Business Clusters Creating Jobs in At-Risk Regions of Serbia

November 28, 2012

Serbian national television this month profiled a pair of business clusters launched in economically depressed regions of Serbia that are now thriving and creating hundreds of jobs.

Formerly a collection of small businesses struggling to make a dent in local markets, the Asstex jeans production cluster in Novi Pazar and Kostana shoes production cluster in Vranje combined for $22.5 million in export sales in 2011 while employing nearly 1,800 people.

The jeans and shoes clusters—interconnected businesses organized in order to scale up and compete for larger contracts—were formed with assistance from the DAI-led Preparedness, Planning, and Economic Security Program (PPES) funded by the U.S. Agency for International Development.

“Just five years ago the government had written off textiles as a dead industry,” said DAI’s Michael Pillsbury, the project’s chief of party. “After helping to raise Asstex’s visibility, textiles is now touted by the government as one of their key export-oriented industries. It has attracted the attention of government support programs such as Serbia’s export-import agency and donors such as the Swiss Import Promotion Program.”

By coming together, the companies are attracting buyers looking to place larger quantity orders than individual members would be able to fill alone. It also softened the cash flow burden of purchasing the front-end materials because the expense is spread across several companies. Economies of scale have been created, improving profit margins as the companies are now negotiating for greater quantities of raw material.

Asstex, a cluster of textile-related organizations based around the city of Novi Pazar, has grown from 17 to 135 members in the past three years. It has successfully branded “Jeans from Serbia” and established a permanent market presence in Moscow, Russia, and Lodz, Poland.

Kostana first established shoe manufacturing in Vranje in 1958. After the industry died during the Balkan wars of the 1990s, it was slowly resurrected in the 2000s with the shoe business cluster launching in 2011 with 12 businesses and two institutions. Kostana sells to Louis Vuitton and Moschino, among other brands.