1. Prospering Foreign Investments
The Reasons to Invest in Serbia & Western Balkans
1

2. List of Content

Key Country Data- Serbia
3

Executive Summary
4

Foreign Direct Investments
6

Investment Incentives
7

Favorable Tax Regime

Skilled and Competitive Workforce

Free Trade Zones in Serbia

Road Network
11

Rail Network
12

Danube- Strategy and Importance
13

Energy
14

Unique Export Potential- Preferential Trade Agreements
15

Western Balkans Overview
16

Case Study
18

3. Key Country Data- Republic of Serbia

Area: 88,361 km2

Population: 7.24 million

Official Language: Serbian

State Form: Parliamentary
Republic

Capital: Belgrade (1.6 million)

Currency: Serbian Dinar (RSD)

Biggest cities: Belgrade (1.57
mill), Novi Sad (0.3 mill), Niš
(0.25 mill)

2 autonomous provinces, 25
districts

Independency since 1878

EU negotiation since 2005

Member of
CE, IMF, OSCE, CEFTA, EFTA, U
N, etc.

GDP per cap. EUR 4,116 (2011)

Avg. (net) salary EUR 373
(2011)
3

4. Executive Summary

1/2
Due to high unemployment rate of 26%, there is large supply of any kind of labor. There
is more than 750 thousand of unemployed.

There is existence or rental labor. This practice started recently, however well-known
international recruitment agencies that offer their services in this field are present on the
market.

There is huge investment in highway construction nowadays and it is expected to
continue. At the moment 573km of highways and 1,197km of new highways. Planned
investment in construction and reconstruction of roads until 2020 is 8.7 billion.

There are 2 international cargo airports available.

Delivery time to Munich from Belgrade with truck is 1.5-2 days. Cost for delivering
goods range from 0.8 €/km up to1 €/km depending on the market- current export and
import volume with the country.

In-house customs is possible in Serbia. This practice started recently.
4

5. Executive Summary
2/2

Generally, customs procedures are easy and fast.

Duty free imports and exports to a market of more than1 billion people. Free trade
agreements with: European Union; CEFTA; EFTA; Russia, Belarus and Kazakhstan; Turkey
and United States of America (Generalized System of Preferences).

There are 11 free zones and even more free zones are planned to be open in the future.

Numerous incentives from the State for capital and labor intensive projects. National
employment service grants. Numerous tax incentives. Municipalities give additional
incentives and most of them give land for free for labor intensive projects.

State offers tailor-made incentives for strategic investors.

For labor intensive projects State can cover up to 100% of investment value as there is
no limit for grant amount.
5

6. Foreign Direct Investments

Since year 2001, Serbia has attracted over
$25
billion
of
inward
foreign
direct
Industry
Investment Value
(mill USD)
Financial intermediation
6,339
Manufacturing
4,521
Wholesale, retail and repairs
3,673
list. The leading spot on the country list is
Real estate activities
3,189
held
Transport, storage and communication
2,949
investment.

Investors from the European Union top the
by
Austria,
followed
by
the
Netherlands, Greece, Germany, Luxembourg
666
and Norway, while major investor countries
Construction
540
also
Other utility, social and personal services
185
Federation, Slovenia, France and Switzerland.

Mining and quarrying
Agriculture, forestry and fishing
176
The actual amount of U.S. investment is
Accomodation and food service activities
121
significantly higher than the official figure
Public administration and social insurance
101
due to their companies investing primarily
Electricity, gas and water
58
through European affiliates. This also holds
Professional, scientific and technical activities
41
for Belgium, Denmark, Israel, and a number
Administrative and support service activities
26
of other countries.
Education
include
Italy,
the
Russian
4
6

7. Investment Incentives
•
1/4
In the municipalities that are considered the most
Financial Incentives
underdeveloped in Serbia:
–
Min. investment: 0.5 million EUR
–
Min. new jobs created: 50
–
Incentives from 4,000 to 10,000 EUR/ every new job
created.
•
In the municipalities of special interest for regional
development:
–
Niš, Zajeĉar, Kraljevo and Novi Pazar
–
•
Up to 17% of
the total
investment
Up to 10% of
the total
investment
Minimum investment
amount
200 mill EUR
> 100 mill
EUR
50-100 mill
EUR
50 mill EUR
Minimum number of
new jobs created
1,000
Eligible projects
Amount of funding
(EUR)
For projects with investment value of over 200 million
EUR and creating 1,000 new jobs the Government will
provide up to 25% of total investment
Manufacturing sector
4th group and
devastated
regions
EUR and creating 300 new jobs the Government will
–
150
Direct investments
For projects with investment value of over 50 million
provide up to 20% of total investment
300
Financial Incentives
In all municipalities for Large-Scale Investment Projects:
–
Mid-sized
investment
projects
Up to 17% of
the total
investment
Incentives from 5,000 to 10,000 EUR or every new
job created.
Large investment projects
Up to 17% of
the total
investment
Min. new jobs created: 50
–
Investments of
special
importance
Amount of funding
(EUR)
Min. investment: 0.5 million EUR
–
Eligible projects
4,000-10,000
for each new
job created
1st, 2nd and
3rd groups
4,00010,000 for
each new job
created
Internationallymarketable
services
Strategic
projects for
tourism
The entire
territory of
Serbia
The entire
territory of
Serbia
4,000-10,000
for each new
job created
4,00010,000 for
each new
job created
Minimum investment
amount
500,000 EUR
1,000,000
EUR
500,000 EUR
5 mill EUR
Minimum number of
new jobs created
50
50
10
50

8. Investment Incentives- Favorable Tax Regime 2/4
40%
Tax Rates
35%
30%
Value Added Tax (VAT)
25%
Standard rate- 18%
Reduced rate- 8%
Social Security
Contributions
Pension and disability insurance- 11%
Health insurance- 6.15%
Unemployment insurance- 0.75%
20%
15%
Corporate tax
10%
5%
Individual
income tax
0%
For Legal Entities
Corporate Profit Tax
10%
20%
Taxes on dividends, shares in profits, royalties,
interest and capital gains
20%
20%
15%
Personal Income Tax
Czech Republic
19%
15%
Hungary
16%
16%
Poland
19%
18%
Romania
16%
16%
Serbia
10%
12%
Slovakia
19%
19%
Corporate
Income Tax
Personal
Income Tax
Bulgaria
10%
Croatia
Country
Capital gains, income from agriculture and
forestry, self-employment, capital and personal
insurance
10%
Salary tax
12%
Copyright, property, profits from gambling and
other types of income
20%
Annual Income Tax
10/15%

9. Investment Incentives- Skilled Workforce 3/4

Serbia's labor force combines exceptional working efficiency with sizable
labor supply. With a unique combination of high-quality and low costs, it is
one of the key factors in reaching a strong business performance.

Technical education is particularly strong as high school students are among
the best performers at world contests in natural sciences, while Serbian
engineers are well-known for their expertise.

In addition, Serbia boasts the highest English speaking proficiency in Eastern
Europe. Management education has also been accelerated by the introduction
of joint graduate and post-graduate courses organized by local universities
and renowned Western business schools.
9

10. Investment Incentives- Free Trade Zones 4/4
•
Fiscal benefits (exemptions from any tax burden for FDI, VAT
and specific local taxes).
•
Free of custom duties on import of goods, equipment and
raw material used in exporting production and construction
material for building of infrastructure.
•
Financial benefits (free cash flow).
•
Efficient administration (one stop shop).
•
Simple and fast customs procedures (each zone has a
Customs Administration Office).
•
Local
subsidies
for
using
free
zone
infrastructure
(Community offers low prices and service cost).
•
A set of services is available to users under preferential terms
(transportation,
loading,
reloading,
freight
services, insurance and banking services).
forwarding

11. Road Network
Route
• 40,845km length of roads
• Investment in highway construction is one of the
priorities of Serbian Government
• Highway Corridor X is expected to be finished until 2015
Length
(km)
Costs
(mill. €)
3
(E-75 Grabovnica- FYRM)
98
605
4
(E-80 Niš- Dimitrovgrad)
83
650
5
M1.1 Kragujevac- Batoĉina
25
75
6
(E-763 Beograd- Požega)
145
850
7
E-70 Beograd- Panĉevo- Vršac
92
570
8
E-761 Pojate- Preljina
110
413
9
E-761 Požega- Užice- BIH
60
480
10
E-761 BUL- Zajeĉar- Paraćin
95
670
11
E-763 Požega- MNE
110
2,000
12
M-21, M-19 Novi Sad- RumaŠabac (public road)
120
200
13
M-24 HUN- Kikinda- PanĉevoKovin (public road)
204
220
Total new construction
1,142
6,733
Rehabilitation and reconstruction of
existing road network
4,305
1,722
TOTAL INVESTMENT
5,447
8,455
• Loans from: WB, EBRD, EIB and HiPERB
(Hellenic Plan for the Economic Reconstruction
of the Balkans)
11

12. Rail Network
• Rail network needs huge investment.
• For rehabilitation of railway Corridor X investment of 730€ mill is needed.
• Priority is construction of second track on some
• Modernization, electrification and construction of second track on Corridor
X will require 2.6€ billion.
parts, reconstruction and modernization of railway
Corridor X.
• 3,809km of rail lines. Out of that 32.7% electrified.
• Total investment in railways up to 2027- expected to be more than 5€ bill
• Russian
Government
loan
of
800€
million
mainly
for
new
locomotives, reconstruction or railway infrastructure and construction of
• Speed limit of 50% of railroads is up to 60km/h due to
new railways.
bad quality of rail lines.
•
WB, EBRD, EIB loans.
Minimum Scenario
km
mill. €
Reconstruction and modernization of route BatajnicaGolubinci (project already under way)
25.3
33
Reconstruction and modernization of route Ćele kulaStaniĉenje
58.3
35.4
New double-track railroad with bridges on route GiljeĆuprija- Paraćin
8
43.4
91.6
111.8
Total
• Montenegro: Railroad Bar- Serbian border (part of Bar- Beograd)
needs
investment
in
reconstruction
from
both
Serbian
and
Montenegrin side. Very important line connecting Belgrade with port
of Bar, length of 476km. Investment in railroad would open
investment in Bar port by consortium of Serbian companies backed up
by Serbian Government. Investment around 300€ mill.
12

13. Danube- Strategy and Importance
• Length of Danube is 588km through Serbia.
• 26 cities and municipalities in Serbia having access to Danube.
• Project involves transport development, energy development, port modernization, waste water management, environment
protection, tourism, etc.
• Large investments will be needed in implementation of all segments of Danube Strategy.
• EU initiated project.
• Financing from: EU funds, IPA
funds, EIB, etc.
• Master plan involves 29 projects
of 240€ million value.
• Danube Strategy is part of Europe
2020 strategy.
13

14. Energy
•
The “South stream” gas pipeline (see the picture) with a total capacity of more
than 10 billion m3/year.
•
Electric power is generated in 8 thermal power plants with 25 power blocks
(total installed capacity of 5,171 MW), 9 hydro power plants with 50 power
generators (total installed capacity of 2,831 MW) and 3 thermal-heating
power plants comprising 6 power blocks (total installed capacity of 353 MW).
•
Electric power transmission is carried out through 400 and 220 kV voltage levels transmission lines 9,808.5 km long, which also
includes 95 high voltage transmission stations, with 182 transformers with the total installed capacity of 17,758 MVA.
•
Centralized supply in heat energy exists in 50 towns of Serbia whereby total installed heat boiler capacity is 6,587 MWt, out of
which 82% within the framework of residential heating and 18% within the framework of business heating.
•
Oil and gas production is carried out on 59 oil and gas fields, with 144 reservoirs in Serbia, and one concession in Angola
•
Exploitation reserves of crude oil have been estimated on the level of 20 Mtoe (million tons equivalent of oil).
•
Oil refining is carried out in two oil refineries: Oil refinery Panĉevo and Oil Refinery Novi Sad, with the total capacity of 7.3 million
tons of primary processing per year.
•
Gas pipeline system in Novi Sad comprises a main gas pipeline 400 km long, running from Horgoš to the Bulgarian border, with the
developed distribution network and underground gas storage in „Banatski dvor‟, with the current capacity of about 470 million
m3, and the projected capacity of about 800 million m3 of gas which is under construction.
•
Total geological coal reserves are estimated at 24.5 bill tons, out of which 68% accounts for balance and 32% for off-balance coal
reserves.
•
Total energy potential of renewable sources of energy is estimated at more than 3.38 Mtoe annually, as follows: biomass 2.40 Mtoe;
wind 0.19 Mtoe; SHP 0.40 Mtoe; solar 0.64 Mtoe and geothermal 0.20 Mtoe.
14

15. Unique Export Potential- Preferential Trade
Agreements
Market
Trade Regime
Inhabitants
European
Union
Preferential
trade regime
494,070,000
USA
Generalized
system of
preferences
302,558,000
Russia, Belarus
and Kakhstan
Free trade
agreement
168,640,000
Turkey
Free trade
agreement
75,000,000
EFTA
Free trade
agreement
13,000,000
CEFTA
Free trade
agreement
29,990,000
TOTAL Market Size
1,083,258,000
15

16. Western Balkans Overview
• Big Potential in Basic Infrastructure
Bosnia and Herzegovina: Three
• Excellent Location for Labor Intensive
entities within one country.
Business Opportunities:
Products
• Future Tourism Destination for Europe
•
Management
•
Croatia will join the EU
Wood and Forest
Mining and Metal
Processing
on the 1st of July 2013.
1/2
Serbia has a bilateral free trade agreement
with Russia, Belarus, Kazakhstan and Turkey
Business Opportunities:
• Agribusiness
• Automotive
• Energy and Environment
• Textile and Garment
Business Opportunities:
•
Shipbuilding
Kosovo is a UN-governed
•
Tourism
entity.
Business Opportunities:
South Stream Gas Pipeline
•
Mining
Existing Highway
•
Metals and Metal Products
Highway Under Construction
Macedonia: A gateway to
Planned Highway
Greece.
Ports Under Modernization
Business Opportunities:
General Statistics (2011)
Source: Bank of Austria, Countries‟ National
Banks
Population (2011)
23.5 mill.
GDP total in €
124.1
bn.
Unemployment
30%
Inflation
3.5%
•
Automotive components
The official currency of
•
Metals and Metal Products
Montenegro is euro.
Albania has the youngest
Business Opportunities:
population in the area.
•
Tourism
Business Opportunities:
•
Mining
•
Tourism
•
Wood processing
•
Infrastructure

17. Western Balkans Overview
COUNTRY LEVEL OPPORTUNITIES
ENERGY & ENVIRONMENT
Energy
2/2
SOFTWARE & DIGITIAL MEDIA
•
Excellent location for labor intensive products. Low cost of labor
•
Skillfull IT engineers coming from universities
Power plants construction and modernization needed in
•
Tax holidays availability
•
Fast growing market for ICT solutions
order to meet EU standards
•
•
•
Numerous investment incentives available for labor and capital
•
E-commerce and e- government solutions
Construction of long distance power lines interconnecting
potential
intensive projects
Western Balkans among themselves and with neighbouring
Big potential in basic infrastructure
Serbia:
countries
•
Huge potential in renewable energy solutions
•
Microsoft R&D department present in Belgrade
Energy strategies with focus on Renewable Energy Sources
Croatia will join EU in July 2013, which means possibility for utilization
•
Privatization of Telekom (telecommunications
(RES). RES is expected to tenfold in Croatia. At least 4%
of more EU funds
growth in RES is expected until 2020 in Serbia
•
•
Bosnia: forestry and mining industry has large potential
Serbia:
•
Opening up of electricity market is expected in following
•
years
•
LIFE SCIENCES
•
Bilateral free trade agreement with Russia, Belarus, Kazakhstan and
•
Environment protection
Serbia:
Turkey
Old power plants and not utilized biomass potential
•
Serbia:
company) expected
•
Privatization of Galenika (pharmaceutical
Received EU candidacy status in 2012- more EU funds utilization
Privatization of EPS (electricity company, installed capacity
producer) is expected
8,359 MW) is expected in near future
•
Environment
•
Food processing industry (Vojvodina- Northern
Serbia province)
Waste water and solid waste solutions needed
•
Significant pharmaceutical production and R&D.
Landfills construction for waste to energy solutions started
SERVICES
•
CONSTRUCTION
Residential and –non-residential
•
design and security management
•
Expected growth of residential constructions, new solutions
Logistics center development
In Croatia and Montenegro priority is
for energy efficiency needed
•
Need for innovative technologies in transport
tourism, continuous investments needed
Construction of tourist resorts
Civil engineering and infrastructure
Bad shape of infrastructure, so huge investments are
MACHINERY AND MANUFACTURING
needed. Highway and railway construction and
•
Large textile subcontracting potential
reconstruction is priority
•
•
”Kombinats” are planning to replace very old
•
Airport modernization and turning previous military airports
agricultural machinery with modern
into civil ones
•
technologies
Danube strategy regarding Croatia and especially Serbiamodernization of ports, transport development, waste water
management, tourism development is expected
Serbia: South Stream pipeline construction will start in 2013 and
expected to finish in 2015.
FORESTRY
•
Forest biomass utilization needed. Huge potential for forest biomass
Serbia:
•
Ministry strategy for forest management started
•
Plan for private forest owners organizations to get more involved
•
Food processing industry is booming, need for
machinery
Croatia: privatization of shipyards is priority and EU
requirement
Serbia: Automotive industry is large and increasing

18. Case Study- Nordic

1/5
Carlsberg (Denmark)

Action: It is one of the most successful privatizations in Serbia acquiring the majority stake in
the Ĉelarevo brewery.

Experience: More than €100 million have been invested in the modernization of production
halls, improvement of the quality of brands, expansion of the distribution network, etc.

Overview: By starting operations in Serbia, any company can take advantage of the market in a
developing mode, with great GDP growth potential, along with local people, whose skills and
competencies represent a true scarce resource.

TetraPak (Sweden)

Action: Tetra Pak group invested in a production facility in Gornji Milanovac.

Experience: TetraPak exports to EU countries and Russia. In 2009, Tetra Pak Serbia was
distinguished as a number one factory within the Tetra Pak family of 42 member companies.

Overview: Tetra Pak is happy with its staff. Well educated and committed persons are
performing well.

Other existing investments: Grundfoss (Denmark) invested in 2 production facilities, Tikkurila
(Finland) bought a Serbian company Zorka Color, etc.

Future investments: IKEA (Sweden) will invest in building a 5 retail stores.
18

19. Case Study- German

2/5
Siemens (Germany)

Action: Siemens is currently employing over 700 people in two main company premises in Belgrade and Subotica,
with bold expansion plans ready to exploit abundant highly skilled and committed workforce.

Experience: Local business partners proved to be of highest quality and their services are a valuable part of
Siemens efforts. Local work force is an irreplaceable resource behind Siemens successful business efforts in Serbia.
Strategic position of Serbia is another key factor in Siemens success story. Serbia is easily reachable from all
important business centers in Europe and has few logistic and legal obstacles for those planning to export from
Serbia.

Overview: Serbia is an ideal starting point for further expansion in the region. Resources are cheap and the local
workforce is without match in the region.

Metro Cash&Carry (Germany)

Action: Investment of close to €100 million in five distribution centers: two in Belgrade, one in Kragujevac, Novi
Sad and Nis.

Experience: Metro is especially pleased with its employees and, based on previous experience, Serbia has a large
number of qualified, highly educated people with a great potential for further improvement. OECD has awarded
METRO Cash & Carry Serbia as the largest regional greenfield investment. This information is significant to the
potential foreign investors since METRO has a reputation of a pioneer in entering new markets and it invests only
in the countries where all financial and trade regulations necessary for doing legal business exist.

Overview: in Serbia, conditions for serious investors exist and they are constantly improving and together with the
region of South East Europe, represent the main growth market in the next period.
19

20. Case Study- USA

3/5
Microsoft (USA)

Action: Microsoft Development Center Serbia (MDCS) exists since September 2005.

Experience: Serbia has an abundance of educated and talented young professionals and a developed taxation system
favorable to investors. Compared to other Microsoft Centers in the world the MDCS progress reports were always amongst
the most impressive ones, a result that came from dedicated work of the local professionals. MDCS praises their local
partners for providing top of the range services and finds them extremely professional and an immense and reliable support
to MDCS operations.

Overview: MDCS can recommend Serbia for its abundance in IT talent, tax climate and various investment incentives
provided by the Government.

Euronet (USA)

Action:n 2004 Euronet opened a Customer Support Center (CSC) in Belgrade, one out of two global centers the company
runs and takes advantage of time zone difference between USA and Europe, as well as outstanding language skills of the
local workforce.

Experience: Serbian market proved to be highly lucrative - introduction of VISA and MasterCard systems, launch of the
national DINA card system and development of an ATM network in Serbia made local Euronet branch one of the most
profitable business units in the whole group. CSC staff demonstrated not only excellent skills and professionalism, but an
exceptionally high employment loyalty - the staff retention rate is well above the average in the industry.

Overview: The company selected Serbia over other countries in the region for the following reasons: Serbia offers Europe s
lowest corporate profit tax rate, provides access to large Southeast European markets and has a large pool of a highly
skilled labor. Recommendation is to use Serbia as a hub for further expansion in the region.
20

21. Case Study- Italy

4/5
FIAT Serbia (Italy)

Action: Fiat Automobili Srbija (FAS) was established on the 29th of
September 2008 by a joint venture agreement between Fiat Group
Automobiles (67%) and the Republic of Serbia (33%). Fiat Group will
invest 940 million EUR in the Serbian Automotive Industry.

Experience: From 2010 FAS became exclusive distributer of Fiat
passenger cars program. Fiat 500L will be manufactured at the new
factory Fiat Automobiles Serbia in Kragujevac, which is the result of
three years of extensive and comprehensive work on the total
reconstruction of the 1.4 million square-meter factory.

Overview: Fiat Automobiles Serbia is today the most modern
manufacturing facility within Fiat's worldwide.
21

22. Case Study- Other

5/5
Azerbaijan: Company Azvirt is carrying out a construction of highway E 763 (from Belgrade to
South Adriatic) with the €300 million work being financed by Azerbaijan while concession
package is expected to last from 20-30 years.

India: Company Embassy Group already started a work on a 300 million-euro IT business park
in Serbia, in the city of InĊija.

The investment will take at least five years to complete and could ultimately create
25,000 jobs.

The group has chosen Serbia for its first investment in Europe to get closer to its
customers, many of whom may choose the new location in Europe for software
development, ICT-shared services and cloud computing. Its client list in Bangalore
includes: Alcatel-Lucent (ALU), International Business Machines Crop. (IBM), LG Soft
India, McAfee Inc., Microsoft Corp. (MSFT), Nokia Siemens Networks Oy, Vodafone Group
Plc (VOD), Yahoo!Inc. (YHOO), and many others.

With 170 hectares of available land and 250,000 square meters of business premises in
the project‟s final stage, the IT Park will turn into the biggest such center in
Europe, putting Serbia on a map of preferred locations to do business in the EU.
22

23. Prospering Foreign Investments
ivana.milosev@prospering-serbia.com
Mobile: +381 62 250 463