or can be employed under a service
contract. The general conditions for employment are that an employee should be over 15 years of
age and of good health, although disabled persons can also be employed to do work in which they
are not hindered by their disability.
Wages and Salaries
The average net salary in Serbia in December 2002 was approximately 16,643 YUD (or
approximately 270 EUR per month). Foreign companies, however, tend to pay higher wages than
their local counterparts.
Working Week and Maternity Leave: The standard working week is 40 hours in Serbia.
The vacation entitlement is 18 working days, provided that a person has worked for 6 months. If
the person has worked for less than 6 months then the vacation entitlement will be prorated
accordingly. An employee is additionally entitled to up to 5 days paid leave per year for
extraordinary events (wedding, funeral etc.).
Maternity leave is 365 days. This leave should start a maximum of 45 days and a minimum of 28
days prior to birth.
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4 Internet Usage
4.1 Internet Access History
During the last decade various events stimulated Serbian population to connect to the Internet.
Usage of personal computer became a prerequisite for business development, and for the
advancement of personal activities. In addition, the war in former Yugoslavia (from 1991), UN
sanctions, the NATO bombardment (1999) and controlled media activity (until 2000) strongly
affected the way in which people operated and encouraged them to search for the information they
wanted via new means and services.
The first Internet users were engineers, scientists, and university students. Since 1996, the Internet
has become extremely popular in Serbia. Over 200,000 locally educated people left Serbia
because of difficult economic conditions, and succeeded in obtaining jobs across the globe.
Keeping in touch with relatives and friends who have emigrated stimulated the market. Many
people purchased computers to communicate with the wider world.
The Internet enabled users to continue with their usual practices, and to perform professional and
social activities during the years of country’s unrest. In this period Internet access was invaluable
for reaching current information and replacing publications/literature and resources which were no
longer available.
Since the introduction of the Internet to the Serbian market in mid-1996, the number of people
connected to the Web has grown at an average annual rate of 150%.
4.2 Internet access availability and pricing
4.2.1 DialUp Internet access
Dialup Internet access is made through a modem that connects the end user’s PC to the normal
telephone line. The bandwidth theoretically available to dialup users can reach 56Kb/s, but in
actual usage it varies wildly, and if the end user is served by an old electromechanical telephone
switch the resulting connection can be slow and unreliable.
There are no free ISP services. All accesses to the Internet are for pay with specific billing, and are
on top of the cost of the telephone call.
POPs of the various ISPs are scattered throughout all Serbia, and since the introduction of SMIN it
is possible to connect to the Internet with a local telephone call from any PSTN line in Serbia.
Internet access is considered affordable for the majority of the population, and for dial-up
connection is priced by the hour. The rate (that vary wildly from one ISP to another) for dialup
PSTN access is between 0.15 and 0.50 Euros per hour when sold in packages of 100 access
hours, with flat rate monthly packages (access 24x7) starting from 12 euros per month.
ISDN is a special kind of telephone line, digital, that provides two independent channel that can be
used to make two phone call at the same time (using two phones connected to the same line, of
course). ISDN connection requires a special modem (ISDN modem) and guarantees a bandwidth
of 64Kb/s, that can be doubled if both channels are used.
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The ISPs with lower hourly rates charge double the PSTN rate for 1 channel ISDN connection,
while the ISPs with higher hourly rates don’t have price differences between PSTN and ISDN
connections. Two channel ISDN connection counts as two simultaneous separate connections, so
is billed at double rate.
4.2.2 Cable TV Internet access
CATV companies that have adequate equipment and network cabling can distribute Internet
access in addition to TV programs. The end user has to be equipped with a special modem (cable
modem), that is connected to the Cable TV company’s cabling. That modem, in turn, is connected
to the PC of the end user. The cable modem is often sold, leased or given in usage to end user by
the Cable TV company.
This Internet access is presently the faster Internet access targeted to end users, with a bandwidth
of 128 or 256 Kb/s.
Cable TV Internet access is available only to a very small part of the Serbian population, due to the
small coverage of Cable TV by at large, and due to the fact that only fractions of the Cable TV
customers are reached through networks and distributing devices adequate to carry Internet.
Cable TV Internet connections are persistent, are not put on and off as the dialup connections, and
are billed by the quantity of data traffic the end user exchanges with the Internet: from 0.05
euro/MB down to 0,035 euro/MB, with the lower prices going to users that buy big traffic packages.
On top of those costs there is the Cable TV subscription monthly fee, and a one time connection
and installation fee.
4.2.3 Digital Lines Internet access
Digital lines are the building blocks of communication networks. They are special circuits set up
between two points, e.g. a customer office and an ISP (that sells Internet bandwidth and services
to the customer). They can use various cabling media (copper, fiber optics, etc.) and different
protocols (Frame relay, ATM, etc.). They can carry (depending on technology) all kinds of
bandwidth.
At the time of the report Telecom Serbia is the only provider of digital lines in Serbia.
The high prices applied by Telecom on leased lines have until recently been one of the major
obstacles to development of Internet usage in Serbia. The market replied adopting wireless
technology. In the last months Telecom Serbia dropped prices for leased lines to lure companies,
and the ISPs, into becoming its own customers (in the case of ISPs, they become de facto
distributor of Telecom’s capacity).
Digital leased lines used to be billed on the basis of bandwidth that can be carried and the actual
exchanged traffic, but now the preferred billing scheme seems to be based on the sole bandwidth.
For a point-to-point 2 Mb/s digital line in the same telephone district an example price is 3000 euro
(one time setup fee) + 1066 euro monthly fee.
The digital line only connects the customer’s site with the ISP’s site. The ISP then sells the Internet
access, an example 2 Mb/s price of Telecom Serbia is 446 euro (one time setup fee) + 1900 euro
monthly fee.
4.2.4 Wireless Internet Access
Wireless Internet Access is having a very strong development in Serbia due to high prices and
difficulties to obtain digital lines from Telecom Serbia (that is monopolist), and the absence of
alternative high bandwidth offering, such as xDSL. With Wireless access the digital line is
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substituted by a digital radio frequency circuit between two special antennas, without cabling at all.
Low prices and high reliability of this technology was the driving force of the development of
business Internet connection and of ISPs expansion in Serbia. It has provided a mean to overcome
the obstacles created by the policy of Telecom Serbia, and is also perceived as a good solution for
the future. There is a good presence of ISPs providing wireless access in all big and medium
towns of Serbia. The billing schemes vary from billing on the sole traffic, to a mix of available
bandwidth and traffic, to the billing based only on available bandwidth.
As an example, a 256 Kb/s connection, without limit on traffic, costs around 400 euro per month,
plus one time connection and installation fee, plus the cost of necessary equipment (around 800 –
1400 euros).
4.3 Serbian Consumers and ICT
It is of paramount importance to understand the deep difference between the urban and rural areas
of Serbia: in the country side the possibilities to connect to the Internet are scarce, the telephone
lines are difficult to obtain and not very reliable (electromechanical switches) causing numerous
drops and slow and frustrating experience, while in urban areas there are plenty opportunities to
connect to the Internet, via well branched Internet Cafes, dialup from home, wireless connections
for companies and in some part of the major towns via broad band cable TV Internet access.
This is a striving community of information technologies end-users in Serbia, evident from the wide
commerce of pirated copies of Computer Games, Software, and DivX coded DVD movies. For the
most basic usage of those pirated media the end user needs a very powerful PC.
This market and the growing market for online gaming through cable Internet, give the perception
that at least one important niche of the urban population is provided with state of art personal
computers and is eagerly using the last technologies both for personal empowerment and for
entertainment.
4.4 Consumer’s usage of Internet access
About half of Internet users are university graduates, and almost all of them have completed
secondary education. Socially, most of users are students and active (working) citizens, such as
engineers/technicians, scientists, journalists, architects/designers, IT people etc.
At the end of 2000, about 5% of the population was using Internet. At the beginning of 2002, over
600,000 users were estimated, around 7% of the population.
The above figures are based on the number of individual users of the four biggest Internet
providers (EUNET, PTT, VERAT and YUBC), as well as the users of the University/Academic
Network and government institutions. The actual number of users is higher, since there are several
users of a single PC and/or Internet connection.
We translated the most relevant pages of a sociological research on Internet usage “Internet
pregled: Beograd 2002” made by Milanovic, Bakic and Golcevski of CEPIT. See Annex I.
4.5 Company’s usage of ICT and Internet access
There are roughly 225 thousand companies and organizations in Serbia (without Kosovo), and
Internet is in the early usage phase. Information and Communication Technology (ICT) is not
effectively applied in corporate activities, despite the demands of various businesses.
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However, most of the companies have some computers, which they use for word processing, office
applications and accounting. Existing computers are internally networked for data processing,
reporting, and enterprise applications. Old and new generation equipment is integrated into same
network.
Many workstations are shared between employees. This is particularly the case wherein
computers have access to the Internet. Some employees use e-mail for communication, even if the
companies do not provide e-mail accounts for employees.
Efficiency gains resulting from the use of ICT systems are widely recognized. Major obstacle for
more intensive implementation is the cost of equipment/software/services. Employees are
advancing their skills and are willing to attend additional training. Many of them understand English
and have no difficulties in understanding computer commands/interfaces. They are open to
innovation. They learn quickly and share ICTs and ICT related experience among themselves.
Employees apply new knowledge to working assignments and seek methods to upgrade office
equipment and software with great enthusiasm.
Companies’ usage of Internet is mainly for email, with a growing interest in Internet banking, in
order to save time and costs.
Presence of companies on the Internet is mainly gauged by the growth of domains. See the 4.7.2
section.
4.6 E-Government
Most governmental agencies provide basic information. Some government agencies post key
information on websites, including service directories, hours of operation, and downloadable forms.
Information is often not kept current and relevant.
Transactions take place primarily in person, by fax or telephone, though electronic mail may
expedite the process. The government distributes some information about services, procedures,
rights and responsibilities in hard copy.
Interaction between government and citizens is mainly paper based, phone or fax based. There is
some online interaction with specific institutions.
Interaction between government on one side, and its suppliers and contractors on the other side is
mainly fax, phone and paper based.
Online application for permits, licenses and taxes is not possible.
4.7 Statistics
4.7.1 Statistics on Internet usage from ITU
The figures that follow are from general assessment that ITU (the UN office for
Telecommunication) makes available yearly for each country in the world.
Those data put Serbia’s Internet demographics in global perspective, related to neighbor countries,
to Italy (not so developed western market) and to United States (well developed western market).
It has to be noted how quickly Serbia is approaching the neighbor countries in only two years from
the end of the Milosevic’s Government (that was accompanied by more than a decade of wars,
economic sanctions and deep economic crisis).
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It is important to note that the estimated PCs in Serbia are reported by the Association for
Information Technology at the Serbian Chamber of Commerce to be 600 thousand in September
2003, while ITU reports for Serbia & Montenegro only 290 thousand PCs in 2002.
Country
Internet
Internet
Users (k) Users per
2002
10.000
inhab. 2002
155000
5375
Italy
Internet
Internet
Hosts total Hosts per
2002
10.000
inhab. 2002
106'193'339 3728.74
(2001)
672638
119
17000
3010
Croatia
29644
61.20
789
1628
Estimated
Estimated
Pc
(k) Pc per 100
2002
inhab.
2002
178000
62.50
(2001)
11300
19.48
(2001)
760
15.69
Bulgaria
Romania
Albania
32986
40971
172
42.28
18.35
0.43
605 (2001)
1800
10 (2001)
746
806
25
270
800 (2001)
30 (2001)
United States
3.46
3.57
0.76
Serbia
& 16972
15.83
640
597
290 **
2.71
Montenegro
** at September 2003 there was 600 thousand PCs in Serbia, according to the Information
Technology Association of the Serbian Chamber of Commerce
4.7.2 Statistics on Serbian Hosts, Websites, Domains from RIPE NCC
The following data are extracted and elaborated by the consultant from the official RIPE NCC
Internet Register, the European wide authority for Internet Domains.
RIPE NCC are taking into account only the domains and hosts that are under the YU TLD, while a
consistent part of Serbian domains and hosts has been registered also under the COM, NET,
ORG, TV and BIZ TLD.
So the important meaning of those data are the growth trends, much more than the figures.
The actual number of Serbian domains can be estimated roughly at more than double of the YU
TLD number, both for the difficulty to obtain a domain name in the YU TLD, and for the regulation
that allows only companies to register a domain, only one domain for each company. See the 5.1
section.
It is important to note that the number of websites is increasing much more quickly than the
number of hosts (denoting a development in the providing of web hosting services), while the
number of domains is much more higher than the number of websites (denoting that almost half of
the total number of domains do not yet have a public website).
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4.7.3 Internet and Ecommerce in Serbia (Taylor Nelson Sofres Interactive)
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5 Internet related Regulations
5.1 Domains
There is a single institution for the registration of domain names (www.nic.yu).
This institution, located at the Electrotechnical Faculty, is a legacy from the past when it was
charged with the management of the all Yugoslav domains (at the time when Yugoslavia was
composed by Slovenia, Croatia, Bosnia-Herzegovina, Serbia, Montenegro and Macedonia).
With the splitting of Yugoslavia, the Internet Authority on names (ICANN –IANA) confirmed the
responsibility for the YU domain to this institution (while the republics, as soon as recognized as
proper states, begin to use new TLDs, .sl for Slovenia, .mk for Macedonia, and so on).
Serbia & Montenegro still have to use the YU TLD, also since with the new constitution of the
Union of Serbia & Montenegro there is no more an entity named Yugoslavia.
In the near future it is almost sure that the YU TLD will be phased out in favor of a new TLD,
probably CS (Crna Gora – Srbija). By the way, it is more and more believed that the Union will also
split, so maybe there will be a third TLD for Serbia alone.
This situation is very unpleasant for the owners of domain names in the YU TLD, that would like to
have stability for investing in website visibility, brand name awareness, etc.
On top of this situation with the Serbian TLD, the legacy from the past is felt also with the same
workings, rules and efficiency of the institutions.
Individuals cannot obtain a domain name. Only companies and organizations physically located
and properly registered in the Union of Serbia and Montenegro can apply for a domain name. Each
registrant can get only one domain. Once registered, a domain name cannot be transferred.
All this limitations are to be lifted when the new regulations for domain names is adopted.
5.2 Telecommunications and Internet
Before April 2003 there was no law in Serbia that regulated the Internet. Law on
Telecommunications ("Official Gazette" No. 44/03) is the first law that regulates Internet service as
a public telecommunications service realized by applying Internet technology, while public
telecommunications service is a publicly available telecommunications service provided by a public
telecommunications operator.
Law on Telecommunications prescribes that "Telecom Serbia", the operator of Serbia's public fixed
telecommunications network, has the exclusive right to provide all existing and future types of fixed
telecommunications services to users in the Republic of Serbia until 9 June 2005 at the latest.
This exclusive right does not affect Internet services, multimedia services nor any other radiotelevision and other broadcasting services of cable television that can be provided freely and under
equal conditions according to the provisions of the law, which has to be implemented by an
independent body “Agency for Telecommunication”.
The Agency shall issue a general authorization to any person whose intention is to operate a public
telecommunications network or provide public telecommunications services under this regime,
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provided that such person has met or agreed to meet all requirements prescribed for that network
or service. The general authorization shall be particularly issued for Internet Service Providers. At
the time of the report the Agency has not yet been created.
5.3 Public Information and Internet
Law on Public Information ("Official Gazette" No. 43/03) is the first law in Serbia that defines
electronic publication of media outlet on Internet as a media outlet.
According to the Law on Public Information, media outlets shall comprise newspapers, radio and
television programs, news agency services, Internet and other electronic editions of media outlets
as well as other public information media that use words, images and sound to publish ideas,
information and opinions intended for public dissemination and to be used by an unspecified
number of users.
5.4 Copyright
The recent new Copyright Law meets the modern standards and is in line with EU
recommendation and WTO TRIPS.
The Agency for Intellectual Property Rights is in course of reorganization, with a project funded by
EAR, that will results in effective capability of enforcing IPRs.
5.5 Privacy
Serbia has a Law on the Protection of Personal Data (No. 139, enacted 12 May 1998) that is in line
with the most common EU and western regulations.
5.6 Digital Signature, Electronic Commerce, Cyber Crime
The Law on Digital Signature (that is of paramount importance for any form of B2B, B2C and EGovernment development) has already been in the procedure a couple of years, and is expected
to be adopted before the end of 2003. It is drafted in line with EU and US common practices and
regulations, and various players are preparing themselves to the implementation phase
(Certification Authorities).
There is no specific regulation or law on Electronic Commerce, and the Law on Digital Signature is
seen as the first step in this direction.
The Serbian Law does not yet recognize Internet specific crime. Several Law packages on this
issue are expected to enter the procedure.
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6 Fast growing Internet Businesses Areas
Serbia is still in the phase of building infrastructure for distributing Internet access. Methods for
Internet payments are in infancy, credit cards are not yet acceptable through the Internet due to a
lack of local gateway processors, and the investments in services are waiting for infrastructure
buildup.
There is wide expectation that the boom for Internet services, e-commerce, marketplaces and
value added applications will begin in 2005, after the completion of spending in equipment and
infrastructure and in parallel with the flow of investments expected by competitors at the end of
Telecom Serbia monopoly.
Until now most players in the Internet area are undercapitalized. Moreover an entrepreneurial
culture of surviving in an adverse environment has been obstacle to medium term development
projects. An eager market has been forgiving toward quality issues.
The monopoly of Telecom Serbia on voice traffic, and the lack of legislations and regulations have
until recently discouraged investors from entering the Serbian Internet market.
However this landscape will be reshaped in the next two years timeframe and the flexibility learned
in difficult times is likely to short the e-business adoption time.
6.1 Internet Access Distribution
6.1.1 Wireless
Wireless is the preferred method chosen by ISPs to expand their offer from consumer dialup to
business users connection.
Three concurrent factors have driven the success of wireless:
 High prices and difficulties in obtaining digital lines from Telecom Serbia (monopolist)
 No enforcing of regulations on 2.4 Ghz radiofrequency
 Low cost of equipment
Since the inception of the Internet Providing business Telecom Serbia has been perceived as
unresponsive if not plainly hostile by a part of the ISP community. High prices were charged for the
digital lines needed as a medium to connect the ISP to the business customer, and various ISPs
lamented that those lines were delivered without a reliable timeframe, or simply not delivered at all.
The lack of a clear regulation and the delays in the licensing involved had until recently been an
obstacle for ISPs willing to lay down alternative fiber optics distribution networks. The Serbian
market had seen the growth of wireless technology Internet distribution, in which radio-frequency
digital circuit is realized between two antennas on the 2.4 Gigahertz frequency.
Wireless technology substitutes the digital line. With low cost equipment, easy to install and to
operate it is possible to realize point-to-point digital connections up to 11 Mb/sec, between the
customer’s premises and the ISP’s gateway.
Drawbacks of wireless technology, as it is implemented now, are the partial sensitivity to
atmospheric events, the limitation of the possible delivered bandwidth, and the more and more
crowded urban landscape that will cause problems of interference and overlap between different
ISPs and users which antennas are too close.
Possible solution to overcoming those problems are in better technology for antennas and in the
usage of higher frequencies (usage of which will be regulated soon).
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Telecom Serbia reacted to the wireless explosion by lowering dramatically the prices for leased
lines, but wireless remains very competitive.
6.1.2 Cable TV
Cable TV companies have been the first businesses to succeed in having officially recognized their
right to deploy cabling and fiber optics needed to distribute TV programs and to interconnect their
distribution networks. There are many small companies distributing Cable TV programs in Serbia,
most of which are covering only one town, or part thereof.
Cable TV Internet in the best implementation can bring to end user a bandwidth between 256kb/s
and 2mb/s. Cable TV Internet access is a very interesting business for Cable TV distribution
companies, because of the high margin and the possibility to bundle various interactive services
(interactive TV, TV shopping, Video on Demand). The main drawbacks are the considerable
amount of investments needed to deploy, upgrade, interconnect and manage the distribution
networks.
Only two companies seem to be driving their expansion towards robust Internet distribution: SBB
(private consortium with a participation of SEEF, a George Soros’s investment fund) and PTT-KDS
(which is part of State owned PTT).
Generic Cable TV equipment and network are not suitable for Internet distribution. While one of the
major consortium of Cable TV distribution (SBB) is working to bring up the technology in the
participating networks and is distributing Internet in some location, the other big competitor (PTTKDS) seems to have already better technology in place, but this is now slowed due to financial
weakness.
6.1.3 DialUp and SMIN
Dialup continues to be a very important and profitable part of the Internet business in Serbia, and is
growing with ISPs trying to follow the pace of demand growth. For the end users demand growth,
see the 4.2.1 and 4.7 sections.
It is very important to note that in various European countries, after the end of telecommunication’s
monopolies, dialup Internet access is offered for free by the Telco operators, and that an evolution
in this direction can be taken by competing Telecom Operators following the June 2005 end of
Telecom Serbia monopoly on voice traffic.
Dialup access consists in the end user making a phone call through its own modem (connected to
the PC and the normal phone line) to a telephone number that is connected to another modem
(property of the ISP) connected to a device (computer or router) that is connected to the Internet.
Through this telephone call between modems the computer of end user is connected to the
Internet through an ISP.
Until some months ago each ISP had to physically deploy modems in each telephone district it
wanted to accept phone call from (to allow the end user’s modem to call its local number). For
each modem pool, ISP had to deploy a device (computer or router) and a connection between the
modem pool location and the ISP’s Internet data center premises. This connection was not easy at
all, because of the difficulties of obtaining a digital line from Telecom Serbia to connect the remote
modem pool (lets say in Kragujevac) to the Internet premise of the ISP (in Beograd).
ISPs have reacted finding their own way within Telecom in order to obtain digital lines, and/or
installing wireless connections that brings the Internet to the remote modem pools. Then, some
months ago, Telecom Serbia entered the market with SMIN, a modern optical network connected
to the Internet, accessible through modem from all Serbia with a local call. Telecom Serbia is
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Investing in Serbia’s Internet and IT sector: Challenges and Opportunities (public report)
renting to ISPs “virtual modem pools” (on monthly fees or shared profit basis) that connect to
SMIN.
ISPs are using SMIN to cover telephone districts where they are not present with their own “real”
modem pools.
6.2 Ebanking- Mbanking
Electronic banking is quickly becoming popular among companies. Business to business
transactions had been traditionally handled by ZOP, a State clearinghouse that was requiring the
fill out of various paper forms at his own offices. With the banking reform, since 2003, business
transaction are handled directly between banks, and the implementation of Ebanking technology is
widely accepted by customers as a way to save time (and money).
Ebanking is an important way for Serbian banks to achieve higher level of efficiency and to cut
costs, conveying a big number of routine transactions as money transfers, payments, balance
checks, etc. to the virtual space, without having to open new branches or to increase their staff.
The new regulation on accounting and taxes requires companies to have detailed listings of all
daily money transfers, and this is distributed through email to the customers that adopt Ebanking.
Ebanking is also seen as a way to increase loyalty of customers and to offer additional free
services, enhancing quality of the overall offer.
Due to the lack of regulation and Laws on Digital Signatures, the banks that offer these services
are using digital certificates on smart cards or CDs signed by the banks itselves or by their
suppliers.
Mobile Banking, or Mbanking is Ebanking via cellphone. The balance check through SMS is a
service that companies seem to find very useful, and payment services through SMS are in the
planning phase.
6.3 Services to the Serbian Diaspora
More than 200.000 well educated peoples that are gone abroad during the Milosevic era are now
well inserted in various countries around the world, particularly in Germany, Switzerland, Austria,
USA, Australia. On top of them there is also more ancient Serbian emigration, dating back to the
‘70s and before.
Many of these people, Serbian like to refer to them as “the Diaspora”, are eager to have news,
music, books, information from their homeland, and they try actively to maintain their roots,
connections, and relations with relatives and friends.
This niche of Serbian population has something very interesting as a target for Ebusiness: is
relatively affluent, has access and habit to use means of payments like credit cards, and has no
other way to get the products it wants.
The Serbian Diaspora has until now been the test bed for the Electronic Commerce of Serbia.
Particularly the media have been active in this area, and the most important information weeklies
are planning or have active pay-per-read services.
In the last couple of years the Diaspora has been the target for numerous other small initiatives of
E-commerce, like music CDs and books online stores, and even an interesting example of click
and (kind of) brick initiative, where from a website you can order the management of the graves of
your relatives, with flowers, candles, etc. changed at particular dates or at a schedule, etc.
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All those initiatives have to use foreign processor of credit cards, due to the lack of domestic
services.
6.4 Open Source Software in Serbia
The licensing cost of a legal copy of Microsoft Windows and Microsoft Office for personal usage
could be roughly equivalent of more than two thirds of the Gross National Income per capita, or six
times the average monthly wage in 2002. The licensing costs of operating systems, databases,
collaboration and communication software for desktop and servers are simply unbearable for the
vast majority of Serbian SMEs. OSS programs and operating systems are able to run also on
outdated and very cheap hardware platforms.
OSS usage was growing steadily between both individuals and companies, and the recent
crackdown on software piracy, coupled with the law enforcement on copyrights, is giving a boost to
OSS adoption.
The Government of Serbia signed in 2001 a partnership with Microsoft allowing discounted
licensing of a portion of software used at that time by the Public Administration, and efforts are
underway to accelerate the adoption of OSS in the society.
ISPs (like in the rest of the world) were the first big adopters of OSS, for the reliability, security,
interoperability of the server’s software and today they represents very skilled competence centers,
able to consult and to develop tailored solutions for their customers.
Other competence centers are under development in Technical and Business Universities, e.g.
FON (the business faculty) is releasing the complete Serbian language documentation for the main
desktop OSS software, while the Serbian language version of OpenOffice is ready.
IBM and ICTT have created a Linux competence center and offer formal certified courses on OSS
implementation and administration. Sun and Suse (a German Linux distributor) are implementing
their training efforts, while on the low tier of the training market many computer schools are
introducing OSS lessons.
It is expected that a wide market will be developed for solutions targeted to SMEs and to industries
modernization and restructuring.
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7 Key Internet Business Players
7.1 Ministries, Agency for IT and Internet Development
The Serbian Minister of Transport and Telecommunications, Marija Raseta-Vukosavljevic, is
primarily responsible for transportation, while Assistant Minister Andrija Bednarik is responsible for
telecommunications.
The Serbian Ministry of Science, Technology and Development Dragan Domazet is not
responsible for telecommunications per se, but it oversees the Internet, academic networking,
EGovernment projects and informatization policies.
These tasks are handled by the Agency for IT & Internet Development, created in 2001 as a
separate agency and merged into the ministry in 2002. Being outside the ministries, the agency
initially had more freedom than it does today, but it also had no channel for introducing new
legislation and no authority to implement E-Government projects within the ministries.
The Agency’s E-Government project is still at an early stage, surveying government ownership and
use of ICT hardware and software while trying to secure adequate support from foreign aid
agencies. The Agency’s project is expected to last 5 years and cost $25 million.
Branislav Andjelic developed the Agency for IT and Internet Development for Serbian prime
minister Zoran Djindjic and he was heading the Agency for the Minister of Science, Technology
and Development. Some months ago, after public criticizing the Government inaction on
informatization issues, Andjelic was dismissed by the Agency. Since then the Agency for IT and
Internet Development seems to be less active.
7.2 PTT Serbia
PTT Serbia is today a State owned holding, owning 80% of Telecom Serbia, 100% of Post Serbia
and 49% of Mobtel cellular company. Without counting Telecom Serbia and Mobtel, PTT has today
roughly 18,000 employees.
Before 1997 the telephone network (future Telecom Serbia) was an integral part of PTT from which
it was spun off and partially privatized.
The amount of shares of Mobtel owned by PTT is disputed by the Government of Serbia, that
would like to increase its shares as “reparation” for the “illicit profit” made by Mobtel profiting from
the favors of the Milosevic’s Government. The General Manager of PTT was fired in September
2003 for having signed a deal that would assign 55% of Mobtel to PTT. Government claimed this
amount too low and the agreement was invalidated.
In PTT are found the major components of an Ebusiness powerhouse:







the most complete delivery network coverage of the Serbian territory (postal and
accelerated courier services of Post Serbia)
the most complete coverage of territory with front end outlets (1000 Post Offices)
the citizens trust Postanska Stedionica that is the Post’s Savings Bank, and Post itself, that
is used by most of the population for various kind of payments
the fixed telephony services (Telecom Serbia)
the mobile telephony services (Mobtel and MTS)
the sole present national Internet backbone infrastructure (SMIN of Telecom Serbia)
the most articulated corporate private network (PostNet, interconnecting 400 of the Post
outlets)
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


the major retail ISP (PTTNet, 130,000 subscribers, that is sharing equipment and personnel
with PostNet)
the second major Cable TV and broadband Internet distribution organization (KDS)
the first and sole integrated logistics, CRM, call center, Certification Authority, payments
gateway, business services organization (CEPP)
PTT is preparing to play a big role in the Ebusiness Serbia, and is developing skills, knowledge,
services and partnerships in a comprehensive and long sighted way.
PTT is in the process of bringing up Post (yet much trusted by population) to advanced standards,
with courier services, franchising, alliances with banks (Post’s local offices will be acting as local
counters for banks that have no local presence).
At the same time Post is planning to have its own national Internet and VoIP backbone
infrastructure by developing together KDS (Cable-TV and Internet distribution last mile), PostNet
(its own private corporate network) and PTTNet (its own ISP), gaining independence from Telecom
Serbia’s infrastructure. The aim is to have complete convergence between all the digital Post’s
operations, with the seamless integration of the corporate PostNet.
Current believing in PTT is that KDS, Cepp and Internet operations will be privatized in one or two
years, and that PTT will retain the entire post service and a share in the Ebusiness developed by
Cepp.
PTT is at the time of this report (October 2003) troubled by two main issues: a difficult financial
situation caused by the buy back of shares of Telecom Serbia from Telecom Italia, and the lack of
General Manager, that has not yet been appointed after the dismissing of the former one. The
present “ad interim manager” seems mostly in charge of managing the troubled financial situation.
The actual strategy of development, privatization, spin off, etc. will be drafted by the next General
Manager that will be appointed by Government. However, Government seems waiting for a more
stable political situation to decide (new elections are coming).
PTT is very interested to receive investments to pursue its development plans.
7.2.1 PTTNet - PostNet
PTTNet, the ISP division of PTT, started in 1998 and now is the biggest provider in Serbia with
130,000 dialup subscribers and 60 customers on leased lines. Recently began to distribute
broadband Internet access to KDS subscribers. PTTNet has its own 26 modem pools and access
points, completely independent from Telecom’s SMIN, with 2020 dialin ports.
PTTNet offer business services as VPN and VPDN, in addition to dialup and leased line Internet
access. Wireless equipment from Alvarion will be operational in two months, allowing the
penetration in the wireless Internet access market.
PostNet is the private corporate network of PTT, that interconnects all 1000 post offices and
carries all kind of transaction from payments to email.
These two networks that are yet managed by the same personnel, without any outsourcing, are
planned to converge into one big capacity infrastructure that will also make use of fiber optics laid
down by KDS. The resulting network will allow being a telephone operator. The convergence plan
is now advancing at slow pace due to financial difficulties.
PTTNet is very likely to be spun off privatized. Therefore PTT is looking for investors that are
willing to start investing in this convergence project today. The form of this new partnership is a
sharing income agreement that will be converted in equities at privatization time.
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7.2.2 KDS
PTT Serbia was one of the first companies to provide CATV, beginning in 1989 in Subotica
(northern city in Vojvodina region).
KDS (a department of PTT) is today the second biggest provider of CATV in Serbia, after SBB.
From 21,000 subscribers at the end of 2001 KDS reports in August 2003 77,000 subscribers which
are from several places throughout Serbia, such as: several urban areas in Belgrade, Smederevo,
Petrovaradin, Soko Banja, as well as Subotica and Karlovci.
KDS main activity is to build infrastructure and put CATV and services on it, while PTTNet-PostNet
is in charge of the Internet and network management part. The broadband Internet distribution has
started in some local networks, and will soon be provided for Belgrade and other major towns.
KDS is credited to have deployed a better quality network and technology than those deployed by
competition. Big part of its existing distribution system was designed since the beginning to carry
bidirectional, digital and interactive services.
Plans are to accelerate dramatically the realization and interconnection of the fiber optic networks,
as well as to use that network for distributing the whole spectrum of digital and interactive services,
from Internet broadband access to Video on Demand. The network capacity will also be available
to independent service providers and to companies.
KDS will allow Voice over IP over its network, as an internal corporate service for its offices (for
PTT itself at first) until the monopoly of fixed telephony is over. Then in 2005 it will be ready to
enter the voice market.
KDS is very likely to be spun off privatized. Therefore PTT is looking for investors that are willing to
start investing in this project today. The form of this new partnership is a sharing income
agreement that will be converted in equities at privatization time.
7.2.3 Cepp
Cepp is the Ebusiness department of PTT. It is realized in collaboration with Saga, one of the main
software and integration private companies in Serbia.
The main activities of Cepp are:
 Call center and Customer Relation Management (CRM)
 Digital Signature Management
 Certification Authority
 Electronic Payment gateway between banks, companies and customers
 Electronic Payment services
 Credit Card gateway
 IVR automated services
 Mbanking
 Mcommerce
 Logistics and Ecommerce solutions
Saga is contributing technologies, software and technical support and for this receives a share of
the Cepp revenues. Partner in Certification Authority and Signature Management is Entrust, an US
company with 38% of worldwide market share.
Cepp is the contact point between PTT and companies looking for outsourced solutions in logistics,
delivery, CRM, Ecommerce and is also the partner of Central and Local Public Administration for
EGovernment projects. With capabilities of warehousing, delivery, collecting payments in cash or
electronic, Certification Authority, it is a complete Ebusiness enabling partner.
The aim of Cepp initiative is to move the trust that customers have in PTT correctness and
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efficiency into virtual space, based on the most complete communication infrastructure in Serbia
(direct cross connections with the core backbones of Telecom, MTS, Mobtel, Internet).
Cepp seems to be the only integrated service for Ebusiness in Serbia. It is already in production
and is actively looking for new customers.
7.3 Telecom Serbia
Telecom Serbia was spun off from PTT and incorporated as a joint stock company in June 1997
and immediately partially privatized. 49% of share capital was sold at a price of 1.568 billion DEM 29% was purchased by Italian STET and 20% by Greek OTE.
In preparation to that partial privatization Telecom Serbia was awarded a GSM license (against the
fact that the year before Mobtel was awarded an exclusive, monopolistic license on GSM) and the
complete monopoly on fixed telephony.
This partial privatization was made by the Milosevic’s Government in a very troubled economic
period, and the influx of cash was utilized to pay pensions and salaries, chilling the rampant social
turmoil that was menacing the Government.
After the buy back of the Italian share in 2003 for 195 million Euros (less than 400 billion DEM
equivalent), PTT owns 80% of the Telecom shares, and a gold share with the right to veto on all
important strategic decisions made by the Managing Board. The Managing Board is composed of
the representatives of the two Shareholders in proportion to their capital.
The mobile network of Telecom Serbia, Mobile Telecom Serbia (MTS) started operations in August
1998.
Telecom Serbia directly employs 12.763 people.
Following the changes in 2000, the new management of Telecom Serbia has expedited the
infrastructure development and telephone network digitalization throughout the country. The major
part of the profit invested so far has been intended for the development of fixed telephony.
Starting from 2000 digitalization levels of 28% in Belgrade, and below 20% in Novi Sad, Telecom
Serbia has brought up digital capacity to 50% in Belgrade and 60% in Novi Sad, while in 2005 all
two-party lines (duplexes) are expected to be separated, 300,000 new digital lines to be installed
and the Country digitalization to reach 95%.
Of 528 million euros of total investment over the past three years, 57% (300 million) was invested
in the development of fixed network, which is a prerequisite for the development of good-quality
Internet services.
The effects of such investment: data capacity has increased 155 times, from 4 mb/s in 2001 to
622mb/s on two separate routes. Owing to that investment Telecom Serbia were able to offer
drastically lower lease rates and considerably simpler and more favourable conditions for the
operation of the Internet Service Providers (ISPs). This year, the expansion of the capacity is
planned for additional 622mb/s, ensuring even lower lease rates.
As a result of major investments in digitalization, this year Telecom Serbia will be able to offer
ADSL lines, which are in the process of receiving the operating licence.
Telecom Serbia has launched the yellow pages project, which will be issued in both printed and
electronic form (website). This will enable companies, especially SMEs, to market their products
and services both in the country and abroad.
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Telecom has its own certification body with the role to support the security of electronic mail
exchange, but also to protect and ensure authenticity (incontrovertibility) of the documents in
electronic form. The process of extending the capacity of the certification body is underway to
enable the users outside Telecom, including banks, to issue digital certificates.
An organized market entry of Telecom in the outsourcing market is planned for the next year.
Outsourcing services currently provided by Telecom include designing and supervision of the
construction of computer networks, consulting services in all areas of IT and printing services
rendered in the Printing Centre (the most state-of-the-art and largest Printing Centre for such
purposes in the territory of former Yugoslavia).
Other initiatives planned by Telecom includes a state-of-the-art Contact Centre (that will use the
international award winning TIS technology, internally developed) intended both for communication
with users of Telecom services and for provision of outsourcing services, and the collection of
payment for services provided by other companies through its own bills.
7.3.1 Official data as of June 2003
Total number of subscribers
2.370.805
Number of connected subscribers per 100 37.17
people
Number of installed lines
2.707.783
Number of installed users ISDN BRI (2B+D)
Number of connected users ISDN BRI (2B+D)
21.518
5.760
Number of installed users ISDN PRI (30B+D)
Number of connected users ISDN PRI (30B+D)
979
279
Number of X.25 users
Number of Frame Relay users
273
683
Territorial coverage of Mobile Telephony Serbia
Population coverage of Mobile Telephony
Serbia
Base stations MTS
Subscribers MTS
66%
92%
335
1.603.908
7.3.2 SMIN, T-Net and Telecom Serbia policies
The SMIN initiative of Telecom Serbia is composed of:



a national fiber optic network
international Internet connectivity
the facilities to access the network by a local modem call nationwide.
SMIN, together with T-Net (T-Net is the internal computer network of Telecom), represents a single
unit which, apart from providing dial-up modem and ISDN lines, also enables connection of
external computer networks via 100 Mb/s Ethernet connections.
The infrastructure of SMIN and T-Net together, with its 300 local computer networks integrated in
a single network, total installed capacity of more than 10,000 active computer connections and
over 15,000 passive ones in more than 190 Serbian towns, represents the largest computer
network in the Balkans.
43
Investing in Serbia’s Internet and IT sector: Challenges and Opportunities (public report)
For dialup on SMIN see the 6.1.3 section.
Telecom Serbia is reacting to the ISPs wireless growth with a dramatic reduction in prices for
digital leased lines, and proposing to ISPs to resell its connectivity and virtual modem access.
Telecom Serbia after the end of monopoly (June 2005) is very likely to be privatized and split in
different companies, one of them will be an ISP. Rumors (obvious) are that Telecom with a policy
of cooptation of ISPs into resellers is preparing to buy some of them before its own privatization.
7.4 Mobtel
During the Milosevic’s era the private BK Group (Moscow and Belgrade based) formed a company
with PTT Serbia (State owned) named BK Telecom, who was awarded the first and exclusive
license to operate a mobile telephone network in Serbia. BK Group was (and maybe is) the biggest
private group in Serbia, encompassing banks, TV and radio stations, ISPs, etc. BK Telecom is
owned 49% by PTT and 51% by BK group. BK Telecom developed the Mobtel cellular company
(063 mobile numbers).
In 1997 another license was granted to Telecom Serbia, to increase the value of his shares that
were to be sold to Italian and Greek Telcos. BK obtained as a reparation a percentage of the
annual income PTT gets from its stake in TS.
After 2000, with government change, BK Group was one of the target of the law on illicit profits and
properties, intended to punish those that profited from ties with the Milosevic’s Government. BK
paid big taxes of reparation, and for a while Mobtel was directly managed by the State.
The Government intends to have a bigger share in Mobtel. In the last months, the PTT General
Manager was fired for having signed an agreement with BK Group that would assign PTT 55% of
Mobtel, and the agreement was claimed invalid by the Government.
In the last months Mobtel was the first to be operative with GPRS, and it provides various
multimedia and interactive services to its customers, as the VIVO MMS service (digital pictures
through the GPRS phones, email access, etc.) in addition to WAP Internet access.
Mobtel and PTT are planning to release a host of new services like Mbanking, Mcommerce, etc.
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7.4.1 Official Mobtel’s 2002 Data
Territorial Coverage
Population Coverage
1997
1998
1999
2000
2001
2002
1997
1998
1999
2000
2001
2002
30 %
40 %
50 %
85 %
87 %
88 %
Competition
1997
1998
1999
2000
2001
2002
Mobtel
100 %
98 %
79 %
75%
58%
50%
40 %
60 %
70 %
92 %
94 %
95 %
Subscribers
Competition
0%
2%
21%
25%
42%
50%
1997
1998
1999
2000
2001
2002
Revenues
Profits
1997
1998
1999
2000
2001
2002
1997
1998
1999
2000
2001
2002
360 476
1 442 019
3 969 120
5 174 708
10 698 410
15 266 840
50 000
150 000
355 000
765 000
1 000 000
1 210 000
98 925
382 811
682 451
748 987
2 689 902
3 994 172
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7.5 Internet Service Providers (ISPs)
While there are more than fifty ISPs on the Serbian market, only few of them really own Internet
international bandwidth, while most are private small companies that resell access to bigger ISPs.
The majors ISPs are: Eunet, BeoTel, Verat and YUBC (all of them private companies) and, as
seen before, PTT and Telecom Serbia (State owned). Statistics on the ISP market are not
available.
Until some months ago, the four private big ISPs (Eunet, YUBC, Verat, Beotel) had 34Mb/s each of
international connectivity, and they roughly seem to have the same company size.
Eunet was one of the first and most popular ISPs, owned by the private BK Group (see Mobtel, 7.4
section) started in 1996 as Serbian affiliate of the international consortium EU.net. Eunet seems to
be caught in the orbit of Telecom Serbia in the last times, as reseller of SMIN access.
BeoTel is owned by Telefonija, once an engineering subsidiary of PTT now a stock company with
20% State participation that has had an active role in the building of the SMIN Internet
infrastructure of Telecom Serbia. It is one of the most important telecommunication engineering
companies of Serbia. It is very tied to Telecom Serbia and provides bandwidth to smaller ISPs.
Verat and YUBC are both actively pursuing a path of independence from TS, seeking for
investments, and preparing to compete in the post 2005 demonopolized telecommunication
market. Therefore, the following paragraphs provide a description of these two promising ISPs.
7.5.1 Verat
Verat begins operations in 1993 in the real estate sector. Verat Group still operates in this sector,
with 30 employees, while the Internet operation has today 62 employees. Verat is the only provider
in Serbia completely independent from Telecom Serbia for its own international connectivity and
distribution backbone, both realized with wireless links.
Recently Verat built a 2x155 Mb/s link to Deutsche Telecom through its own wireless backbone
until the northern border of Serbia (not dependent from Telecom Serbia leased lines), in addition to
the 34 Mb/s that still purchase from Telecom Serbia, to be used as backup connectivity if traumatic
events happen to the main connectivity. Verat has 40,000 dialup customers and hosts 5,600
websites in addition to 100 customers through leased lines.
Verat is now negotiating to obtain an exclusive license to use 3.5 Ghz wireless links, that give
better bandwidth and would permit to avoid the problems that comes with the use of the crowded
2.4 Ghz frequency, used by all ISPs. Verat is building a state of art datacenter, for housing
customer’s server farms and others 24x7 operations. The datacenter, first in Serbia, will start with
500 square meters and will be operational in January 2004.
Plans are to expand the wireless backbone in Center and South Serbia and connect with Bulgaria,
Greece through Macedonia, Italy through Montenegro, with planned costs about 10 millions euros.
Verat is interested in Data transmission and Voice market, and is planning to be ready for those
markets as soon as the end of Telecom Serbia’s monopoly (no later than June 2005).
They are buying other providers, and want to pursuit an acquisition strategy to gain local market
share in Central and South Serbia. The aim is to reach 45% of the market.
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7.5.2 YUBC
YUBC begun operations at the end of 1989 and is incorporated as a Joint Stock Company since
end of 1999. YUBC has 29.000 dialup users, it is present in Belgrade with its own modem pools
(around 500 dialin lines) and with virtual ports from SMIN in all Serbia. In November 2003 the
wireless coverage of the entire Belgrade will be completed, its most part is already covered. YUBC
claims to have 26% of the ISP market in Serbia, has won numerous quality awards, and has a very
good technical reputation.
YUBC has completed the feasibility study and is ready to begin building its own fiber optic
backbone, which should cover Serbia connecting Hungary, Bulgaria e Macedonia. The path of the
backbone will follow the highways, and the ducts will remain property of YUBC. The plan is to lay
down more fibers than immediately necessary, and the excess capacity will be rented and will be
available for future developments. The overall cost for the backbone is estimated to be in the order
of 12 million euros.
This backbone would be the first to compete with the backbone of Telecom Serbia, and should
allow the whole spectrum of services, Internet and data traffic, fixed telephony and video on
demand. This backbone will not be constraint by the limitations of wireless technology.
7.5.3 ISP Association
The Yugoslav ISP Association was founded at the end of 2001 as a sector of the Yugoslav
Chamber of Commerce. Until September 2002 it was not able to agree on the most basic issues,
as how to confront Telecom Serbia in a litigation regarding the right of ISPs to terminate VoIP
traffic, or how to take in charge the administration of the YU TLD.
After a change in leadership, Vojislav Rodic is now in charge (a content provider with a bilingual
news site) the Association became more vocal, receiving good coverage from the press on their
disputes with Telecom Serbia.
7.6 Cable TV
Cable television evolved spontaneously in Serbia, without a specific law or regulatory mandate.
The law on Telecommunication is stating the monopoly of Telecom Serbia on fixed telephony until
June 2005, but explicitly exclude monopoly rights on Cable Television and Internet provisioning.
The first player to actually succeed in having recognized by the authorities the right to deploy his
own infrastructure was SBB. This right is now recognized also to other players (e.g. ISPs) and very
recently Telecom Serbia announced that will give to third parties the right to use its own ducts in
urban areas (avoiding to dig trenches within cities). There are many small companies distributing
Cable TV programs in Serbia, most of which are covering only one town, or part thereof.
Only two companies seem to be driving their expansion towards robust Internet distribution: SBB
(private company with a participation of SEEF, a George Soros’s investment fund) and PTT-KDS
(which is part of State owned PTT).
While generic Cable TV equipment and network are not suitable for Internet distribution, one of the
major players of Cable TV distribution (SBB) is working to bring up the technology in the
participating networks and is distributing Internet in some location. The other big competitor (PTTKDS) seems to have a more state of art network, but is now slowed due to financial weakness.
Cable TV distribution is interesting because companies that lay down and operate state of the art
networks can distribute not only TV programs, but the same cabling and devices can be used also
for data distribution as Internet and even telephony (Voice over IP).
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7.6.1 SBB
SBB started operations in September 2000 in the city of Kragujevac. In May 2002, having 2500
subscribers it received a strategic equity investment from the SEEF fund of George Soros. Since
June 2002, through acquisitions of other distribution companies and internal growth, it has reached
130,000 customers and is present in 30 towns. SBB already deployed optical infrastructure in
Belgrade, Novi Sad and Nis.
SBB is in negotiations with Telecom Serbia about an agreement in which SBB would provide to
Telecom Serbia the last mile (cabling from the distribution network to the customer’s device) for
voice and data traffic. SBB is also planning to rent the usage of its infrastructure to many other
organizations (ISPs, banks, etc.).
While the revenue per unit coming from the proper TV programs distribution is low, both revenues
and margins grows dramatically with Internet distribution. The challenge for SBB is to upgrade the
technology of the networks that bought, and to interconnect them in a national network.
SBB received a grant from US TDA for a feasibility study on a national fiber optics backbone that
could carry any kind of traffic (multimedia, data, voice, Internet, etc.) and is actively looking for
investments.
7.6.2 KDS PTT
See the 7.2.2 section.
7.7 E-Banking
For a description of this sector, see the 6.2 section.
7.7.1 Zepter Bank
Zepter Bank was one of the first private banks in Serbia to offer services of Ebanking, right after
the new regulation that shifted from State managed ZOP offices to banks all the responsibilities for
inter companies money transfers. The bank has 14 locations, 12 of them interconnected with the
Head Quarter in Novi Beograd through the Frame Relay network of Telecom Serbia.
Using software and consulting from Antegra and Saga, and doing internally system management
and some software development, the bank has succeeded in connecting 1,600 companies through
its extranet system.
Its security system is based on standard PKI encryption, with certificates distributed to customers
on smart cards and Cds. This method (self signing of certificates by an internal Certification
Authority) will be phased out in favor of official certificates when the Law on Digital Signature is in
force and implemented.
Its SMS system that gives access to balance check, currency rates, and other information at
scheduled times or on demand, is used by 80 companies, with 8,000 messages sent monthly.
With the new regulation companies have to document money transactions daily, with a printed list
of transactions, and many customers are receiving these documents by email, with a volume of
60,000 email sent monthly.
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Zepter Bank is developing a system that will sent to customers the data for the tax report that has
to be filled twice each month. While until now the bank has targeted Eservices only to companies,
in November the offer for individual customers is planned. The bank is not seeing Eservices as
profit center today, but as a mean to cut internal costs and to retain customers increasing the
quality of its offering.
The most perceived problem is the lack of available leased lines, the difficulty and the time needed
for obtaining them.
7.8 Serbian language Contents, Portals
7.8.1 Serbian Language Contents
Serbia is in the early phase of content production. Internet penetration in Serbia is still around 10%
of the population and is just crossing the threshold of the early usage. As the Internet user is right
now changing from the very well educated urban English speaking to a more average Serbian
citizen, the related “content industry” is preparing to take off.
The impossibility of accepting credit card transaction for a Serbian company has hampered the
development of Ecommerce, that is at the heart of a viable development of Serbian language
contents.
Until now, Serbian language content is mostly found in four categories:




Contents targeted to the Serbian Diaspora (hundreds of thousands expatriates that have
credit cards and will be the first target of Serbian Ecommerce)
News magazines and Newspapers (targeted both to the Diaspora and to local consumers)
Companies’ commercial presentations
Spontaneous, grass roots, academic and not for profit websites
For the Serbian Diaspora see section 6.3.
News magazines and newspapers are actively developing their presence online. The relatively
small investments needed for the operation (the content is produced anyway, for the printed
version) has spur various well done websites, part of which carry online the entire content of the
printed version. The online presence of press is aimed at capturing market share while waiting for
Electronic Commerce to be possible. In the mean time, there are some experiments, e.g. with
PayPal access to weekly magazines contents.
Companies commercial presentations are mostly online brochures, that often carry outdated
content and seldom carry also an English language version. Companies are not yet interacting with
customers through their websites that are today more a matter of prestige and emulation than
business tools.
Production of spontaneous, academic and not for profit contents is very much active and often of
very good quality, but obviously lack the continuity and timing of funded operations.
There are about 10,000 websites registered under the YU domain, while estimates guess that a
comparable number of additional Serbian sites are under the NET, ORG, BIZ, TV and COM
domains. Various small companies design, realize and manage websites (also very dynamic and
interactive, and/or for Ecommerce) for third parties abroad, on outsourcing contracts.
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7.8.2 Radio B92, Contents and Ecommerce
B92 was the most famous radio station of the opposition to Milosevic’s Government. From the
underground times it has grown into a group that comprise also a TV station, a record publishing
operation, events and concerts organization, merchandising, and the most popular website in
Serbia. With more than 200,000 daily page views (two third from the Diaspora), and 30,000 unique
visitors is by far the most successful Serbian online media. A web advertising campaign on B92
websites cost roughly ten times a similar campaign on the competition websites. B92 has around
5,000 euros of income from web advertising monthly.
The website comprises a web newswire with real time news in Serbian and English language, live
streaming of radio and TV programs, extended sport, music and cultural events coverage.
Few months ago B92 started his own Electronic Commerce initiative, targeted today mainly to
Serbian Diaspora, but rapidly growing also on the local market. B92 is planning to launch and
develop a different brand for its own Electronic Commerce initiatives, to differentiate it from the
news and culture main brand. The Electronic Mall is now accepting transaction by mean of a
foreign (UK based) credit card processor, but this costs around 10% of the value of each
transaction. Main sold items are books, CDs and DVDs, concert tickets, sport merchandising.
B92 ownership situation is evolving from socially owned to privatized, with US investors. This will
give the possibility to develop immediately an Electronic Commerce accepting credit card
transaction with an American merchant account, while waiting for the possibility to accept
transaction with a Serbian account.
Another problem for selling items to the Diaspora (that accounts for the majority of Ecommerce
sales) is the regulation of customs, which is asking the intermediation of a shipping company also
for small number of items shipped. For internal market (and most part of the Diaspora market) B92
use Post to deliver items.
7.9 SME Services
Serbian Prime Minister Zoran Zivkovic opened in October 6th 2003 the first international
conference "Small and Medium-Sized Enterprises (SMEs) - New Opportunities for Serbia" saying
that the development of SMEs is the Serbian government priority. Zivkovic said that there are
270,000 SMEs in Serbia at the moment, adding that it is the objective of the government to
increase their number to 400,000, which would open one million workplaces. According to the
Prime Minister, entrepreneurship in Serbia already participates with over 45 percent in the gross
domestic product, 27 percent in exports, 50 percent in total revenues and 44 percent in total profits
that Serbia's economy makes.
Online services, set aside the Ebanking (see 6.2 and 7.7 sections), are not yet developed in
Serbia. The lack of ICT infrastructure in SMEs and the general economic situation in the last
decade slowed down investments in Electronic Services. With the notable exception of Cepp (PTT
department for Electronic Business) there are no other comparable operations.
There are at least two interesting projects in the area of SMEs Internet services BBNet and VEZA.
7.9.1 Telecom Serbia Yellow Pages
See the 11.2.2 section.
7.9.2 PTT-Cepp
See the 7.2.3 section.
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7.9.3 BBNet
BBNet is an online system promoting e-Commerce, intended for improvement of services to SMEs
in former Yugoslavia and in the Balkans, establishing business contacts for the existing SMEs, as
well as providing guidelines and best practices for the newly formed ones. The BBNet project
started in 1998. At the international conference “Southeastern Europe: An agenda for the 21st
Century” (Budapest, March 5-7, 1999) the BBnet project was adopted as a starting point for a
successful development and business co-operation of private SMEs in the Balkans.
BBNet has realized a database with 64,000 companies in Serbia and Montenegro (by ownership,
industry/field, type, location). The system is able to show various kinds of business relevant
information in a geographical approach, as companies’ concentration in geographical areas,
resources available (electric grid, water grid, etc.). The database is highly interactive and can be
expanded both in quantity and in deep of information.
BBNet is also publishing business related material useful to the development of SMEs, like
instruction to draft a business plan, sources of financing, contact with consultants, etc.
BBNet is now in a redesign phase, with ambitions of being pivotal in the Ebusiness of Serbian
SMEs in the context of European and Balkan markets.
7.9.4 VEZA
Veza project is in the advanced planning phase, with initial deployment in December 2003. Its aim
is to bring Internet and e-business services to SME sector in Serbia.
Main objectives of the VEZA project are:




To put 1000 SMEs on the Internet in the first year
To educate their staff and management in how to use the Internet for their business
To provide an environment and supporting services for SMEs using the Internet
To become self-sustainable within 2 years
Main activities will be the distribution of a package comprised of basic training, Internet access
subscription, website creation, email access. In collaboration with the local Chambers of
Commerce, SIEPA (the Governmental Agency for SMEs) and international institutions VEZA
project will lay down the basis for a massive shift into Electronic Business of SMEs, through an
hands on, easy and direct to the business advantage approach. EAR has shown interest in
supporting VEZA project.
7.10 ECommerce
Why not yet?
There are no significative Ecommerce initiatives in Serbia. Until recently the absence of various
fundamental enablers impeded the development of online business transactions:



Lack of adequate Internet access distribution means that businesses simply cannot get
enough bandwidth to reliably operates on the Internet
Lack of local credit cards processors means that merchants cannot accept payments
through the Internet
Lack of Digital Signature Law means that electronic business cannot be conducted in a
regulated way
But is ready to start
Internet infrastructure is geared toward the satisfaction of the market demand, both Telecom
Serbia and independent ISPs are deploying distribution networks (wireless, fiber optics, cable) that
will assure the possibility of Electronic Commerce and Business
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Serbian technological companies are at the same technical level as similar companies in the
Western Countries. Actually, there are various Serbian companies realizing Ecommerce websites
in outsourcing for foreign enterprises. Credit card acceptance through the Internet is announced for
2004, and the Law on Digital Signature is expected to be approved sooner.
7.11 Information Technology Association of Chamber of
Commerce
Information Technology Association of the Chamber of Commerce of Serbia is operative since
2001, and has around 1,000 companies associated. In the Association participate not only pure IT
companies, but also companies that have important IT departments. The most important activity of
the Association is the promotion of Serbian software development companies, but is now planning
to expand its activities to cover the promotion of Information Technologies and Internet adoption to
SMEs.
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8 Internet related Methods of Payments
8.1 Credit Cards
Serbia is the fastest growing market for credit cards in the Balkan region. Banks have just begun to
offer credit cards to customers, so the total number of cards is small, around 400,000, but is
growing very fast.
In Serbia both VISA and Diners are distributed, while American Express is not yet present. VISA in
September 2003 announced the start of Ecommerce in Serbia for the year 2004, and is busy
bringing banks to the state of art in managing Electronic business.
One interesting characteristic is that Yugoslavia had credit cards in the past, VISA and American
Express were present in Serbia twenty years ago. So, it is not needed to build awareness of the
brands, or of the credit card concept, at least not as it was necessary in other transitional countries
like Czech Republic, Poland or Hungary.
Credit cards distributed in Serbia are exactly the same as in other countries, and are able to pay
through the Internet. A Serbian cardholder of a VISA issued by a Serbian Bank can buy items on
US websites.
In the present it is impossible for companies and merchants in Serbia to accept payments through
Internet. The payment processors are not clearing online payments. This because banks are not
yet comfortable with this kind of business, and credit card companies are counseling banks to first
acquire knowledge and skills.
Credit cards companies are not delaying the acceptance of cards through the Internet for the fear
of hackers or of the fraud rate in Serbia. Banks on the contrary seem uneasy with Ebusiness, for
fear to lose money and to be sued by customers.
National Bank (the Central Bank of Serbia) is developing a domestic credit card, Dynacard, which
will be processed by 5 national banks (and offered by all banks). The aim of Dynacard is mainly to
substitute checks.
8.2 Money Transfers
Money transfer is the usual way for Serbian people to pay bills or items they buy through mail
catalogs. Money transfers are very cheap in Serbia, also international transfers, with costs around
one percent of the transferred sum. Transfers can be done from banks and from Post offices, and
will certainly retain an importance in the new environment of Ebusiness. Almost all domestic
Serbian commerce trough the Internet (ticket sales, sport merchandising, books and CDs) is
presently paid through money transfers.
8.3 Special for pay telephone numbers
Telecom Serbia has developed a special telephone numbering, with 041 prefix, which is used to
charge the caller with a special amount of money on top of the local call cost, which will be given to
the owner of the called service, minus a percentage fee that goes to Telecom.
This paying scheme, like the 900 prefix in US, is very popular in Serbia, and is utilized to sell
access to the Internet without a contract. The customer only has to call the special number. 041
phone services are utilized also for chatting, information, adult entertainment, access games and
other events during TV programs, etc.
The same scheme is applied also by cellular companies, both Mobtel and MTS, and is fast
developing. The deployment of GPRS by both mobile companies, and the multimedia possibilities
involved, are making Mservice and Mpayment very promising areas.
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Investing in Serbia’s Internet and IT sector: Challenges and Opportunities (public report)
9 Internet Consumer Portals and Advertising
9.1 Portals Market
9.1.1 History of the Portal development and important historical events
The first portal targeted to people from Serbia & Montenegro Cyber space was www.beograd.com
(1995). That site instantly became the most visited Serbian site. It was managed and hosted from
USA (owner Branislav Andjelic, former director of the Republic Agency for the Informatics and
Internet). That site was in the top five most visited sites until 2002.
First portals were created in USA and Canada, such as www.serbiancafe.com (the most visited
site in S&M Cyber space from 1995 until today), and www.yusearch.com (first real domestic search
engine, much visited site from 1995 until today).
In1996 started the development of domestic portals owned by persons in Serbia & Montenegro.
There were two main portals from Belgrade – www.beocity.com and www.beonet.yu. Also, the ISP
portal www.sezampro.yu was a much visited place. Significant domestic portals from outside S&M
were www.oaza.co.yu (fun portal), www.suc.org (political portal) and www.siicom.com (political
portal), www.novisad-home.com (regional portal).
In 1997 there was a rise of local domestic sites. One of the sites that drew attention of international
community was the site of the student political protest movement at the beginning of 1997. That
event was the first significant sign for others to start with the site development. Until the end of
1997 sites like www.yugoslavia.com (general portal), www.yurope.com (general portal), www.yu
(search engine portal) were some of the most visited sites.
In 1998 big offline media emerged online, like www.b92.net, www.blic.co.yu, as well as the special
interest portals like www.sport.co.yu and www.pretraga.co.yu (search and Internet marketing). Until
the end of 1998 there were more than 20 S&M sites in the category of 50.000 most visited sites on
Internet. More than half of them were portals.
Significant rise of the number of portals became obvious during 1999. The main reason was NATO
bombing issue. Sites like news portal www.inet.co.yu and www.freeserbia.com emerged from
people’s need for fast and adequate information. Events during 1999 showed the possibility to
draw large attention of international community for the domestic content. There were more than 10
sites with more than 1 million impressions per month, during this period.
The period between end of 1998 until during 2000 is marked with significant number of
unsuccessful tryouts to develop large portals, from several individuals and groups, as well (e.g.
www.pretrazivac.com).
Portal www.pretrazivac.com is the best example of a serious project with private investment (it is
owned by the same company that owns the successful portal www.balkanmedia.com), which is left
un-updated since beginning of 2002. Project lasted only for one year, it was in the category of five
most visited sites, but the domestic advertising market situation shuts it down.
Many projects did not see "Internet Sun", and some projects lasted for several months only. The
main reason was that the companies that created those sites did it without any further investment
after the initial cost for site development. In that period several important portals emerged from
Montenegro – www.cg.yu (ISP), www.cafemontenegro.cg.yu (entertainment site) and
www.mse.cg.yu (search engine).
The period after elections in 2000 marks a real optimism for the further development of Internet,
with the creation of the majority of current active portals.
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9.1.2 Telecom Serbia
Telecom Serbia has developed one of the most visited dynamic portals in Serbia with CRM
concept applied via „moj r@čun“ service, that enables the users to see their latest, as well as the
previous bills for Telecom's services, and to list the data on each call they made. Call data are not
older than one day, and Telecom plans to make this period, in near future, as short as 5 minutes.
According to the independent web site www.alexa.com, the number of visits to Telecom's portal is
currently around 40.000 per day.
Telecom Serbia has recently announced the yellow pages project, which will be issued in both
printed and electronic form (website). This will enable Serbian companies, especially SMEs, to
market their products and services both in the country and abroad. The installation of GIS platform
and software is underway, which will enable Telecom to shift the focus of its information system
from alphanumeric databases to geographically referenced databases and provide outsourcing
services in the field of GIS technologies (the opportunity of thematic search of data per maps will
be offered to all users).
Telecom is introducing advertising for other companies through its own bills and Internet portals,
and particularly through its Yellow and White Pages service.
9.1.3 Private initiatives in Portal development
More than 99% of portals in Serbia is developed and financed by private initiatives. Those are
mainly projects that involve no more than 3-5 persons. The majority of portal projects are oneperson projects.
There are several larger portal sites, mainly in business sector. For example, www.vibilia.co.yu,
business portal with up to date information about offers in various business sectors, as well as the
information about ongoing tenders and privatization. In addition, portal www.fairsources.com is
trying to become internationally recognized portal for the fair related business industry.
The most successful Serbian language portal sites are owned by companies outside S&M. For
example, www.serbiancaffe.com, www.robnakuca.com (shopping portal), www.balkanmedia.com
(commercial music portal), www.turbomuzika.com (domestic folklore music portal),
www.nostalgija.com (dating portal), etc.
There are various emerging portals, which are very promising. The examples are:
www.autoberza.info (car industry portal), www.chillout.co.yu (clubbing music portal),
www.poljubac.com (dating portal), www.bgdcafe.com (entertainment portal), www.aktuelno.com
(advertising
and
PR
portal),
www.benchmark.co.yu
(computer
industry
portal),
www.exxtreme3d.co.yu (gaming industry portal), www.infostud.com (student issues portal), etc.
9.1.4 Revenue from portals
Actual situation in revenues of portal industry shows that the main trend towards viable portal
business model is development of membership based portal sites. For example, in past several
months some of the most influential new portals (www.b92.net, www.nin.co.yu, www.vreme.com)
started subscription based services. The same strategy is followed by the much "younger" news
services (www.emagazin.co.yu, www.aktuelno.com).
Revenue in portal industry is mainly based on the combination of foreign advertising and affiliate
models (estimation 60 %), domestic affiliate models (20%), domestic advertising (5 – 20%). Selling
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55
its own products is not very common, and estimation is that only 5% of portals sell its own products
and services.
Less than 5 portals have significant volume of advertising revenue, mainly because they managed
strong advertising sales pipeline (e.g. www.krstarica.com, www.benchmark.co.yu). In addition,
there are some less known portals (low visit), but they have very good advertising sales force. As a
result, they have larger revenues than expected (e.g. www.kudazavikend.com).
Domestic portals developed by foreign companies (diaspora) have their revenue mainlycoming
from advertising. Those are the mostsuccessful projects (e.g. www.serbiancafe.com). The main
reason for this situation is that most of the visitors of those portals are people who have long ecommerce and online payment knowledge.
There were several projects financed by foreign donations, but none of them was based on viable
business plans, relying on a short sighted strategy.
9.2 Portal Players
9.2.1 Showcase of viable Portal sites
www.krstarica.com.
This is one of the most visited sites in S&M, with some 20 people employed. Main revenue comes
from foreign advertising and affiliate programs. There is also a strong domestic affiliate programs
support (they have a shop with lot of domestic products). Revenue from domestic advertising
space is emerging.
www.serbiancafe.com.
Another of the most visited sites in S&M, with 5 people employed. Main revenue comes from
advertising. Often, companies have to wait in line for several months before the actual advertising
campaign period, to book place in advance for advertising on this site. It’s targeted to people
outside proper S&M (diaspora), and the rules are completely different than in domestic advertising
industry.
www.vibilia.co.yu.
This business portal makes revenue mainly from the yearly subscription to their services. They
claim a subscription base of more than 8.500 business users. These subscribers pay 100 EUR per
year. This is one of the best examples of viable online sites based on subscription.
www.benchmark.co.yu.
This computer industry portal makes its revenue from the major domestic computer equipment
resellers. This is one of the sites with viable revenue model based on domestic advertising. The
main reason for this situation is high quality content, mainly computer equipment comparison and
benchmarking.
9.2.2 Main players in domestic portal Industry
General portals: www.krstarica.com, www.pretrazivac.com, www.trebinje.com
Entertainment portals: www.serbiancaffe.com, www.bgdcafe.com, www.cafemontenegro.com
News
portals:
www.b92.net,
www.glas-javnosti.co.yu,
www.politika.co.yu, www.nin.co.yu, www.vreme.com
Investing in Serbia’s Internet and IT sector: Challenges and Opportunities (public report)
www.blic.co.yu,
www.rts.co.yu,
56
Business information portals: www.halooglasi.co.yu, www.011info.com, www.yuyellowpages.net,
www.economy.co.yu
Music industry portals: www.chillout.co.yu, www.turbomuzika.com
Sport news portal: www.sportskacentrala.com
Computer and Internet industry portals:
www.pcberza.co.yu, www.pretraga.co.yu
www.benchmark.co.yu,
www.elitesecurity.org,
9.3 Portal Technology
9.3.1 Web Technology in Portal Development
Some portal still uses plain HTML technology for Web site development, while there is significant
grow of web-based application solutions for content management. Web application solutions are
mainly realized in Linux/php/MySQL application environment, and few of them uses JAVA server
based solutions, as well as Microsoft Web application solutions (asp, MSSQL, Dot Net solutions,
etc.).
Vast majority of Web based application are based on Open Source Content Management Systems
(CMS). In addition, there is significant number of custom-made CMS solutions. Quality of systems
vary widely, from amateur-based work to high professional world class CMS solutions.
Some publishing systems are based on manual creation of the individual Web pages, meaning that
the main advantage of a CMS solution – automated creation of new Web pages - is not leveraged.
This kind of application is usually composed by a mix of plain HTML pages and some web based
application.
The implementation of current CSS 2.0 and xHTML w3c based standards is not widely adopted.
9.3.2 Portals' Popularity and Number of Visitors
Several sites that begun operation in 1996 (www.serbiancafe.com,
www.beograd.com) still today in the category of the most visited sites.
www.yustart.com,
www.serbiancafe.com owns the record on Alexa service, only Serbian language site that has been
regularly on the list of top 1.000 sites made by Alexa.
Alexa service is very important in S&M for the ranking of most visited sites, because the promotion
of that service started at the beginning of 1998. Information about Alexa services were published
by several very popular sites and the estimation is that to date more than 10.000 Serbian people
downloaded Alexa toolbar.
Most visited sites according to www.alexa.com:
- http://rang.eutelnet.com/
- http://www.pretraga.co.yu/direktorijumi/yutop/alexa/
- http://www.economy.co.yu/e-business/internet.php?action=internet_yutop
The most visited Serbian language sites by Alexa rating are between 10.000 top sites worldwide
(there are six Serbian language sites in this category).
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Google Page Rank (PR) shows the number of reference that other sites contain about a particular
Web site. In S&M, there has been five sites with the PR 7. At the date of report there are no sites
with PR higher than 6. In this category there are 20 sites. PR 5 category of sites is the lower
reported by Google, and in this category there are about 80 Serbian sites. PR 5 category can be
reached with a good knowledge of search engine optimization (SEO) tactics.
www.radar.co.yu was created as try to answer the need for a domestic ranking system.
Most visited News portals:
- www.b92.net, one of three most visited sites (about 50.000 visitors per day), mainly due to its
previous role and the content translated in several languages.
- www.glas-javnosti.co.yu, www.politika.co.yu and www.blic.co.yu are the most visited daily news
sites with average traffic of 30.000 visitors per day.
- www.novosti.co.yu and www.danas.co.yu are in category of sites with more than 15.000 visitors
per day.
- The most visited magazine is www.nin.co.yu, although they started subscription service recently.It
has about 7.000 visitors per day.
- Sites www.svet.co.yu and www.nedeljnitelegraf.co.yu are magazines web sites with 40.000
visitors per month. Similar numbers for www.vreme.com.
9.4 Online Advertising Market
9.4.1 Online advertising history
First large online campaign was developed by Informatika AD (Belgrade) in 1998. NGO European
Movement of Serbia developed second large online campaign, before the elections in 2000. In the
period between 2000 and 2003, there were less than five significant online campaigns.
From 1996 to 2000, there were only few cases where companies paid for online advertising space.
When companies paid for advertising space, that was the result of a successful sales person or
sales team. A great majority of the site owners were "Internet Evangelists". There were a very
small segment of serious online advertising models. Quality of online advertising was quickly
decreased, because most available advertising space was "traded" on the barter base, as well as
on many free banner exchange sites. The result was a number of untargeted, badly created and
over-placed banners. Only a few sites had a strict policy on barter arrangements, real value and
placement.
www.beocity.com site was the first Web site who introduced non barter advertising model, in 1998.
That was the Web site with the highest real revenues (cost/profit based revenues) in domestic
online advertising, in the period 1998 – 1999. The estimated monthly advertising revenue was
between 2.000 and 4.000 DEM.
Online advertisers at that time were choosing not more than 3 to 4 sites for advertising campaigns;
most of the times one Web site per month. Most part of campaigns did not last more than three
months. There were only a few advertisers who had campaigns with a duration of more than six
months.
Situation in online advertising of Web sites with Serbian diaspora target was completely different.
www.serbiancafe.com is an example of successful advertising based business, with advertisers
waiting "in-line" for booking advertising space on the Web site. There was only few commercial
Serbian language Web sites with foreign owners in the period between 1996 and 1999.
In the year 2000, www.balkanmedia.com (foreign ownership) offered a plan based on the clickthrough results, but the model lasted only few months. Another attempt to create a domestic clickInvesting in Serbia’s Internet and IT sector: Challenges and Opportunities (public report)
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through advertising business was done by www.klik.co.yu in 2000 (before the dot com crash). The
project successfully lasted until the foreign advertising companies Klik.co.yu was selling goes
broke.
9.4.2 Online advertising market characteristics
Large marketing agencies have not yet decidedly entered the online advertising market. There
were several attempts, but the online advertising revenue is too small comparing classical
advertising revenues (most of which comes from advertising materials production). TV advertising
makes more than 90% of advertising industry revenues, and other channels have to "fight" for the
rest of the advertising money.
Less than three large advertisers had serious online campaigns. Others usually contact few Web
sites for advertising, not investing more than 500 to 1.000 EUR per month.
Only a limited number of Web sites have steady advertising revenue, due to quality sales strategy,
price strategy, and the cost/benefit advertising offer.
The main characteristic of online advertising market is that the offer is huge, comparing to the
demand.
9.4.3 Online advertising revenue structure
More than 95% of all advertising revenues came from single Web site campaign, mainly due to
experienced advertising sales people. Due to underdeveloped online advertising market, ad rates
are very different: from zero to more than 1.000 EUR per month. Advertising revenue is spread on
more than 200 sites, and 60% is divided between the 50 most visited sites.
Average monthly revenue for the most visited online media sites is between 500 and 1.000 EUR.
Average monthly revenue for the rest of the sites who participate in the advertising market share is
between 50 and 150 EUR. Average monthly revenue for the sites with developed advertising sales
force (regardless the site's traffic and target groups) is between 500 and 1.000 EUR.
Most part of the sites that succeed in selling advertising space is in the portal category, with
general targeted audience.
Regarding site content, the online advertising revenue is divided between sites with general
content, entertainment, news sites, sports, yellow pages, business education, Internet education,
ICT industry commercial sites, etc. There is also a revenue share for the sites targeted to female
audience.
9.5 Online Advertising Technology
Most part of Internet advertising budget is spent on Web advertising, mainly banner advertising.
There are less then five advertising-capable e-mail newsletters (mailing lists), and only two of them
actually sell space. Serbian use of Search Engine Marketing (SEM) techniques is on the rise,
mainly based of Google AdWords program. Other kinds of online channel advertising are not
currently in use.
Online PR activities are mainly based on media relations through mailing lists dedicated to
journalists. Each company makes its own list. There are several online press clipping agencies, but
the use of this kind of services is just beginning.
Main banner formats in use: 468x60, 120x60, 112x42 (local "standard" format, developed by
www.yusearch.com), 88x42. Main banner development technology is animated gif. There are only
few sites that are capable of showing Flash banners. Advertisers started to use Flash banners
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more often in 2003.
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10 Internet Consumer Services (B2C)
10.1 History of Internet Consumer Services
The first web site which implemented e-tailing (e-commerce functionality in B2C sector) was
www.balkanmedia.com in 1995. Balkanmedia implemented a form-based ordering system offering
ex-YU music (cassettes and CDs). Form-based ordering system without shopping cart online was
the e-commerce solution on this Web site (based in Germany) until the year 2000. The target
markets of www.balkanmedia.com were people outside ex-YU who understand Serbian, Croatian
and Bosnian language (Diaspora).
The first shopping cart system in S&M was developed by www.2net.co.yu (CD shop) in 1997. That
system was only gathering orders, without online payment possibility. This web site created the
first affiliate program.
The first online bookstore, www.knjizara.com, was developed at the end of 1997, and still the
largest online bookstore.
Until 1999 there were only few e-commerce sites mainly targeted to users outside S&M. An
interesting project was http://bazar.beograd.com/ (Washington based), where visitors could order
and pay online for different Serbian goods (food, drink, etc.), that were sent them by "Jabuka"
(Belgrade company).
The most successful period of e-commerce development in Serbia was between the end of 1999
and the fall of 2001. In that period BK Group's Astra Bank had E-bank online payment service BKB
card. BK Group's companies Mobtel (mobile telephony operator), Mobiklik (mobile telephony
service) and Eunet (ISP), implemented e-bank online payment systems with large discounts for
their users. There was more than 1.000 users with online payment accounts. The system was
abandoned when Astra Bank gone out of operations.
In that period more than 50 different e-shops were operating, which covered large part of
consumer services. Main e-commerce players at that time:
www.mobtel.co.yu (Mobile telephony operator)
www.mobiklik.co.yu (Mobile telephony service)
www.eunet.yu (The largest Internet Service Provider in that time)
www.vavilon.com (variety of products) - Not existing anymore
http://shopping.tehnicom.net/ (variety of products) - Not existing anymore
www.robnakuca.com (variety of products) – Foreign users based
www.yu4you.com (variety of products, ex. yuamazon.com)
www.mrljes.com (Books) - Not existing anymore
www.srpska-mreza.com (Books) – Working, but not active
www.tehnicom.com/konfigurator/ (Computers)
www.euromarket-e.com (variety of products) - Not existing anymore
www.memodata.net/shop/shop.html (variety of products) - Not existing anymore
www.inet.co.yu/shop/ (Techno-shop) - Not existing anymore
www.infostan.co.yu (Government rent taxes for Belgrade)
www.shenemil.com (Health) - Not existing anymore
www.oglasi.org.yu/dragstor/ (variety of products)
www.turizam.co.yu (Tourism services)
http://elite.beograd.com/ (Tourism services)
www.strazilovo.co.yu (Construction)
www.audi-shop.com (Cars) - Not existing anymore
...
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More than 50% of all shopping sites were not active after the year 2001. The problems for further
development of e-commerce were:
Lack of online payment provider after Astra Bank closed
Lack of secure distribution system
Inexperienced domestic Internet users
Very expensive international distribution service (DHL)
Not much marketing efforts for promoting domestic e-commerce
In 2003 the situation of domestic e-commerce is much better, but there are less e-commerce sites
than in the period between 1999 and 2001. On the bight side, revenue from e-commerce is much
higher than it was.
10.2 Main E-commerce B2C players
www.balkanmedia.com is the oldest e-commerce site for music and movies. Since 2001 the
headquarter of the company is in Belgrade. Main market is Diaspora from Ex-YU. Reported
revenue in 2002 was 400.000 EUR.
www.yu4you.com is a very successful e-commerce, with a site concept similar to Amazon.com. Its
name was yuamazon.com until 2000, when Amazon.com sues it for infringing trademark. After
that, site changed its name to Yu4you.com.
www.robnakuca.com is one of the oldest foreign-based e-commerce sites targeting Diaspora
outside Ex-YU. It developed a very successful affiliate program.
www.knjizara.com is the first and the largest Serbian online bookstore. According to information
from several domestic book publishers, its market share is small comparing to classical
bookshops.
www.oglasi.org.yu is the first Web site with classified (from 1998), including (mostly inactive)
auctions.
www.kajmak.biz is an interesting e-commerce site for dairy products. The supplier of the products
growth production ten times after Web site development and promotion. Main market for this
domestic site (Central Serbia) is foreign Internet users.
www.turizam.co.yu is a tourism Web site with an housing order system. The site was most
successful before 2001.
www.processor.co.yu is a site with computer online shop capability.
www.pcberza.co.yu is the first price comparison PC shop. This site is very popular site and has
received several important domestic awards.
www.autoponuda.info is the most visited site for online Car offers (mostly used cars). On the site is
also possible to order car spare parts.
www.garden.co.yu is a site for the gardening industry. One part of the site is dedicated to selling
related goods. The site is online from 1998.
www.ultrahome.co.yu is a site who sells furniture, based on orders taken online.
www.repromarket.co.yu is a generalist ecommerce site, selling a wide variety of goods.
www.krstarica.com is one of the most visited Serbian Web sites, on Yahoo model, selling a variety
of goods and services.
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www.maxi.co.yu is the first online grocery shop, owned by Delta Group (one of the largest private
Serbian company, which also owns the nation wide "Maxi" supermarket chain). The site is very
successful, and the current monthly revenue is about 5.000 to 10.000 EUR.
www.tiketservis.com is the first online domestic entertainment ticketing service, started several
months ago. It is targeted mostly to the Belgrade market.
10.3 Main B2C Sectors
Books
All major publishers have their own Web sites and they sell their books through order-based
system. Only few smaller book publishers do not sell their books on the Web. The revenues are
relatively small, although some publishers declare to be satisfied with web sales (e.g.
www.kombib.co.yu).
Major booksellers:
www.knjizara.com
www.plato.co.yu
www.gerila.com
www.yu4you.com
Computers
All major computer distributors have their own Web sites, and they have ability to sell computers
online. The most part of smaller computer resellers have their price lists on their Web sites.
Major players:
www.pcberza.co.yu
www.pinsoft.com
www.pakom.co.yu
www.cores.co.yu
www.jugodata.co.yu
www.erccommerce.co.yu
Cars
The main players in this sector are the sites which offer mostly used cars. There are few Web sites
owned by car manufacturers, but they do not sell car online.
Major players:
www.autoberza.info
www.autopijaca.info
www.autoponuda.co.yu
www.autooglasi.co.yu
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11 Internet SME Services
11.1 Internet SME Services Market
After the fall of Slobodan Milosevic's Government SMEs situation evolved dramatically but the
problems with development of small and medium privately owned companies remained. There
were no mechanisms for any kind of support and banks were not giving financial support to SMEs.
The first year of democratic government in Serbia produced a more stable financial environment
with reconstructed mechanisms for getting bank loans and support. The major role was played by
the National Bank, which introduced monetary stability and cleared the banking sector, and by
international organizations, which supported the development of economy by providing very cheap
medium term loans and other support for building businesses.
Only recently the Small and Medium Enterprises Sector in Serbia started to get a treatment similar
to the one it has in the Western world. Both Government and economic elite recognized SMEs as
the only part of the industry that can pull out Serbian economy from unemployment and midtransition recession.
Some of the main points of the Strategy for Development of SMEs and Entrepreneurship are:
Focus on priority sectors capable of generating economic growth, more employment and
increased foreign earnings: food processing, manufacturing, tourism and e-business;
Strengthening of institutional support and advocacy at all levels for SMEs: Ministry of
Economy and Privatization, Republic Agency for the Development of Small Medium-sized
Enterprises and Entrepreneurship, Regional Agencies and Centers for SME Development,
etc;
Prepare Serbia's SMEs for the digital age through the development of a modern and
competitive telecommunications infrastructure, support for application of information and
communication technologies in business, support for development of software industry and
e-business as well as the gradual implementation of e-government to facilitate on-line
compliance with administrative formalities by SMEs and provide improved access to public
procurement opportunities;
Those points are extracted from the document "A Strategy for the Development of SME and
Entrepreneurship in the Republic of Serbia 2003-2008", issued by combined effort from European
Agency for Reconstruction (EAR) and Republic Agency for Development of SME (RADS).
Most of the services provided to SMEs in Serbia via Internet are official web presentations of
Government bodies, Republic and Regional Agencies for Development of SME, and various
NGOs. Very few initiatives in this area come from private sector.
11.2 Internet SME Services Players
11.2.1 Official government web sites – services for SME
The only official government web site providing services to SMEs is the site of the Ministry for
Economy and Privatization at www.priv.sr.gov.yu. At this location entrepreneurs can find all the
relevant information and laws about conducting business in Serbia and public procurement
requests and tenders. Still, in this case Internet is used only as another media for informing
interested parties. There is no way to apply for a public procurement request or to get the needed
tender documentation online. There is no option for getting a weekly or monthly newsletter with
relevant changes in legislature or other information.
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11.2.2 Telecom Serbia Yellow Pages
Telecom Serbia has launched the yellow pages project, which will be issued in both printed and
electronic form (website).
This will enable Serbian companies, especially SMEs, to market their products and services both in
the country and abroad.
11.2.3 Relevant agencies
Although much of the credit for newly created positive attention about SME goes to Republic
Agency for development of SME and Entrepreneurship and its director Mr. Nenad Penezić, most of
the field work is done by regional agencies within a project for non-financial aid to SME, funded by
European Union and realized by European Agency for Reconstruction. These agencies have
started a service for helping small businesses in organizing, planning and financing their ideas.
The importance of this network of agencies is yet to be shown since most of the projects supported
are in their development phase. At this point, this is the most valued support a small business in
Serbia can get. How to make a business plan, how to market, how to better organize and produce
with less expenses are the typical consulting provided. Each of the agencies works as profit-based
body.
Although each of those agencies has its own IT sector, showing the possibilities of IT to interested
businesses, the services offered through the Internet are not much articulated. All of the regional
agencies have web sites with relevant services info and contact pages and a link page to most of
the relevant institutions in Serbia and EU. The information provided about EU regulations and EU
SME Network requires a good knowledge of English language.
The project leader, Mr. David Miller, said agencies are very busy providing for the basic needs of
local businesses and that an initiative for e-businessification of the process as well as education
about e-business principles, mechanisms and benefits would be most welcomed by the agencies
and businesses as well. The creation of marketplaces and peering systems between businesses,
both on domestic and foreign markets, is the most desired service.
11.2.4 Private initiatives
There were some past initiatives on the web that wanted to profit on this gap of providing services
for SMEs. Most of them offered a sort of automated marketplace with basic, if at all, info on how to
use it and with no other support. They all failed.
Vibilia
One of them remained on the market due to owner's own diligence and idea that SME sector
needs to be provided by more in deep information. The Vibilia project, owned by the engineering
and software manufacturing company INKO, started in 1998 and now has 8500 member
companies in Serbia and Republic of Srpska. The services provided are basic information
(business news copied from the daily newspapers or uploaded by local correspondents, list of
active tenders, company register etc.) sent by email to their members. Although this service was
aimed at INKO's customers at first, the need for information and peering in SME sector provided
the opportunity to turn it into a commercial enterprise.
www.vibilia.co.yu
INKO
Mihajla Pupina 191
11070 Novi Beograd
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65
management contact: Aleksandar Parezanović, director
tel. 011 319 14 11
email. office@vibilia.co.yu
VEZA
The top-down approach utilized by projects so far (build something and expect businesses to
come) is abandoned even in economies with highly developed awareness of e-business benefits
and possibilities. The reverse approach characterizes VEZA project, that is in the planning phase.
The main idea is to educate the SME sector about e-business, provide them with basic tools to use
Internet, and help them conquer the most needed skills to promote and sell online.
Offered services will begin with allowing companies to get information, contacts, offer their
products online, buy online, use e-banking, get tender info and documentation, to develop then into
an e-marketplace with a strong support through online and offline consultancy, peering with other
SMEs and enterprises and strong presence on the international scene.
The project has been presented to EAR and is welcomed by regional agencies for development of
SME to be implemented into their regular consulting programs.
11.2.5 Web sites providing information to SME:
Regional agencies for development of SME:
BELGRADE
Topličin venac 11/IV floor
phone/fax +381 11 186 730, +381 11 186 740, +381 11 632 990
www.mspbg.co.yu e-mail: office@mspbg.co.yu
KRAGUJEVAC
Kragujevačkog Oktobra 98
phone/fax +381 34 331 971, +381 34 331 949
www.smerakg.co.yu e-mail: smerakg@eunet.yu
KRUŠEVAC
Dragomira Gajića 1
phone/fax +381 37 443 018
www.mspks.co.yu e-mail: mspks@ptt.yu
NIŠ
Dobrička 2
phone/fax +381 18 23 124, +381 18 24 936
www.ranmsp.co.yu e-mail: ranmsp@ranmsp.co.yu
NOVI SAD
Dunavska 13/III
phone/fax +381 21 612 273
www.almamons.co.yu e-mail: almamons@eunet.yu
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SUBOTICA
Trg Cara Jovana Nenada 15
phone/fax +381 24 554 107
www.smer.co.yu e-mail: bmalagurski@smer.co.yu
UŽICE
Kneza Lazara 2
phone/fax +381 31 523 065
www.mspue.co.yu e-mail: office@mspue.co.yu
ZAJEČAR
Trg Osloboðenja 1
phone/fax +381 19 426 519, +381 19 425 380
www.msp-timok.co.yu e-mail: zajecar@msp-timok.co.yu
ZRENJANIN
Gimnazijska 25/I
phone/fax +381 23 510 567
www.mspzr.co.yu e-mail: office@mspzr.co.yu
Other:
www.fondzarazvoj.sr.gov.yu (Fund for development)
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12 Software Development / System Integration, a
First Overview
In Software Development / System Integration, a First Overview chapters (that were not required
by the original Terms of Reference for the study) the consultant aims to give some general
information about this market in Serbia, and the interesting possibilities that may be found.
12.1 Software Development / System Integration Market
Almost all major hardware and software manufacturers have a presence in Serbia (i.e. Microsoft,
IBM, SAP, Oracle, etc.). End-users usually procure products through distributors and dealers, while
large and more sophisticated systems are purchased directly from major manufacturers.
Serbia is still in the first phase of building the IT market, where installing and upgrading hardware is
the priority and takes a big chunk of annual IT money. The projected growth is from $274.7 million
in 2002 to $342.1 million in 2003 with 16.8% of revenues in software installations and services.
(IDC Report on IT market in SEE region 2003)
Local system integration companies offer a broad scope of IT related services. The majority of
them are located in Belgrade. Most market-leading integrated software solutions are available and,
as elsewhere, Microsoft products are commonly used.
IT knowledge and experience are not distributed evenly throughout the country. The highest
concentration of IT companies and professionals are in Belgrade. The supply of skills is adequate
in some other major cities (Novi Sad, Nis, Subotica, Kragujevac) but not in the rest of the country
(Zrenjanin, Kraljevo, Valjevo, Cacak, Negotin, Zajecar etc.)
12.1.1 Banking sector
Most of the core banking software installed is done by domestic companies. The middleware and
front-end development for e-banking is also provided by Serbian companies. But, when it comes to
sophisticated systems for credit card transaction processing (also for switching and clearing) the
Central Bank opted for Estonian and UK solutions (TeleSyn, Nomad), while most of the processing
software (as well as migration to smart cards) are in hands of Greek and French companies
(Mellon, SchlumbergerSema), in spite of government recommendations to buy local.
Although there are no official statistics for this segment, an estimate would be that the core
banking solutions and e-banking sector software is a $18 million market (estimate for year 2003
made according to data provided by the Association of Banks) where "Saga" holds 27%, "Pexim"
21%, "Antegra" 14%, and Slovenian company "Halcom" 9% . The percentages are calculated
according to number of software installations and not to values of the contracts.
Pexim rose to one of the market leaders in just 3 years due to their focus on booming financial
sector, offering mainly two products: Core banking information system (PUB2000) and e-banking
system (i-Bank), with most of the revenue coming from PUB2000. "SAGA" is a clear leader in ebanking segment, with its solution totally relying on Internet (no end-user software installation or
smart-card required) and providing needed flexibility in using the e-banking (home-banking)
system. Their e-banking solution installed in Raiffeisen Bank received international praise.
RaiffeisenOnLine was voted the "Best Corporate/Institutional Internet Bank in Europe" and "Best
Consumer Integrated Site in Europe" by the prestigious "The Banker" magazine.
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68
12.1.2 Ebusiness sector
Most of the companies in software business are aware of the expected boom in electronic
economy. E-commerce payment gateway solutions, E-commerce catalogue solutions, ready made
e-shops etc. are being built and are waiting for adequate legislature to be passed in the parliament
(electronic signature act, trade act, data security act, privacy act, financial transactions and
insurance act, etc) to be presented to the emerging market. Small companies like Independent
Expert Group (IEG) are heading a long list of teams waiting for e-commerce to happen. IEG,
through their sister company in Canada, Psytronics, already have payment gateway solutions
compatible to interfaces installed in banking information systems that accept credit card payments
from Point-of-Sale and imprint machines. A wide area of ready made e-commerce components
(shopping carts, smart marketing search engines, web traffic analyzers, etc.) are developed by
small teams or individual programmers.
The data that motivated their effort to be ready for the e-commerce boom (2005) are the estimates
that show that between 9 and 13 percent (720,000 to 1,000,000 persons) of the population uses
the Internet and the figure is likely to grow to 4 million in two years (Source: "Doing Business and
Investing in Serbia", PriceWaterhouseCoopers, May 2003). Most of these people are "middle
class", with above average education and are very tech savvy. They use credit cards, most of them
already shopped on Internet and will be spending their money on domestic e-shops.
The number of people using credit cards is rising every month. From 600,000 in April to 870.000 in
September (source National Bank of Serbia), while VISA users doubled from 100,000 in June to
200,000 in September (source: VISA International). Around 10% of those people already shopped
on Internet and spent 1,3 million euros since February 2003 (source: insider information from
banks issuing Internet ready debit cards). Commercial banks received 220,000 orders to date
(November 2003) for the new national credit card DinaCard, which has a complete technical
background for Internet use and thus will allow development of E-commerce in dinars.
12.1.3 Government initiatives
The authorities have stated that prime importance has to be given to the development of electronic
initiatives in government, electronic business and use of the Internet in the educational system.
Incentives will be given for development of IT technology and systems. The Government strategy
for development of SME sector established e-business as one of the four pillars for the economic
growth with clear intentions to provide the environment for its development. With the other three
being Food Processing, Manufacturing and Tourism it is obvious that the Government recognizes
the potential of software industry and plans various legal and tax incentives for export oriented
projects and companies.
One of the objectives of the Ministry of Science and Technology and Development is the fostering
of the information society vision proposed by the WSIS United Nation initiative in the Republic of
Serbia. The issue of application of modern information and communication technologies is of
crucial importance to SME sector. This Ministry will stimulate the establishment of software
development companies and Internet-based provision of services as it supports not only the
development of domestic software industry but also existing information systems of local
companies.
The new Public Procurement Agency will develop a public procurement portal that will enhance
tendering opportunities for SMEs. (source: A Strategy for Development of SME in the Republic of
Serbia 2003-2008).
All of the Government Offices, Agencies and Ministries have a directive to build their own web sites
and Information systems and to contract independent companies for the job via tenders and public
offerings.
A strategic partnership agreement with Microsoft Corporation, in the area of IT improvement and
69
Investing in Serbia’s Internet and IT sector: Challenges and Opportunities (public report)
the development of an e-government project, was signed in December 2001.
12.1.4 Retail software
The culture of pirating software, music and video took its swing during the 1990s. Serbia had
almost no licensed software and piracy was considered positively especially during the
confrontation with the West. In such environment, the only retailing possible was of pirated
software and scarce local CD multimedia presentations of monasteries and local history with
gentleman agreements not to be pirated.
Since the political and economic changes, piracy is now repressed and retail industry is emerging
into three visible ways: Entertainment software (Multimedia CDs), Educational software
(Encyclopedias, Educational titles following school requirements, Dictionaries) and Business
software (Small shops applications, Electronic Business Plans, City plans and Yellow Pages).
Nevertheless, the market is still responding negatively to the "high" prices of "original" software
(avg. 10 euros compared to 1-3 euro for pirated software) and sales are not enough to cover the
cost. Most of the Serbian titles on shelves are sponsored by the Government or other institutions.
12.1.5 Software Piracy
Microsoft Corporation together with other major international IT companies had invested in a
legalization (licensing) campaign; the objective was to reduce piracy and protect the interests of
software producing companies. The licensing campaign was completed at the end of 2002. The
computer software piracy issue is one of the main limitation factors for the growth of retail software
industry. Although there is visible improvement on this issue (there are no more street kiosks and
shops selling pirated software and games) the problem with the mind set still remains. The average
Serbian consumer still considers hardware to be the main investment, while software is regarded
as something complementary to the hardware.
12.2 Provisional Conclusions
Software Development industry (the big companies in this sector are also the major Serbian
System Integrators) seems to be in good and smart shape; however wages are not so low as in
Ukraine or India. The structure of wages is at bottom in the state owned companies, around 250
euros net month for a software engineer and is higher in the growing private enterprises, to reach
700/1000 euros net month for a very skilled software developer. Therefore business in this area
has to be carefully identified and matched.
Business in this sector may be identified around a twofold approach: possible delocalization of
software development from Europe using local high skills and possible penetration in the Serbian
software market of European products complementing local software.
Moreover the Serbian market is more advanced in some areas (particularly in the banking, ebusiness and communication), and seems possible to export some local software solution,
particularly in the mobile and user interaction areas, because local banks and businesses easily
accept innovation and are used as beta tester from the local software companies.
Given the relative high cost of software manpower the business identification may be not as
straightforward as in the physical deployment of national data backbones, in fact there is no such
important need for capital investment in infrastructure. What is requested is a detailed identification
of the complementarity among Serbian and European software and system integration actors.
The most important issue to be documented in the study would be the Regional and European
positioning of the Serbian sectors in the more wide International market, in relation with Regional
players, particularly Croatia, Bulgaria and Romania. This will require a broad exploration of the
Regional Players’ sectors, including an overview of the most interesting trends, products and
companies in those Countries.
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70
Annexes
I - Net Sociology
This is a translation we made of excerpts from a Serbian language booklet “Internet pregled:
Beograd 2002” by Milanovic, Bakic and Golcevski of CEPIT. See www.bos.org.yu/cepit
1. Basic characteristics of the sample
a – Sex of examinees
1
2
without answer
Number of examinees
141
138
0
Percentage
50.54
49.46
0.00
We see that the sample is almost completely balanced by the “Sex” variable, i.e. almost precisely
50% of examinees are female and 50% male.
b – Age
18 – 22
23 – 26
27 – 30
without answer
Number of examinees
76
127
76
0
Percentage
27.24
45.52
27.24
0.00
We see that within the sample most persons are 23-26 years old, and the number of persons 1822 and those 27-30 is equal.
Zvezdara
Novi Beograd
Stari grad
Vracar
Vozdovac
Cukarica
Rakovica
Barajevo
Zemun
Palilula
Savski venac
Mladenovac
Karaburma
Batajnica
Obrenovac
without answer
Number of examinees
23
46
31
26
25
19
14
1
11
32
21
1
1
1
1
26
Percentage
8.24
16.49
11.11
9.32
8.96
6.81
5.02
0.36
3.94
11.47
7.53
0.36
0.36
0.36
0.36
9.32
Here we see Belgrade communities in which our examinees live. Novi Beograd, Palilula, Stari
grad, Vracar, Vozdovac and Zvezdara are the most frequent communities.
d – How long do you live in Belgrade?
Number of examinees
Percentage
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71
1 year
1 – 2 years
2 – 3 years
3 – 4 years
more than 4 years
since birth
without answer
9
1
5
11
72
180
1
3.23
0.36
1.79
3.94
25.81
64.52
0.36
Most of our examinees are born in Belgrade (64.52), and many of our examinees live in Belgrade
longer than 4 years (25.81).
e – Education level
Number of examinees
51
156
14
57
1
secondary vocational school
high school
advanced school
faculty
without answer
Percentage
18.28
55.91
5.02
20.43
0.36
Most of examinees finished high school/secondary vocational school. There are 198 students
within the sample.
f – Occupation
student
employed
unemployed
without answer
Number of examinees
196
67
14
2
Percentage
70.25
24.01
5.02
0.72
We see that within the sample most persons are pupils and students, there are less employed, and
about 5% unemployed persons.
g – Household members
1
2
3
4
5
6 or more
without answer
Number of examinees
14
38
64
124
27
2
10
Percentage
5.02
13.62
22.94
44.44
9.68
0.72
3.58
We see that most frequent number of family members is 4, and than 3.
h – Monthly household income
6000 – 12000 din.
12000 – 18000 din.
18000 – 24000 din.
24000 – 30000 din.
30000 – 45000 din.
over 45000 din.
without answer
Number of examinees
37
65
41
53
45
22
16
Percentage
13.26
23.30
14.70
19.00
16.13
7.89
5.83
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72
Various family incomes amounts are very equally distributed in our sample. These results, for
better insight, we show in histogram.
1. - Histogram of total monthly income
Previous tables and histogram show us basic social-demographic characteristics of the sample.
Both sexes are equally present. Most examinees are students in Belgrade University, and belong
to “middle standard” households (incomes 12000 – 30000 din. i.e. 200 – 500 euro. having in mind
that in Serbia, real middle class does not yet exist). Most frequent is 4 members household. There
are 24% employed, only 5% unemployed examinees, and rest are pupils or students. Most
examinees live in central Belgrade municipalities, or those of “wider center”, while most frequent
municipality is Novi Beograd (16.5%).
Basic data about Internet access and quality of established connection
Second part of the study gathers basic data about Internet access and quality of established
connection. Although they are useful technically and for marketing, these data are very important
for understanding Belgrade Internet users survey.
a and b – Where do you access Internet, and where most frequently?
Most examinees access Internet at home – 77.77%. This data is very important for further analysis
in our study because accessing Internet from home enables more complete, more relaxed and
private interaction with other users, or search of worldwide network. Generally, most frequent
Internet accessed places are:
Where do you access Internet?
home
work
faculty
NGO
from friend
internet café
Number of examinees
217
54
50
38
55
47
Investing in Serbia’s Internet and IT sector: Challenges and Opportunities (public report)
Percentage
77.77
19.35
17.92
13.62
18.99
16.85
73
Interpreting Percentage in the table, as well as number of examinees that choose certain option,
one should take into consideration that examinees were allowed to choose more than one option in
this survey item. If the question is redefined into “Where do you access Internet most frequently?”
we get the table with more informative review:
Where do you access Internet Number of examinees
most frequently?
home
173
work
10
faculty
28
NGO
10
internet café
12
friends
6
without answer
40
Percentage
62.01
3.58
10.03
3.58
4.30
2.15
14.34
Unfortunately, many examinees (even 14.34%) did not answer this question. Here we see real
proportion of Internet usage frequency. The net is most frequently accessed at home – 62%,
14.34% of examinees state to access in a way not described in our answers’ list, net is accessed
from faculty by only 10% of examinees, and from NGO computer centers – just 3.58%! Since most
of our examinees are students, these data should affect university and nongovernmental sector.
c – What providers you use to access Internet?
This question is the most interesting for possible apply in marketing, but less important for our
study. However, here is a table regarding usage of some of our biggest/greatest Internet providers
(examinees were able to choose more alternatives).
What provider do you use to Number of examinees
access Internet?
Eunet
113
PTT
42
Infosky
36
YUBC
49
Beotel
36
Drenik
3
another
56
Percentage
40.50
15.05
12.90
17.56
12.90
1.07
20.43
One should have in mind that some popular providers (for instance Bits) were not included in
offered answers.
d – Satisfaction on access speed, transfer speed and Internet connection reliability
Next three questions regards gathering information on weather users are satisfied with the services
they get from Internet providers.
Are you satisfied with how
fast you access Internet?
very unsatisfied
mostly unsatisfied
not satisfied nor unsatisfied
mostly satisfied
very satisfied
without answer
Number of examinees
Percentage
29
61
72
107
9
1
10.39
21.86
25.81
38.35
3.23
0.36
Are you satisfied with the Number of examinees
Percentage
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74
speed of Internet transfer?
very unsatisfied
mostly unsatisfied
not satisfied nor unsatisfied
mostly satisfied
very satisfied
without answer
34
84
82
72
7
0
12.19
30.11
29.39
25.81
2.51
0.00
Are you satisfied with reliability and
quality of Internet connection?
very unsatisfied
mostly unsatisfied
not satisfied nor unsatisfied
mostly satisfied
very satisfied
without answer
Number of examinees
Percentage
44
66
91
72
6
0
15.77
23.66
32.62
25.80
2.15
0.00
We see that Internet providers in Belgrade cannot be very proud of how their users rank provided
service. Only speed of accessing Internet is most frequently qualified as “mostly satisfying”, while
very important speed of transfer, reliability and quality as a sort of “general estimate” of service
satisfaction, gravitate toward negative judgments.
e, f and g – How long do you use Internet, how often, and would you like to spend more time
online?
How long do you use Internet?
Number of examinees
Percentage
up to 1 month
1 – 3 months
3 – 6 months
6 months – 1 year
1 – 2 tears
longer than 2 years
without answer
5
3
9
22
50
190
0
1.79
1.08
3.23
7.89
17.92
68.10
0.00
This shows that our sample is very “experienced” in using Internet – 190 examinees (68%) use
Internet longer than 2 tears and 86% longer than 1 year.
How many hours do you weekly Number of examinees
spend on Internet?
up to 1 hour
61
1 – 3 hours
78
3 – 5 hours
52
5 – 10 hours
56
10 – 20 hours
21
more than 20 hours
11
without answer
0
Percentage
21.86
27.96
18.64
20.07
7.53
3.49
0.00
Total time spent on Internet and weekly spent time
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75
2. – Internet experience and weekly online spent time
We see that most examinees use Internet 1-3 hours per week. Over 65% examinees spend up to 5
hours on Internet weekly (on average less than 1 hour daily), and almost 90% up to 10 hours
weekly (on average not more than 1.5 hours daily) which means, comparing to results of other
studies, that our sample spends really lot time online. Our examinees are experienced users (use
Internet over 2 years). As in the Nie & Erbring study (2000), in our sample there is connection
between online experience (total time spent on Internet) and weekly online time – there is mild
tendency of increase weekly online spent time with more experience on Internet. Let’s see the
table with nonparametric statistical indexes of this relation.
Chi-square
df
p
Pearson Chi-square
37,34
df=25
p=0,053
Contingency coefficient
0,34
Spearman Rank R
0,20
t=3,43
p=0,00
We see that Pirson’s 2 value did not achieve level of statistical importance (although it is very
close), but there is statistically important Spirman’s correlation value between these two variables –
as we said, connectivity is not strong, but it exists. In table, we also show value of C - Contingency
coefficient.
It is interesting to compare Internet experience and weekly spent online time by male and female
examinees. Two following graphics show us these two variables by sex.
Investing in Serbia’s Internet and IT sector: Challenges and Opportunities (public report)
76
3. - Internet experience and weekly online spent time – male examinees
4. - Internet experience and weekly online spent time – female examinees
Finally, would examinees like to spend more time on Internet, if they had possibilities?
If you could, would you like to Number of examinees
spend more time online?
yes
113
no
75
not sure
91
without answer
0
Percentage
40.50
26.88
32.62
0.00
Very interesting – over 40% examinees would like to spend more time on Internet than they do
currently, while 32.6% is not sure, and only 26.9% examinees would not want that.
Since we got an impression of basic characteristics of the sample and details about Internet
access, established connection quality and satisfaction with that connectivity, now we pass to
online behavior survey, experiences and reactions. Since the space doesn’t allow presenting of all
relevant analyses, we will present aspects we find interesting and informative enough.
Central survey section of our study was communication on Internet. Our research has preliminary
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77
character, so we insisted on making many questions, covering many interesting domains, opening
many subjects, to get better insight and in the future possibly create standardized polls on online
communication and behavior. With this approach, detail and deep examination of every opened
subject had to be sacrificed of course, as well as partly precision in examining certain domains.
Defining of domains within behavior phenomenology and communication on the Internet, which
has to precede any analytical examination attempt, was a great problem itself. It was clear from
the beginning that domains as e-mail behavior and communication, chat services, participation in
online communities etc. had to be separated. But it was not clear what to do with entire spectrum
of psychological experiencing Internet participation that includes wide spectrum of cognitive
(conceptual) and emotional reactions. We paid special attention to how examinees endure
frustrations participating communications online, and on the other side, for better understanding of
these phenomena, we separated expectations from this technology as individual domain of this
survey. We also paid special attention to Internet dependence phenomena, and other individuated
domains are social behavior on Net, where we mainly tried to quantify users’ “social traffic”,
eventual malicious and aggressive behavior problems (sending viruses, invading systems), kind of
content most frequently searched and Internet “search style” (how many windows, if the usage is
based on certain sites, use of search engines, etc.)
3.1. Expectations and opinions regarding Internet
a. What was your knowledge level about what is Internet before you started using it?
I knew well what is Internet
I mostly knew what is Internet
I had an idea about it
I almost knew nothing
I didn’t have any idea about it
without answer
Number of examinees
21
99
129
16
14
0
Percentage
7.53
35.48
46.24
5.73
5.02
0.00
b. what were your expectations from Internet before you started using it?
I expected miracle
I expected something interesting and useful
I didn’t expect anything particular
I expected something boring and useless
I didn’t have any expectations
without answer
Number
examinees
16
219
19
1
24
0
of Percentage
5.74
78.49
6.81
0.36
8.60
0.00
c. What was your impression after first séances of using Internet?
very positive
positive
neither positive nor negative
negative
very negative
without answer
Number of examinees
Percentage
74
143
52
6
3
1
26.62
51.44
18.70
2.16
1.08
0.36
d. What is your opinion of Internet now?
very positive
positive
Number of examinees
63
164
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Percentage
22.58
58.78
78
neither positive nor negative
negative
very negative
without answer
48
2
2
0
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17.20
0.72
0.72
0.00
79
II - Open Source Software
What is Open Source Software?
The core concept of OSS is that software development is better done in an open, public and
collaborative way, making available the source code of programs (the inner workings that
programmers write). The programs and their source are downloadable for free from the Internet
and can be reproduced and distributed in any form (CDs, etc.)
That enable the user (individual or organization) of an OSS program to modify it, to fix bugs, to
immediately correct security flaws, to add features, to adapt it to his own particular needs. Most of
enhancements made by users (and judged useful to others by the main team developing that
particular OSS program) are then merged into the main distribution of the program.
The business model of OSS is centered around the sale of support, consulting and formation; and
around the sale of hardware and collateral products and services.
As the very software can be obtained for free, OSS companies make their income from supporting,
developing ad hoc extensions and enhancements, installing, implementing, packaging and in other
way make the software useful and fitting the users needs. Or by selling the hardware on which
OSS can run.
What are the uses of Open Source Software?
OSS is (and was since inception) at the very heart of the development of the Internet itself. The
entire electronic mail, routing, DNS, web serving, and all the Internet operations has been provided
almost solely by OSS, before Microsoft gained a part of this market distributing his own functional
equivalent of OSS programs. The Internet, and particularly its core functionalities and big
implementations still work via OSS.
OSS programs strictly implements the international and de facto standards and regulations, and
can cooperate and dialog with non OSS software that follows the standards. Many extensions and
functionalities are made to OSS programs to make them work also with software that does not
correctly implements standards or that has features that goes beyond standards (and for the areas
where there are not yet recognized standards)
Examples of core OSS are: the Apache web server, the Sendmail mail server, the BIND DNS
server, the Linux operating system. The major companies selling high end hardware to enterprises,
banks, governments and military (like IBM, Sun, HP, etc.) actively started supporting and
contributing to OSS software because of its superior quality and reliability and also because there
was no other solutions available for their kind of hardware.
As time passed the OSS developers (that yet mastered most parts of the server side) begin to
target the desktop side of the computing. Linux has become a viable alternative to Microsoft
Windows, and there are at least a couple of viable alternative to Microsoft Office. Big hardware
companies quickly jumped on this bandwagon, that gain to them an independence from Microsoft
(that was almost to became the only one to provide a desktop operating system with Windows and
the only provider of word-processing, spreadsheet and the like with Office).
Lot of different OSS products are available today for the professional accomplishing of each
business and scientific tasks, and the fears about monopoly in operating systems, desktop
programs, graphics software, database systems, etc. are fading away.
Open Source Software adoption rationale
While OSS was born and grown in USA’s Governmental, Military, University and Corporation
projects, it is now quickly adopted both by EU and developing countries.
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While for high income countries the main reasons to adopt OSS are security, functionalities and
control over what is running, developing and transitioning countries often see OSS as the sole
possibility to join the Information and Knowledge Based Society.
In developing and transitioning countries the adoption of OSS is one of the ways that allows the
low budget building of national skills in software development, and the path for SME and Public
Administration informatization that avoid software piracy (e.g. the illegal copying of software).
Often the general vision is to spread the use of OSS to foster ICT usage in the society, and to use
non OSS software when and where needs arises (e.g. for big enterprises databases, complex
billing solutions, etc.).
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Sources and Credits
We have quoted three fundamental works:



Ernst & Young, Doing Business in Serbia, 2003
UNECE, Toward a Knowledge Based Economy – Yugoslavia Country Readiness
Assessment Report, 2002
Global Internet Policy Initiative (GIPI), Serbia – A Preparatory ICT Assessment, 2002
We also used websites, publications, and data obtained from:
 OSCE
 SCEPP
 IFC-SEED
 World Bank
 Federal Statistical Office of Serbia & Montenegro
 Serbian Ministry of Transport and Telecommunications
 Serbian Ministry of Science, Technology and Development
 Deloitte and Touche
 SMMRI
 Taylor Nelson Sofres Interactive
 And from all the companies and organization cited in the report
We have had very interesting discussions, ideas and information from the following person:
Danilo Golijanin - Advisor to the Minister of Science, Technology and Development
Marina Jovanovic - e-Government Project Coordinator of Information Technology and Internet
Agency (ITIA)
Djuro Kutlaca - Head of Mihajlo Pupin Institute Group, Science and Technology Policy Research
Centre
Bob Horvitz - Program Manager of Global Internet Policy Initiative (GIPI)
George Sadowsky - Executive Director of Global Internet Policy Initiative (GIPI)
Slobodan Markovic - Country Coordinator of Global Internet Policy Initiative (GIPI)
Zoran Kovacevic - Director & Editor-in-Chief of “Internet Ogledalo” magazine
Dusan Zjalic - Director of Information Communication Technology Tower (ICTT)
Stanislav Polic - Managing Director of Information Communication Technology Tower (ICTT)
Vojkan Vaskovic - Professor of Faculty of Organizational Sciences (FON)
Lazar Boskovic - Creative Director of AgitPROP - marketing agency
Cedomir Sujagic - General Manager of SezamPro
Dejan Georgijev - Manager of SezamPro
Dragoljub Dzekulic - CPU
Darko Dunjic - Marketing Manager of EUnet
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Darko Cvetanovski - Sales Director of EUnet
Igor Bogojevic - Executive Director of “Ekonomist” magazine
Simo Ivaneza - General Manager of YUBC system A.D.
Radivoje Milicevic - Head of Internet Department of Telefonija
Tatjana Antonic - Deputy Head of Internet Department of Telefonija
Dusan Katilovic - Journalist of“Internet Ogledalo” magazine
Mihailo Jovanovic - Assistant General Manager for Telecommunications and IT of PTT
Milivoje Zunic - Executive officer of Independent department for CDS of PTT
Dragan Solak - Chief Executive Officer (CEO) of Serbia Broadband (SBB)
Victoriya Boklag – Deputy Chief Executive Officer (CEO) of Serbia Broadband (SBB)
Gary Collins - IBM Business Consulting
Petar Kocovic - General Manager of Tehnicom
Bozidar Radenkovic - Professor of Faculty of Organizational Sciences (FON), chamber of
commerce
Milomir Jevtic – Executive Director VeratNet
Verica Radovic – General Manager VeratNet
Radmila Medakovic – Secretary of Information Technology Association of Chamber of Commerce
Mila Korugic Milosevic – General Manager Deloitte & Touche Serbia
Vojislav Kecman – Director CEPP PTT
Natasa Stevanic - CEPP PTT
Aleksandar Radetic – IT Zepter banka
Nela Arsic – Ebanking Zepter banka
Miroslav Vujnovic – Cisco Systems Capital
Milos Djurkovic – Cisco Systems
Dejan Restak – Project Manager B92
Branimir Peric – IT Chief Officer Telekom Srbija
Jozek Gruskovnjak – Regional Manager Cisco Systems
Dusan Radeka – Head of Ebanking Vojvodjanska Bank
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