USAID Creates Jobs in Serbia By Uniting Former Rivals and Helping Them Enter New Markets

USAID Creates Jobs in Serbia By Uniting Former Rivals and Helping Them Enter New Markets
Serbia makes high-quality shoe parts for designer labels
USAID
Small shoe and clothing companies stand up to larger competitors
"Only with USAID's assistance were we able to find common ground and establish the Kostana Shoe Cluster."

Serbian shoe and textile manufacturers are negotiating nearly $2.2 million worth of orders following their debuts at German and Russian trade shows, appearances made possible through the U.S. Agency for International Development’s (USAID) assistance.

These orders may seem miniscule when viewed from a global perspective. But for small and medium-sized firms from two of Serbia’s poorest regions, South Serbia and Sandzak, these and similarly sized orders are helping them expand and create new jobs.  By doing so, these manufacturers are helping to restore South Serbia and Sandzak’s reputations as regional shoe and textile manufacturing hubs, industries that were decimated during the break-up of Yugoslavia.  

Novi Pazar: Jeans = Jobs

Novi Pazar was once a major center for jeans production in the former Yugoslavia. And while it still makes Serbia’s best jeans, it suffers from one of the highest unemployment rates in Europe at approximately 40 percent.  

To support economic growth in the region, USAID began working with companies that demonstrated the potential to expand and create jobs.

After helping some of these manufacturers participate in trade fairs, it became clear that these companies would stand a better chance of competing with larger firms in the region and beyond if they worked together. At trade fairs in Moscow, for example, Russian buyers expressed interest in Novi Pazar companies, but were hesitant to make deals with small producers or to travel to Serbia to inspect their products.

In response, USAID helped establish the ASSTEX cluster of 135 small textile manufacturers in 2008, and has since supported its efforts to tap into the Russian clothing market by uniting manufacturers under a common “Jeans from Serbia” brand. After realizing successes at Russian trade fairs, ASSTEX recently opened a Moscow distribution center.

“There were earlier attempts to unify local companies, but they failed without USAID’s assistance,” says Nihat Ugljanin, owner of jeans manufacturer Join. “USAID taught us how to manage our businesses and recognize our place in the market.”

An economist by training, Ugljanin says USAID is helping local manufacturers expand their market share through better product design, marketing, branding, and logistics. Ugljanin notes that many companies had expanded too quickly when capitalism took hold. Today, with USAID’s guidance, ASSTEX companies embrace efficient manufacturing methods and carefully monitor purchases of raw materials to minimize waste.

In March, five ASSTEX companies attracted $225,000 in orders and $775,000 in prospective orders at Moscow’s Fashion Fair. Ugljanin proudly notes that ASSTEX will participate at the next Moscow fair without USAID support.

Vranje: Stepping Back into the Shoe Market

While Novi Pazar has been making strides in textiles, the people of Vranje in south Serbia have been taking small steps into the global economy with their shoes. The Kostana factory used to employ 4,000 workers. After socialism collapsed, its skilled craftsmen opened small businesses.

Today, some of Europe’s most expensive brand-name shoes are being crafted and assembled by dozens of small companies in and around Vranje. Given their diminutive size, these companies were unable to accept large orders or get the best prices for their work.

In 2011, USAID helped 12 small shoe companies unite as a cluster under the once-famous Kostana name. Working together, these former competitors now collectively take on larger orders from some of the world’s top designers including Louis Vuitton, Prada, and Moschino.

While the companies pride themselves on the piecework they do for top designers, they get no credit for their workmanship and earn only €4 to €7 for each pair of designer shoes they partially assemble. Conversely, they can earn €14 to €19 for each pair of their own brand shoes that they sell in the Balkans, Poland, Russia or Germany.

Five Kostana members returned from Germany’s largest footwear show in May with $1 million in prospective contract work for larger companies and possibly $200,000 in orders for Serbian brand shoes. The cluster, which currently makes 4,100 pairs of shoes daily, expects a 50 percent sales increase within the next three to five years, and hopes to increase its workforce from 1,060 to 3,000 employees. It is working with a regional development agency and Vranje’s vocational high school to develop a skilled employment base.

“Only with USAID’s assistance were we able to find common ground and establish the Kostana Shoe Cluster,” says Bratislav Djordjevic, whose collaboration with USAID has helped him grow his business and enabled him to employ 160 shoemakers. His Stefi Komerc brand shoes, sold in South Serbia, contribute 20 percent of his company’s revenue, which grew from $866,000 in 2009 to $1.4 million in 2011.

Djordjevic is excited about interest from German and Russian buyers at the recent Dusseldorf trade show, and says Kostana will soon host a group of German buyers who want to see the Cluster’s potential. “Thanks to USAID, the shoemakers of South Serbia no long view each other as competitors, but as partners who are improving the region’s economy and its reputation for making high-quality footwear,” he says.

The support to manufacturers from Serbia's poorest regions was realized through USAID's Economic Security project, which ended in March 2013. 

Last updated: October 29, 2013

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