THE ROLE OF BUSINESS ENVIRONMENT IN THE PROMOTION OF INVESTMENT ACTIVITIES: CASE STUDY OF CITIES AND MUNICIPALITIES IN THE REPUBLIC OF SERBIA

Abstract

Many municipalities and cities face certain problems in attracting local and foreign investors and one of them is ineffective local administration, as well as the lack of transparency of rules and procedures start-ups and enterprises, branches and the like. Many local governments are not even aware of what is causing the problem and the lack of investment and investor preferences for other municipalities and cities. To be able to clearly state the causes of the problem, a program of certification of cities and municipalities has been initiated in many countries, including Serbia. This program involves evaluating the quality of services of municipalities and cities in terms of those elements that are particularly relevant to existing and potential investors. On the basis of the data on the level of quality of certain elements, one can realize what the local government of a city or municipality must change in order to be a convenient area for investment, and that would provide a friendly environment for potential investors. In addition, the program ends with a certification in case the municipality or city meets the minimum requirements in each of the elements of assessment. Since the evaluation of the conditions represents the basis for gaining the certificate confirming that the city or municipality is a favorable environment for investors, a very important issue is to determine the significance of the elements, and appropriate criteria, bearing in mind that not all elements are equally important from the perspective of investors. The aim of this paper is to establish a link between the level of fulfillment of the criteria in the process of certification of cities and municipalities and the ability to attract investors, and the acceleration of investment activity at the local level. The paper presents the current way of conducting the procedure of certification of cities and municipalities, and based on the results of the correlation analysis and DEA (Data Envelopment Analysis) method an insufficient influence on the fulfillment of these criteria to attract and activate investments at the local level was found.