Information Technology

Bulgaria’s stable macroeconomic environment and its government’s dedication to prioritizing the ICT sector combined with long-lasting traditions and talented human resources, make Bulgaria an ideal location for flourishing ICT companies. The success stories of local branches of international firms, as well as the high-quality performance of the biggest local companies, prove the potential for optimally positioning Bulgaria on the world’s ICT map.

A distinctive feature of Bulgarian ICT enterprises is the creativity and personal drive of high level business leaders toward staking out Bulgaria’s ICT primacy. Unlike other ICT prioritizing countries, Bulgaria cannot offer “unlimited” human populations; however, it compensates with a critical mass of highly-qualified, well-educated professionals possessing proven theoretical background and efficient, cost-effective international experience.

In order to complement Bulgaria’s human advantage, Bulgarian government and business leaders have seen to the continuous improvement of ICT infrastructure so that business can expand. The liberalization of the telecommunications market since 2003 shows positive effect, visible in the decreasing costs for Internet access and the higher quality of connectivity. Competition on the telecom market is expected to grow in coming years, and today more than three licensed fixed-lines operators are already operating in Bulgaria.

Not surprisingly, the ICT sector indicators represent stable growth in the last few years, evidenced by a continuous increase in the expertise and potential of Bulgaria’s domestic companies. These facts are accompanied, and surely positively influenced by a strengthening of cooperation among Bulgarian ICT firms, leading to the creation of a number of widely represented and internationally known ICT sector associations.

Of great importance for the present and future of ICT industry development is the quality of Bulgarian education, which undoubtedly ranks among the best in the world. This is illustrated by the multiple awards won by Bulgarian students, who regularly demonstrate outstanding achievement in the world-wide competitions for mathematics and informatics.

The local business environment includes a reasonable level of operation costs for running a successful business, up-to-date legislation, and the availability of skilled workers in most fields of the economy. All of these make Bulgaria an enticing destination for investment and outsourcing.
With a government that acknowledges the potential of the local ICT sector, business representatives that are eager to prove the qualities of their companies, and an impressive number of highly qualified and motivated people, Bulgaria is ready to become one of the pre-eminent players in the world’s ICT market. It is not a matter of “whether”, it is a matter of “when”, and for the Bulgarian ICT business sector, the answer is “now”.

Present

Today there are over 4 350 actively operating ICT companies in the country. After a serious decline in the first years following the transition to a market economy, the ICT sector is gaining strength, and the enormous human potential has gathered again to re-take positions that Bulgaria enjoyed in the past. Though most of the ICT companies are small and medium enterprises, they have successfully demonstrated that Bulgaria provides the high quality of products and services needed by global markets. It is not coincidental that customers of Bulgarian companies include Canadian government agencies such as the Department of Transport, the Department of Environment and others, as well as global blue-chip companies such as BMW, Boeing, Ford, NATO, Lockheed Martin, Nortel, Hasbro, SAP, Xerox, Telesis Technologies, and PricewaterhouseCoopers.

Future

The Bulgarian ICT sector has already built a positive image and won the trust of its partners; however, there is recognition that constant improvement is needed. Therefore ICT companies have joined efforts and, together with the government, have elaborated a Strategy and Action Plan for Increasing the Competitiveness of Bulgarian ICT Sector. The implementation of this concerted Strategy will further strengthen the position of the Bulgarian ICT industry in the world marketplace. The opportunities of the Bulgarian ICT sector are based on talented human resources and on the direct access to globalised markets afforded by NATO (2004) and EU (2007) accession.

Romania Romania was the first country in Eastern and Central Europe to produce first generation computers such as CIFA-1957, MECIPT–1961, DACICC-1962. In the 1970s a powerful industry was created using western technologies such as CII France, Friden Holland, Ampex, Memorex, Control Data USA, etc. The industry employed more than 40,000 people and focused on R&D;, production, service, commerce, and IT centers. Computers made in Romania were exported to Czechoslovakia, East-Germany, Middle East, etc. In the 1980s the modern technologies developed in the 1970s became obsolete due to Romanian autarchic policies and the decrease in imports. The ICT sector, as the whole Romanian economy, entered a period of isolation. After 1989, the main players in the ICT global market came to Romania, discovering its most important assets: highly qualified labor and a very dynamic market. The Romanian ICT educational system is considered one of the best in the world; more than 5,000 graduates from ICT related fields enter the workforce each year. Other 2-3,000 graduates from different fields decide to reorient to the IT field, mainly because of higher salaries. The well-known Romanian company Brainbench is ranked first in Europe for qualified software developers. Nevertheless, specialists in the field acknowledge that the ICT industry in Romania faces a shortage of human resources. The ICT contribution to GDP was as high as 3.42 billion USD (2.75 billion Euro) in 2005 and 4.3 billion USD in 2006 (+26%). In 2005, the expansion of IT hardware sector (due to PC assemblers group and to starting hardware at Celestica Bors) has been accompanied by a reduction in the telecom hardware sector. The IT software and services sector is still the most dynamic of the ICT industry, with annual growth rates of over 40% in the last years. The total turnover in 2005 exceeded .5 billion (1.2 billion Euro), and increased in 2006 to billion, nine times higher than in 2000. The contribution of the ICT industry to the GDP is about 4% (3.94% in 2005 and an estimated 4.19% in 2006). The largest contribution comes from telecom services – 3.1%, software contribution is about 0.8% and hardware – 0.26% (lower than in the previous years). In 2005, exports increased up to $ 1 billion (790 million Euros); the estimates for 2006 exceed $ 1.3 billion – that is an increase of 32%, representing 4% of total Romanian exports. Despite the increase in the export of IT software and services, the ICT field maintained a negative external balance ($ 1.9 billion in 2005 and – $ 1.8 billion in 2006) due to the massive amount of import of hardware and electronics. The ICT industry employed more than 101,000 people in 2005 and 110,000 in 2006 (2.3% of the total personnel employed in the Romanian economy); work force was concentrated in service area as follows: 47,500 in telecom services and 47,000 in software and services. 2006 was the fourth consecutive year where the number of employees in the software sector increased by 7,000, close to the number of corresponding university graduates in the field. Number of people employed in the industry between 2000-2006 (thousands employees) In 2005, the average annual gross salary in the ICT sector increased to ,358 (5,920 Euro); the 2006 estimates are as high as 8,800 $ (7,040Euro); the large raises (31% and 35%) come from software and services area, the sector which suffers from a lack of balance between demand and offer of specialised labour. In 2005, the average ICT industry productivity increased by 28%, and the gross added value per employee was ,790 (27.170 Euro). The high level of productivity was mainly due to telecom services. In hardware, and especially software and services, salary raises were higher than productivity and resulted in a lower profitability rate. Micro-enterprises account for 56% of the total number of companies in ICT (16,300 total / 8,650 micro-firms in 2005). Most of these micro-firms (6,900) engage in the area of software and services; they account for 14% of the total industry turnover and 38% of the profits. These percentages are higher than the economy average, indicating that micro-enterprises are still used for the transfer of profits and of salaries in particular. Projected effects for the next one to three years Growing operating costs will translate into growing tariffs for Romanian companies on the international market. Romania has ceased to be a cheap location a few years ago, especially compared to India and China, or even Russia and Ukraine, and will continue this trend, as costs (salaries, rents and administrative costs, etc) will tend to match those at the European level. From an industry perspective, we have been advocating, together with other associations and public sector representatives, for a change in positioning on the external market for the Romanian IT industry, from “a low cost location” to a “high added value” one. Efforts at a national level that brought together major players and stakeholders in the field resulted into the definition of the industry brand: “Romania IT – Creative Talent. Technical Excellence” Analysts indicate that interest in business in this part of Europe and especially in Romania will remain in the next years. A KPMG survey published in March 2007 that involved more than 100 CIOs in European companies indicated that almost 90% of the respondents would choose a local/ regional contractor for at least a part of their services and that one third had unsatisfactory experiences with providers in areas like India or China. They also say that although costs in Eastern Europe are a higher than in Asia, they are balanced by high quality and capacity to answer local needs. Romanian companies also predict that in the medium and long term they will be more easily accepted as long-time partners, rather than mere subcontractors for small projects. Local industry will also change due to the new economic rules. Increased competition will generate further efforts on the company’s’ part to remain competitive. Companies that we have interviewed indicate that increased investments in research and development and extended partnerships will generate dynamism and help them “stay fit” for both internal and international competition. European funding – major drive for the industry’s development We cannot talk about EU funding without at least mentioning the opportunities offered through Structural Funds, from which Romania has started to benefit in 2007. Structural Funds are aimed at supporting general areas where alternative funding is imperative but lacking – such as infrastructure, environment, economic competitiveness, human resources. Despite being targeted as direct beneficiaries for only subsections of these areas, IT companies can greatly benefit from this type of funding as providers on projects led by third parties. Most of these projects are included in the Sectorial Operational Program for Growing Economic Competitiveness, Priority Axis 3 – ICT for Private and Public Sectors. The axis includes three Key Areas of Intervention: Supporting the use of information and communications technology – facilitate public and SME access to broadband and connected services Developing and increasing the efficiency of modern public services – eGovernment, eHealth, eLearning E-economy development – support the use of business applications in order to improve product and process management, develop electronic commerce, facilitate access to international markets This type of funding is a powerful financing instrument especially for public administration-driven projects. It is known that financing for public projects, especially for those that involve large budgets, was difficult to access. However, one should be aware that these funding instruments do not only create funding opportunities but also require great effort from the companies in terms of applying for funds. The complex application procedures indicate a need for consolidated strategies for development at local, regional and national level and also of substantial effort in preparing the application documentation. Of course, the projects that will receive European funding will come on top of already existing projects in the private industry and in the public sector, and they will increase Information Society implementation at a national level. Mid and long-term strategic options. It is too early to give a definite answer to the question regarding the balance between inherent short time negative effects and long time opportunities for development, but some of the companies we contacted have already designed their approach for the next period. Three options seem to be favored: High added value and quality oriented positioning  Niche approach for products and services offered  Regional development as an extension to home market success. Romanian IT industry is still considered an emerging one because of continuing high growth rates of 15 to 25% per year in different niches. It is possible that the drive of European IT spending, if used the right way, will keep growth rates high in the years to come and boost the development of the local market as well as of local players to an unprecedented extent.

STATE OF THE ART INFRASTRUCTURE

Croatian fixed telecommunications network is 100% digitalized, and it is the most modern out of all CEE countries’ networks. Broadband penetration rate totals to 28.26% compared to the OECD countries’ average of 25.9%.

INNOVATIVE SOCIETY

Innovative hub out of which many pioneering patents have emerged. Croatia has one of the highest proportion of enterprises with innovation activity in the region. ENTERPRISES WITH TECHNOLOGICAL INNOVATION (% OF ALL ENTERPRISES)

Key facts:

• With population little over 3 million people and a GDP of $14B it is a market that you would consider relatively small.
• The IT market is estimated about $190 million, with $66 spending per capita and market growth of 1.4%
• The ICT Development Index in the previous years, between 2002 – 2010, recorded an extremely high gr.owth of 88%.
• There are more than 1800 companies and over 8000 professionals that operate in the IT industry.

The ICT industry

The recent world economic crisis didn’t affect much the economic development of the country and its future development is positively evaluated. The financial sector was stable and the small decline from investment withdrawals was balanced from the inflow of savings from returning migrants back to Albania.

The Albanian ICT sector has improved significant in the last 6 years due to the efforts from the local government, donors and businesses. Furthermore, the annual report indicates that the ICT is one of the main development opportunities when doing business in Albania. On the other hand, access to finance, corruption, tax rates and regulation are the main disadvantages when considering in investing in the domestic market and some hurdles you should take under serious thought before engaging in trade with a local representative.

For telecommunication and mobile companies, the advancements over the last years in ICT infrastructure are with great improvement. There are 4 mobile operators with 2 of them offering 3G to their customers and currently operators are preparing to introduce 4G. A couple of years ago the mobile penetration was close to 90% and now it is expected to have surpassed it, being one of the highest rates in the region.

More than half of the population is using the internet and also the e-services offered by the government is quickly growing. Almost 80% of the central  government services are accessible online.

Most of the companies working in the ICT sector in Albania are not specialized in a particular market segment but have two or more activities in their portfolio and operate in a number of sectors and categories. Very few companies are specialized in software development, system integration or hardware distribution alone. There are two main factors why this happens: first, most companies operate only in the domestic market which brings us to the second factor that it is a small market and so the IT businesses must have a wide range of services or products in order to have strong revenues and be profitable.

Most of the companies decide what products to resell or develop based on their customers’ requirements and they do it often for different fields. These companies within the ICT sector  show strong desire for further development and progress. The majority of the businesses specialize in installation, maintenance and IT supplying, internet services and software designing. As it was stated above, they offer a variety of services for different industries, so a company can have customers from the Travel Industry and the Construction at the same time. That means that they have a significant part of the general development and market growth in Albanian economy.

Percentage of companies servicing the industry sectors in Albania

Most of the ICT companies are SMEs that in a great percentage work only with local customers with few having exposure to some EU markets. Their quest for new markets will drive the development for new technologies, larger investments in R&D; and will also have a positive effect in the management and marketing skills of local talent and will be a driving force for local competition.

The companies

There are about 1800 registered companies that indicate in their incorporation that at least one of their business purpose is IT services. They represent almost 2% of the country’s total number of companies, somewhat 101,000. The vast majority of these IT companies are sole-proprietorships, 1600, and only a small number of them, 190, are registered as limited liability companies and just 7 as joint stock companies. 50% of all companies are located in the capital district of Tirana.

Companies by annual turnover in Albania

A significant 47% has commenced operation in the last 5 years, with about half of them being in business less than 3 years. So, this high rate of new businesses entering the market indicate that the IT sector is not only young but also expanding and this growth in comparison with the overall new business growth, which has varied between negative 2% and 2% in the past 5 years,  in the country is also higher.

Organizational structure and management

There is something worth noting in the case of internal structure, the different roles between administrative staff and technical staff who is involved in the creation and delivery of service and products. Larger companies in general, have a lower percentage of technical staff than micro and small companies, which in turn lack the existence of administrative staff.

About 58% of the companies have a marketing department but often other responsibilities are assigned as well and marketing isn’t their only duty within the company. Of course, small companies don’t even have a marketing department and referrals and networking is their source of new deal registration and clients.

Domestic market coverage

The main business activity is located in the greater area of the capital city, Tirana, and 47% of the companies report activity only where their headquarters are and furthermore 70% of the total companies are active in just a few cities. Just 14% operate in national scale and cover the entire country. This phenomenon has its routes mainly in the general domestic economic activity and not due to the weakness of IT companies. 60% of the economic activities or more take place in the district of Tirana and in the IT sector this number is possibly higher as the IT demand in rural districts is very low. In some fields, such as IT consulting, the demand outside Tirana is insignificant.

Average share of revenue by type of service in IT sector of Albania

Partnerships with foreign companies

About 68% of companies indicate that they have had in the past or still have partnership relation with a foreign company that has no direct end customers there, so they have established a reseller, VAR, distributor partnership, etc. It is common that this type of cooperation happens for specific projects and the distributor type of partnership follows along with local sales partner.

Business activity in Albania, and International Standards

The most important factor that creates a strong barrier for local companies to export their technology is international quality standards. They face many challenges in order to comply with international standards or EU technical requirements that have to be implemented if they want to export their products and increase their position in the international markets. Along with standards, local companies need to recruit more and more specialized and qualified workforce that will lead the efforts to close this gap. Finally, the re-education and continuous training plays a vital role in adapting the latest technologies available and also devoting a large part of resources to that purpose is something Albanian companies have taken in serious consideration.

The SWOT Analysis of Albanian ICT sector

We’ll conclude this article with a short analysis of the ICT environment, so companies that are interested in entering the local market can have a concise pros and cons image as well as future possibilities to take into consideration.

Strengths:

• ICT government agencies and associations exist;
• IT companies are aware of the fact that they need to implement the international standards and quality metrics for their products;
• Labor costs are significantly lower that other countries, especially Western Europe;
• Due to the location, IT companies have a key role and knowledge of the Balkan and Eastern Europe markets;
• The government has already realized the need of faster ICT development in all sectors of the country and investments are increasing.

Weaknesses:

• It’s not a country that supplies and exports IT products or services;
• Most products and services are outdated;
• In the telecommunication field, there is a monopoly that leads to high prices with low quality services;
• IT companies are not specialized in certain field or vertical but rather have a dispersed clientele;
• There is lack of marketing talent and expertise and international strategy;
• The size of most companies, sole proprietorship, is a disadvantage for them to expand internationally and so is their budget;
• There is a gap in project management skills and production of software;
• The available capital to invest in initiatives that will make local products to comply with international standards is very limited;
• The accessibility of digital content and the extent of internet usage for business is not as it should be as in other more advanced countries.

Opportunities:

• There is an increased understanding for world standard practices and methodologies;
• IT companies are more and more competing with regional and international businesses;
• The prospect of joining the European Union gives great market potential;
• The exposure to foreign IT vendor partners will help the ICT companies to gain in expertise and organizational structure to meet the global standards;
• The ICT industry will drive the entire economy and lead into higher living standards; Albania is among the youngest nations in Europe;
• The strategic alliances established with foreign companies will increase exports.

Threats:

• There is a fragmentation in representing IT within different industries;
• The relatively small market doesn’t allow for great industry development and specialization;
• “Brain Drain” of IT specialists in search of higher salaries abroad;.

Summary

Overall, the Albanian ICT industry is a dynamic and growing sector with important leaps in the recent past. It’s a market that is opening fast, more and more to foreign influence and the potential for international vendors to enter is great. Already, the local market is consisted of resellers, VARs, distributors, etc. and the cooperation with foreign vendors is a successful business model. Lastly, the hardware products represent 75% of the local market, the packaged IT is 10% and the IT services is about 15%.

The telecommunications market is the most developed segment of the ICT in Serbia. This market can be defined as mature and dominated by large companies (three mobile operators, one cable operator). The average annual growth rate of the Serbian telecommunications segment revenues in the period 2005-2011 was around 9,5%. An analysis shows that the most thriving sub-segment is the mobile one. In 2008, the telecommunication sub-sector in Serbia was worth about €1.65 billion, with a GDP share of 4.5–5% and an annual growth rate of 10%. For comparison in 2009 the sub-sector was worth about €1.5 billion. The telecommunication sub-sector is expected to grow faster after the expected privatization of the Serbian state owned telecom company and the introduction of a second landline phone operator. In the region of South-East Serbia there are divisions of national telecom operators, so the strategy definition and decision making are focused in Belgrade i.e. headquarters of those companies. At the same time there are very skilled operational teams of regional/local companies and divisions of national operators. Such teams support cross border operations and advancement of main companies in foreign markets. After 3 years with more than 10% annual decrease in the IT segment, in 2011 the market stagnated. The projections for 2012 were for a slight decrease of 3%. In the short term period there won’t be any major changes and the market value of the IT segment will be stay around €400 -450 million.

The structure of the IT market can be summarized as follows:

• Dominant hardware sub-segment, with decreasing profit;
• Vibrant IT services sub-segment, with highly increasing profit;
• Stable software market.

The IT segment in Serbia is fragmented, liberal market dominated by SMEs. The low investments in IT and the insufficient number of IT experts are an obstacle for the development of a competitive IT industry. Due to these weaknesses, companies have limited access to international markets. However, a number of companies are active in the outsourcing market, producing software modules or embedded hardware parts for companies from the U.S., the Netherlands, Germany and other countries. In Serbia, the majority of IT companies are active in the retail of hardware, since the demand for delivery of computers and other hardware equipment is still at a significantly high level. The software sector is dominated by local SMEs producing and/or customizing mainly application software for the domestic market. The demand for software application will increase over the next years and the local companies who manage to create efficient partnerships with the traditional vendors or international service companies will have competitive advantage on the domestic market. There is a small number of companies working exclusively for foreign customers and are not present on the local market. These companies usually use technologies and solutions for which there is no demand on the domestic market. The positive aspect of this is that their products and services have higher added value and the profit they realize is much bigger than the majority of their local competitors. Another small group of companies are subsidiaries of foreign companies only employing local highly qualified workforce.

SWOT ANALYSIS

The SWOT analysis of Serbian ICT environment generated the following conclusions:

Strengths:

• Serbian companies are aware of the need to implement the latest standards;
• Labor costs are considerably lower than in Western Europe;
• Serbia has qualified human resources – about 70% of the skilled workforce in the ICT sector in Serbia has college degree;
• Good communication networks within the country and externally;
• Presence of leading international ICT companies, e.g., IBM, Microsoft, Oracle, etc;
• Wide-spread fluency in English language and high educational profile of the workforce;
• Companies have key knowledge of emerging markets in the Balkans and the Eastern markets;
• Businesses have language and localization skills for Central and Eastern European and Russian markets;
• The Government has realized the need of faster ICT development in all sectors of the country. The ministries in charge have started a broad range of reforms concerning ICT development;
• Young, vibrant and emerging sector with active, innovative behavior;
• Strong capacity to adjust to new conditions and market demands;
• Proximity advantages when it comes to outsourcing.

Weaknesses:

• Country does not have the image of an IT supplier;
• Outdated products/services;
• Lack of quality certification and development methodologies;
• State and public monopolies in the area of telecommunications, leading to low-quality service and high prices;
• Lack of specialization among ICT companies;
• Lack of international marketing skills and expertise;
• Lack of focused international marketing strategy;
• Company size and resources of many ICT companies are too small for international expansion;
• Lack of project management skills and/or industrial production of software;
• Lack of capital for implementation of new competitive standards which can ensure the potential clients in the quality of the provided services;
• Potential for work sharing in the region is not extensively used;
• Lack of cooperation among companies as well as other stakeholders.

Opportunities:

• Increased understanding of software process improvement methodologies;
• Implementation of world recognized models and practices;
• International growth prospects;
• European Union market potential;
• Partnerships with significant foreign companies can subsequently support the „professionalization“ of ICT companies;
• Strategic alliances with foreign companies to increase exports;
• Clustering with other competitive sectors in Serbia and the region;
• Strengthen business-education links;
• Low penetration of IT/ICT within Serbian business sector makes a good market potential in future;
• Geographical proximity to the European market opens “nearsourcing” potentials;
• The government, line ministries and international development organizations recognize ICT as one of the key sectors.

Bosnia and Herzegovina presents a very convenient destination for easy access to the SEE market of over 60 million consumers, as well as to the market of Turkey with additional 60 million consumers. Bosnia and Herzegovina can serve as a platform for this wider geographical market, benefiting from international accords and Free Trade Agreements signed between seven South-Eastern European countries that have created a free trade zone that includes Albania, Croatia, Bosnia and Herzegovina, Bulgaria, Macedonia, Romania, Serbia and Montenegro. In addition Bosnia and Herzegovina has signed a Free Trade Agreement with Turkey. The main purpose of this accord was to increase the scope of regional and international trade, to improve the total capacity of the regional market and to attract foreign direct investment (FDI). It also contains an intention to increase the integration of this region in European structures and the global economy. The accord sends a clear message from these countries to the rest of the world that they are ready to cooperate with the purpose of accelerating economic progress and renewing trade relations, thereby generating a secure and favourable business environment for investment.

ICT IS AN EMERGING SECTOR

Fast development of information society, as well as the improvement of competitiveness in Bosnia and Herzegovina, is not possible without a competitive ICT industry. Statistic information are the confirmation of the growing trend in the ICT sector.

ICT industry set up the association for information society in B&H; – BAIT in December 2003, which has become a representative and guardian of ICT industry business interest in Bosnia and Herzegovina.

The revenues of large ICT companies are growing.

The data analysis shows that a trend of software sale and IT service providing share are in a mild increase from year to year in relation to the hardware sale.

In the past year, primarily legal entities and international organizations have increased their share in the structure of clients using the services and products of IT companies. It is clear that the state through different state bodies and public companies is not the main consumer of ICT services and products any more, as was the case in the past few years.

STRONG ACADEMIC BASE

Bosnia and Herzegovina possesses a growing labour force skilled in various aspects of ICT design, management and applications. Young, educated and innovated workers from B&H; are participating in International project and Companies.

The University of Sarajevo (MIT) and the University of Tuzla (UCDED) both have specialized “e-learning” schools, teaching and utilizing modern multimedia and programming skills.

Several of Bosnia and Herzegovina’s colleges have established online training courses in partnership with U.S. and European universities (University Sarajevo, University Banja Luka University Tuzla, and University Mostar).

Complementing educational activities, areas of research at the B&H; Universities are:

• Management information systems
• Artificial intelligence
• LAN, WAN and wireless network topologies
• Computer architectures
• New information technologies
• System and application software
• Object oriented programming languages
• Evolutionary computation
• Graphics and image processing
• Business and technical information systems
• Software development environment ( IDE )

STRATEGIC LOCATION

Bosnia and Herzegovina has signed Free Trade Agreements (CEFTA) with all SEE countries and Turkey. B&H; presents a very convenient destination for easy access to the SEE market of over 60 million consumers, as well as to the market of Turkey with additional 60 million consumers. They also have a preferential export regime with all 27 EU countries, and USA, Australia, New Zealand, Switzerland, Norway, Russia, Japan, Canada and Iran.

That allows companies from B&H; to export their products to the market of approximately 600 million consumers without any taxes and customs duties.

Bosnia and Herzegovina has signed Agreements on Avoidance of Double Taxation with 35 countries and 36 Agreements on Promotion and Protection of Investment.

Bosnia and Herzegovina ICT Sector

ATTRACTIVE BUSINESS ENVIRONMENT

The accelerated economic reform process in B&H; has contributed to a greatly improved business climate. As a result, B&H; has recorded one of the fastest business growths in South-Eastern Europe.

B&H; has the most stable currency and the lowest inflation in SEE;

B&H; offers favourable Tax and Customs Systems:

• Investment capital is exempt from paying import customs and customs duties (with the exception of passenger cars, slot and gambling machines);
• The Federation Law on the Corporate Income Tax enables the taxpayer, who in the year for which the corporate income tax is being determined, has achieved 30% of their total revenue by export to be exempted from the tax payment for that year;
• Taxpayer who in the period of five consequent years invests into production in the value of minimum 20 million BAM, on the territory of the Federation of Bosnia and Herzegovina, is being exempted from the payment of corporate income tax for the period of five years beginning from the first investment year, in which minimum four million BAM must be invested. If taxpayer from the above paragraph, in the time period of five years, does not achieve the prescribed census for investment, they lose the right of tax exemption, and the unpaid corporate income tax is being determined in accordance with the provisions of the Law on the Corporate Income Tax augmented for penalty interest payable for untimely paid public revenues;
• In the Federation of B&H;, taxpayer who employs more than 50% of disabled persons and persons with special needs longer than one year is being exempted from the payment of  corporate income tax for the year in which more than 50% disabled persons and persons with special needs were employed.

Macedonia has an excellent supply of well-educated IT experts at among the lowest labor costs in the region. Some 500 IT graduates are produced annually in the Universities. A software engineer with 1 to 2 years experience costs from €500 to €600 net per month.

The telecommunications system is first class and is regarded as the best in the region.

A number of international companies such as Seavus (Sweden), Netcetera (Switzerland), M Soft (France), 6PM (UK/Malta) are successfully developing software in Macedonia for the export market and others are providing 24/7 telephone customer support for major multinational IT companies.

MACEDONIAN ICT MARKET: FASTEST GROWTH IN THE ADRIATIC REGION

As one of the fastest growing industries in Macedonia, with a growth rate of about 47% in the last 5 years, the IT and software industry is of growing importance for the overall economic development of the country. In 2011 it was already accountable for $178.98 million turnover, $56.31 m of exports and employed more than 2000 people.

Hardware is the largest and most dynamic segment of the Macedonian IT market, with a striking yearly growth of 84.7%, taking up nearly 62% of the total IT market. IT services is the second largest segment, comprising 25.6% of the total IT expenditure, whereas packaged software is in third place comprising 13% of the total market, with an 8.2% yearly growth rate.

This growth is spurred by large investments by the government and telecommunications companies in IT, continued spending in the financial sector, a decrease in the price of IT equipment, and a decrease in VAT for the equipment.

ICT Industry Profile in Economic Region Center

Lack of industry data on Kosovo ICT private sector.

The project team was not able to identify reliable source of systematic industry data on Kosovo ICT industry. On the one hand, the available analyses are based on information produced by custom surveys. Despite the relevantly high quality of such surveys, they use different questionnaires, samples and methodologies that make comparison of the results and identification of trends difficult, if possible at all. On the other hand the information collected by the National Statistical Office is not structured to support decision-making process of ICT stakeholders and is not easily available.

The lack of systematic information might be considered as significant barrier to the ICT sector development in Kosovo since there is no effective mechanism for monitoring and control.

The collection and analysis of ICT information could not be considered as sole responsibility of the public authorities. In many of the developed countries, in addition to the data provided by the National Statistical Office, ICT industrial information is collected, maintained and analysed by the ICT associations that use it to support discussions and decision making process in the sector. A case study on conducting periodic surveys is provided as Appendix 4, Case study: Bulgarian Association of Software Companies measures the pulse of the ICT sector development – Barometer.

For the needs of this analysis, the project conducted a survey in ERC (Economic Regional Center Pristina) – including 10 Companies from Pristina region and two companies from Mitrovica region. The total number of employees in the companies is 290.

Based on the data of PPRC (Public Procurement Regulatory Commission) (http://krpp.rks-gov.net/) and PPA (Public Procurement Agency) those companies successfully participated in 67% of the public tenders for supply and services of information technology in Kosovo. Taking into account that public sector dominates the ICT market in Kosovo, we can conclude that the result of the survey could relatively well measure the pulse of ICT sector trends.

ICT companies are concentrated in Region Center, where conditions for ICT development are better than the country average.

As of September 2011, 138 companies were registered in the Ministry of Trade and Industry for ICT related activities that include:

• Sale and support of computers;
• Telecommunication;
• Development of software;
• Providing consultation on information technology;
• Cabling.

The total number of companies estimated by the interviewees is 116.

Almost all of the companies are registered in Pristina.. Based on the results of the survey, around 70 % of the businesses operate mainly in Regional Economic Centre, the remaining 30% being also focused on specific regions.