Growing Sustainable Growing Sustainable Business for Poverty Business for Poverty Reduction (GSB) Reduction (GSB) in Serbiain Serbia

Stevan Vujasinovic, GSB Broker Stevan Vujasinovic, GSB Broker

27 June 2007, Brussels27 June 2007, Brussels

Why GSB in Serbia?Why GSB in Serbia?

Underdeveloped or disorganized supply chains to enable higher value-Underdeveloped or disorganized supply chains to enable higher value-adding investment;adding investment;

Uneven growth; Uneven growth;

stagnating rural areas, South and border areas of the country, stagnating rural areas, South and border areas of the country, marginalized populations within the informal sector with no or limited marginalized populations within the informal sector with no or limited access to finance and know-how access to finance and know-how

““After-service” for companies already in Serbia looking to expand After-service” for companies already in Serbia looking to expand existing investments;existing investments;

GSB Opportunities to date: Recycling and Waste Management, Food GSB Opportunities to date: Recycling and Waste Management, Food Processing, Biomass Fuels…Processing, Biomass Fuels…

A significant business opportunity exists in the Serbian recycling sector…

Material

Metal scrap (ex Aluminum)

* Adding all currently collected scrap and the total potential household scrapSource: IFC: PEP SE: “Assessment of the Recycling Sector in Serbia and Montenegro”, company interviews, GSB analysis.

Description (sub-segments Avail material* Market size*

• Industrial/construction metal• Vehicles• Abandoned metal waste

312 43.0 mm

Tons, ‘000 Euros, mm

Plastics • HDPE• LDPE• PET bottles

86 37.9 mm

Paper • Paperboard• Office paper• Newsprint

207 14.4 mm

Aluminum21 16.9 mm

• Industrial Aluminum• Used Beverage Cans

Glass • Bottles24 0.5 mm

…but opportunity remains largely untapped with low recovery rates…

*Given the relative development of the Brazilian Steel industry recovery rates are likely to be comparable to SerbiaSource: IFC PEP SE: “Assessment of the Recycling Sector in Serbia and Montenegro”, company interviews, GSB analysis.

Paper

Ferrous metals

Plastics (all types)

PET

Aluminum cans

Glass

>65%

<10%

15%

<5%

<1%

<1%

Current situation in Serbia

Recovery Rate, 2006, %

Paper

Ferrous metals

Plastics (all types)

PET

Aluminum cans

Glass

??*

15%

38%

26%

85%

41%

Best practice emerging market - Brazil

Recovery Rate, 2002, %

…due to weaknesses across the supply chain…

• Households• Industrial

/commercial

Source Separation

Individual collectors

Collection centers

Low-value processors

Who’s involved?

Recycler

Challenges

• Predominantly Roma and other poor

• Municipal waste Co’s

• SME’s

• SME’s • MNC’s• Local and

foreign end users

• No containers• No separation• Low

awareness

• No equipment• No

information

• Insufficient #• Poorly

located• Limited scale

• Limited equipment

• Limited scale

• Lack consistent/quality feedstock to create end products

Outcomes • Low recovery rate

Lower quality / value

• Limited capacity

• Low value capture

• Weak economic viability

• Focus on low value-added activities

• Investments not sustainable – no investment in this part of chain

Source: GSB analysis

Key breakages

Insufficient / non-existent

… and limited competition downstream of individual collectors

SourceSeparation

Individual collectors

Collection centers

Basic processors

High value processor

Source: GSB analysis

Ways to drive additional competition…

• Natural competition due to fragmentation

Competition“As-Is”

• Geographic monopoly

• Price information asymmetry

• Geographic monopoly

• High barriers to entry due to large asset base

• Limited number of players

• Price discovery (SMS) to sell to collection centre with best offer

• Price discovery

• Market entry pressure from downstream processors

• Paying quality/quantity premium to collection centres

• Buying from cheapest collection centre

• Creating incentives for additional processors to enter market

• Integrating upstream to compete against basic processors and collection centres

High Low Low Low

The supply chain AFTER GSB investments

• Increased separation

Source Separation

Individual collectors

Small collection

centers

Large collection

centers

Improve-ments

Recycler

Outcomes

• Better conditions

• Better organization

• Increased number / better coverage

• Better management

• Appropriate scale

• Higher value processing

• Increased interest in final recycling (i.e. manufacturing new materials)

• Improved quality

• Higher recovery rates

• Increased collection

• Increased profits

• Sustainable profit

• Consistent demand for recyclables

• Increased productivity of existing recyclers (e.g. paper)

• Potential for large new investments (e.g. in PET)Source: GSB analysis

Current GSB investments

Creating new GSB opportunity

• Functioning network to supply large collection center

Therefore, work with GSB in:Therefore, work with GSB in:

Greenfield investments in recycling (various materials);Greenfield investments in recycling (various materials);

Forthcoming privatization of municipal waste management companies; Forthcoming privatization of municipal waste management companies;

but also in other sectors where GSB is already minimizing risks and but also in other sectors where GSB is already minimizing risks and adding value in similar ways:adding value in similar ways:

Food processing (dairy milk, fruit and vegetables, meat processing);Food processing (dairy milk, fruit and vegetables, meat processing);

Biomass fuels (sourcing supplies from Bosnia, Montenegro as well as Biomass fuels (sourcing supplies from Bosnia, Montenegro as well as Serbia);Serbia);

or any other sector in which your business can contribute to the or any other sector in which your business can contribute to the achievement of Millennium Development Goals. achievement of Millennium Development Goals.

Further Information:Further Information:

Serbia Investment and Export Promotion AgencyVlajkoviceva 3/V, 11000 Belgrade, SerbiaPhone: +381 11 33 98 550Fax: +381 11 33 98 814E-mail: office@siepa.sr.gov.yuwww.siepa.sr.gov.yu

Stevan Vujasinovic, GSB BrokerStevan Vujasinovic, GSB BrokerUnited Nations Development ProgrammeUnited Nations Development Programme69 Internacionalnih brigada, 11000 Belgrade, Serbia69 Internacionalnih brigada, 11000 Belgrade, SerbiaPhone: +381 11 204 0421Phone: +381 11 204 0421Fax: +381 11 344 4300Fax: +381 11 344 4300E-mail: E-mail: stevan.vujasinovic@undp.org