02 October 2009
German Factory Brings Big Hopes to Serbian Town
Prokuplje lures new foreign investment, reducing unemployment
Prokuplje, Serbia — Mention the word "Leoni" to any citizen of Prokuplje, and chances are you will be greeted with a smile.
Prokuplje has a long history: Evidence dates the town’s existence as far back as the 13th century. In the 20th century, it housed numerous factories, which employed thousands of residents, but not anymore. Businesses struggled in the privatization that followed the fall of communism, and then economic sanctions on Serbia took a further toll on local companies. The factories closed, contributing to Prokuplje’s 30 percent unemployment rate today.
But in just a few weeks, a new factory will be operational. Leoni, a German maker of car cables, has decided to open a factory in the town of about 30,000 people. With a strong business strategy, Prokuplje convinced Leoni to locate within its borders rather than in much larger neighboring cities.
Having already hired more than 250 employees and with plans to hire as many as 2,000 by the time its factory is fully operational, Leoni will bring big changes to Prokuplje, residents and town officials believe.
For years, Prokuplje residents, desperate for work, had been traveling to job fairs in nearby larger cities. Residents’ spirits are much higher these days, said Mayor Milan Arsović. It is clear why. Even ahead of the factory’s opening, Prokuplje’s citizens are experiencing benefits. Many of the already-hired Leoni employees have received training in Slovakia and have been paid for their time — paid at much higher salaries than what has been typical for the town’s workers. Recently, when Prokuplje had an employment fair of its own, residents of the larger cities that used to attract Prokuplje’s unemployed came looking for work.
Winning over Leoni was the culmination of years of work by Prokuplje officials, who have taken several steps to improve the town’s overall economic situation. Since 2002, the town has received help from the United States Agency for International Development (USAID) and its partners. USAID provides the town and its businesses with economic and technical assistance. For instance, it helped build an English-language Web site to attract investors.
USAID and its partners have trained community leaders throughout Serbia in developing successful economic development plans — training that helped Prokuplje officials prepare their bid for Leoni. “I’m not surprised [Prokuplje] did a great job with Leoni,” said Danijel Dašić, a USAID manager in the region. “They were well-organized and knew how to achieve a mission and vision.”
More and bigger salaries as a result of the new factory will mean more money flowing to all parts of the city, to shops that benefit from locals with more disposable income and to the town’s budget, which benefits from the collection of more in income taxes. A healthier Prokuplje budget will mean a greater ability to improve infrastructure, which in turn may lure new corporate investors. Even those not employed by Leoni will see improvements, the mayor said.
It took months to persuade Leoni to put its factory in Prokuplje, rather than in one of the many other Serbian cities the company was considering. Although Prokuplje is smaller than most of the other locations that were contenders for the factory, company officials were not discouraged by the town’s size, Arsović said.
The mayor said the town’s business strategy showed tangible solutions that met the company’s needs. Prokuplje agreed to provide all the documentation, licensing and permits for Leoni’s factory free of charge and offered subsidies to the company — a big incentive for any major corporate investor — Arsović said. Prokuplje also promised the company offices and assistance with hiring staff, preparing contracts, translating marketing materials and refurbishing and providing furniture for an old factory building. The town “really did its homework” in planning its business strategy and promoting it, Arsović said.
“Everything [Leoni] needed … we did it,” said Alexsander Jelić, who is overseeing the Leoni project and has provided the company with office space in the town’s Business Incubator Center. The center is an office park that provides extremely low rent, training and technical assistance to small companies. The 13 tenants — including textile, packaging, door manufacturing and alternative tea production companies — could not afford to run their own offices and most likely would have operated out of homes or garages if not for the incubator. USAID helps the Business Incubator Center market its space and select and train tenants. (Today, three years after the incubator opened, there are 90 employees there, and Prokuplje plans to expand the space to house more tenants.)
“We are showing that we can,” Jelić said, adding that Leoni just signed a statement saying the company recognizes that all of the obligations Prokuplje agreed to fulfill before the factory would be opened have been met — and on deadline. The work done thus far meets European Union standards, which is important since Serbia may join the European Union in the next few years.
Leoni, for its part, has agreed to sponsor sports and cultural events in Prokuplje.
Prokuplje officials are optimistic that Leoni is just the first of many companies that will locate in its borders. “When Leoni starts to work … this is something other investors will hear about,” Jelić said.
More information on Prokuplje is available on its Web site.
