doing business in serbia 07 · serbia investment and export promotion agency 3, vlajkoviceva st....

Serbia Investment and Export Promotion Agency3, Vlajkoviceva St. 5th floor, 11000 Belgrade, Republic of Serbia

[email protected]

Doing Business inSerbia 07Doing Business inSerbia 07

Doing Business in Serbia 07


August, 2007


Doing Business in Serbia 2007Published by the Serbia Investment and Export Promotion Agency

Design by Saša ĐorđevićPhotos by Dragan Bosnić, Dragoljub Zamurović, Saša Đorđević

Printed by Standard 2


phone: + 381 11 3398 550fax: +381 11 3398 814

[email protected]

StABIlIty

MArkEt AccESS AnD Growth

EffIcIEncy

coMPEtItIvEnESS

InvEStMEnt oPPortunItIES

EASy StArt uP

fDI trAck rEcorD

contEntS | DoInG BuSInESS In SErBIA | 3

foreword ...................................................................................................... 5

Economy .........................................................................................................7

Investments ............................................................................................... 11

Geographic location ........................................................................ 13

free trade Agreements ................................................................... 15

Incentives and taxes ..........................................................................17

human factor ......................................................................................... 21

fruit Sector ................................................................................................25

vegetable Sector ................................................................................. 26

organic Production ............................................................................27

Automotive Industry ........................................................................ 28

Aviation Industry................................................................................. 29

tourism Industry ................................................................................. 30

textile Industry ...................................................................................... 31

Pharmaceutical Industry ................................................................32

It Industry ..................................................................................................33

wood and furniture Industry ................................................... 34

Energy and Mining Industry .......................................................35

financial Market .................................................................................. 36

Privatization .............................................................................................37

free Zones in Serbia ......................................................................... 38

concessions ............................................................................................. 39

company registration ..................................................................... 41

visa requirements ............................................................................. 43

land and construction ...................................................................44

Intellectual Property Protection ..............................................47

Investor legal Status ........................................................................49

foreign Direct Investment ........................................................... 51

SIEPA ..............................................................................................................53

useful contacts......................................................................................55

fDI time line

company Amount Month year

€570,000,000 November

2006

€425,000,000 September

€475,000,000 July

€1,513,000,000 July

€450,000,000 August

2005

€142,000,000 February

€152,000,000 January

€150,000,000 January

€80,000,000 April 2004


2003




€518,100,000 August

€100,000,000 July

forEworD | DoInG BuSInESS In SErBIA | 5

vesna PericDirector, SIEPA

Serbia is moving from strength to strength and as a potential investor you are now in a position to benefit from the continuing improvements in the Serbian business climate that have occurred over the last year, ensuring you

a smooth, long–term, profitable investment opportunities in Serbia.

Whether you are a foreign investor planning to establish or expand business operations in Serbia, a consultant, a researcher or a journalist requiring information on business and investment opportunities in Serbia, the Serbia Investment and Export Promotion Agency, SIEPA, a Government Agency, is capable of providing you with professional assistance, free of charge.

2006 was a record year with $4.4 billion of Foreign Direct Investment flowing into Serbia. We are particularly pleased that Norwegian Telenor privatized a local mobile telecommunications provider in a largest single deal ever and is joined by a number of world–class companies and financial institutions that have started, or expanded their operations in Serbia. In 2006, they included Mobilkom, Stada, National Bank of Greece, OTP Bank, San Paolo IMI, Japan Tobacco International, Messer, and many others.

Following on from the US company, The Ball Corporation, and the German retailer METRO Cash & Carry, being recognized as the largest Greenfield investments in South East Europe by the Organization for Economic Co–operation and Development (OECD) in 2004 and 2005, Serbia has, yet again, scooped the top spot with the Israeli real estate developer, Airport City Belgrade in 2006.

With its central location, at the crossroads of South East Europe, and its duty– free access to over a half billion consumer market, these, and many other international investors, have taken advantage of the investment opportunities in Serbia with it’s second lowest corporate tax rate in Europe and it’s very high quality of trained and linguistically skilled work force.

Last year, the European Union commenced their negotiations on Stabilisation and Association Agreement leading on from a positive assessment of Serbia’s overall progress. The European Bank for Reconstruction & Development ranked Serbia top reformer in Central and Eastern Europe for it’s implementation of structural reforms making investment in Serbia more straightforward. Serbia’s long–term credit rating has been raised again by credit rating agencies S & P and Fitch.

The Government of Serbia is continuing to update and upgrade the business climate and gives full support to international companies realizing their investment ambitions in Serbia.

We, at SIEPA, look forward to working with you whether you are interested in Greenfield, existing sites or joint venture investment opportunities.

the world Bank report �pushed Serbia up by 27 placesSerbia–the fastest �growing economy in cEE according to EBrDcontinued negotiations �with the world trade organizationfinalizing Eu harmonized �legislative systemBelgrade received the �city of the future in Southern Europe award from the financial times

St

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yGovernment building–the national InvestmentPlan projects €1.7 billion investments intoeconomy and infrastructure

rapidly Expanding Economy

Take advantage of being part of the fastest growing economy in South East Europe

Strong results Over the past five years of extensive political and economic reforms, Serbia has developed into a stable democratic country with a fast growing market economy. Western–oriented, democratic political parties have a strong majority among citizens and the Government is shaping an attractive environment for business activities, while legislative activities are intensely bringing the legal framework in line with the EU regulations. As a member of the International Monetary Fund, Serbia exercises a sound and consistent economic policy resulting in a strong economic growth, state budget surplus, and rapid export expansion. The country’s progress is fully supported by leading international development institutions, such as the World Bank and the European Bank for Reconstruction and Development, while the processes of the European Union and the World Trade Organization accession are under way.

Investor Privileges Foreign companies in Serbia are guaranteed equal legal treatment as local ones. They are allowed to invest in any industry and freely transfer all financial and other assets, including profits and dividends. A foreign investor can buy real estate under reciprocity condition, and lease building land for up to 99 years. Investment projects in Serbia are insured by all major national and international investment and export insurance agencies. The protection of foreign capital is further safeguarded by Bilateral Investment Treaties signed between Serbia and 32 other countries.

Major Developments Throughout 2006, the ongoing economic and legislative reforms were repeatedly commended by various international institutions:

The World Bank improved the country’s position in the global business ��climate rankings;The European Bank for Reconstruction and Development (EBRD) named ��Serbia a leader in economic growth in South East Europe;The International Monetary Fund concluded a 3-year financial arrangement ��with Serbia; The Financial Times FDI Magazine selected Belgrade as the City of the ��Future in Southern Europe.

Approaching the European union

Affirmative reviews In April 2005, Serbia and Montenegro received a positive assessment of the country’s Feasibility Study for concluding the Stabilization and Association Agreement with the EU. The report acclaimed recent reforms particularly in the field of macroeconomic stability, financial sector improvements, legislative activities, and foreign relations.

Stabilization and Association Agreement The agreement is expected to be signed by the end of 2006, while preparations for full EU membership are planned to be over by 2012.

Bilateral investment treatiescountry year

Austria 2002

Belgium and Luxembourg 2004

Finland 2005

France 1975

Greece 1998

Netherlands 2002

Croatia 2001

Italy 2001

Israel 2005

Canada 1980

Cyprus 2005

Lithuania 2005

Hungary 2004

Germany 1990

USA 2001

Slovakia 2005

Slovenia 2004

Spain 2004

Sweden 1979

Turkey 2001

UK 2004

Source: Official Gazette of the Republic of Serbia

EconoMy | DoInG BuSInESS In SErBIA | 7

“I would encour-age foreign investors to open eyes on Serbia, to evaluate the spe-

cific opportunities, and to make their decision. It definitely matters to be in a pole position when the real competition begins. Our local subsidiary history is relatively short but the achievements are already impressive. Strong growth rates are definitely significant but the overall impact on the market is even more important for the long term approach strategy.”Mr. Silviu hotaranGeneral Manager, Microsoft SEE …on reasons to invest in Serbia

reform Acknowledgments

wB Acknowledgment The World Bank ranked Serbia 68th up from 95th in the previous year, ahead of all the former Yugoslavia countries, except for the EU member Slovenia. The ‘Doing Business in 2007’ report revealed that Serbia introduced an electronic database in its customs system and cut the time for importing and exporting goods from 44 to 12 days, and from 32 to 11 days, respectively. Furthermore, the country introduced mediation inorder to avoid lengthy trials and established an agency dealing withissuing licenses to bankruptcy managers. For detailed information, log on to www.doingbusiness.org.

EBrD recognition In its latest report, the European Bank for Reconstruction and Development acknowledged Serbia’s highest economic growth in SEE adding that with €4.4 billion of foreign investment in 2006 Serbia was second only to Romania. Full data can be downloaded from www.ebrd.org/pubs/index.htm.

IMf’s Positive Decision Having met the agreed obligations in 2005, the Serbian Government formally concluded a $937 million financial arrangement with the International Monetary Fund started in 2002. The IMF’s positive decision confirms that the country implemented essential reforms and acknowledges Serbia’s sound economic policy. The latest reports on Serbia are available at www.imf.org/external/country/SCG/index.htm.

“…Serbia has made significant progress in recent years.“

IMf Executive Board,October 2006

8 | DoInG BuSInESS In SErBIA | EconoMy

Source: The EBRD Transition Report 2006

Scores range from 1 (pure central planning) to 4+ (fully functioning market economy)

Progress in structural reforms (in grades)

Bulgaria

Bosnia & Herz.

Azerbaijan

Russia

Estonia

Romania

Slovak Rep.

Tajikistan

Uzbekistan

Czech Republic

Georgija

Hungary

Lithuania

Poland

Moldova

Ukraine

Armenia

Serbia

1-1 2 3 41 2

Source: The EBRD Transition Report 2006

Progress in Transition (Number of Upgrades)

Bosnia & Herzegovina

Azerbaijan

Slovakia

Tajikistan

Uzbekistan

Lithuania

Albania

Croatia

Montenegro

Russia

Bulgaria

Romania

Ukraine

Kazakhstan

Macedonia

Serbia

Improved credit rating

S&P rating Improved For the second time in less than a year, the international credit rating agency Standard & Poor’s boosted Serbia’s long–term sovereign credit rating to BB– from B+, while affirming itsB short–term rating. In addition, the outlook for both ratings was revised from stable to positive. As a result, the improved credit rating enables further gradual reductions in interest rates in Serbia, while diminishing the risk of investing in the country.

fitch rating Improved The same credit rating was assigned last year by another international rating agency Fitch, with the following reasons standing behind its decision:

Prospects for quicker accession to the European Union;��Improved relations with the international community;��A significant improvement in public finances; ��A positive outlook for continued structural reforms; ��An increase in GDP with a good solvency position of the country.��

Strong Economic Performance

Strong GDP Growth For the third consecutive year Serbia was one of the Europe’s fastest growing economies with GDP growth rate estimated at 5.8%. GDP per capita reached $4,199, while the average net monthly salary amounted to €258, partly due to the local currency appreciation against euro. Major growth drivers were telecommunications, construction, and transport with the respective rates of 38.7%, 11.8%, and 11.4%, while industrial production recorded a 4.4% upswing.

Inflation control As a result of a restrictive monetary policy, 2006 inflation returned to single digits. On a y-o-y basis, it stood at 6.6%.

Export Surge Total exports maintained an upward trend reaching $8.593 billion by the end of 2006 or a 37.2% rise against the previous year. Exceptional export performance was due to the combination of the privatization and restructuring process in a number of industries, ratified free trade agreements with the countries in the region, upsurge in the world prices of a number of goods, and duty-free access to the EU market for food and textile ready-made products. The export/import ratio jumped from 53.0% to 57.7% over the same period, while total imports of $14.885 billion gained 26.0%.

Positive Public Spending Unlike other transition countries, in Serbia public spending was completely covered in 2006. In spite of relatively high public expenditures, the state budget saw 1.3% surplus, providing room for an unprecedented €1.7 billion National Investment Plan.

currency Appreciation A massive influx of foreign direct investment in the second half of the year resulted in sharp local currency appreciation. In a period December 2006-December 2005, nominal RSD/EUR and RSD/USD appreciation amounted to 8.2% and 20.4% respectively.

“Serbia is a leader in economic growth in 2006 in Southeast Europe.“Mr. Peter Sanfey, Senior EconomistThe European Bank for Reconstruction and Development

EconoMy | DoInG BuSInESS In SErBIA | 9

GDP Growth Rate

2006 5.8%

2005 6.2%

2004 8.4%

2003 2.5%

2002 4.2%

2001 4.8%

GDP per Capita in $

2001 1,574

2002 2,112

2003 2,720

2004 3,285

2005 3,525

2006 4,199

rising foreign Exchange reserves In the course of 2006, foreign exchange reserves continued to rise reaching $11.88 billion at the end of the year. Together with foreign exchange reserves of authorized banks, the country’s overall foreign exchange reserves came to $12.64 billion. With the current reserves covering 12-month imports of goods, the country’s external liquidity and exchange rate stability are further safeguarded.

10 | DoInG BuSInESS In SErBIA | EconoMy

National Bank of Serbiawww.nbs.yu

Trade in Goods (USD million)

2001

1,721

4,261

2002

2,075

5,614

2003

2,755

7,473

2004

3,523

10,753

2005 2006

6,427

4,482

13,172

10,461

Imports

Exports

Source: Ministry of Finance

20032002 2004 2005 2006

1.9%

-3.1%

-1.1%

0.9%1.3%

State Budget Balance (% of GDP)

Source: National Bank of Serbia

2006 6.6%

2005 17.7%

2004 13.7%

2002 14.8%

2003 7.8%

2001 40.1%

2001 111.9%

Ball Packaging – one of the largest Greenfield investments in Serbia to date, now successfully exportingto 12 European countries

recognizing the Investment Boom

Serbia is hosting the biggest Greenfield investors in SEE

consecutive 3–year winners Following the 2004 OECD award for Investor of the Year in South East Europe presented to Ball Packaging Europe (USA), METRO Cash & Carry (Germany) was the winner in 2005 and in 2006 Airport City Belgrade (Israel) won the Award.

Massive fDI Out of the total FDI influx over the past six years, last year accounted for almost 50%. With the net inflow of $4.387 billion, Serbia attracted largest foreign investment in South East Europe, next only to Romania. Furthermore, inward investment were even higher–$5.5 billion, while the difference was partly due to international investment of Serbian companies.

Abundant Marketplace The German wholesale chain, Metro Cash&Carry, is one of several other international trading companies that have already taken advantage of the rapid local market expansion. Serbia’s strong GDP growth in recent years has fuelled a double-digit rise in household consumption and retail trade, while the 7.5 million person market is the second largest in South East Europe.

Market of the Month The importance of the Serbian market has been recognized not only by the European investors, but also by the American Ministry of Trade by proclaiming it the Market of the Month. Today, the preferences of the local consumer are products originating from the United States and other developing countries. The unsaturated market is one of the few that produces a double-digit rise in household consumption and retail trade.

Belgrade – city of the future The capital has been awarded as the City of the Future for Southern Europe 2005. It was chosen among the most developed cities in the region based on the economic potential, cost effectiveness, human resources, IT and telecommunications, transport, quality of life and FDI promotion. The first class office space availability is on the rise and every year there is a 75,000 square meters addition to the existing luxurious premises. The city, famous for its riverboat cafes, restaurants and clubs, has also been recognized as one of the top 20 hotspots worldwide in 2005 by Lonely Planet. Belgrade with its unique geographical location and modern urban plan is rightfully striving for the throne of the most alluring FDI location in Europe.

For the third consecutive year, Serbia was awarded by the OECD as the largest Greenfield investment location in South East Europe

InvEStMEntS | DoInG BuSInESS In SErBIA | 11

Annual Inflation

Year 2002 2003 2004 2005 2006

Inflation rate, end of year 14.8% 7.8% 13.7% 17.7% 6.6%

Inflation rate, year average 19.5% 11.7% 10.1% 16.5% 12.7%


Average Salaries

Average net monthly salary, EUR 152 176 192 209 258

Average net monthly salary, real growth 29.9% 13.6% 10.1% 5.7% 11.41%

Source: Statistical Office of the Republic of Serbia

free trade Agreement �with russia – market of 150 million peopleA member of the South �East Europe cEftA free trade area comprising 25 million consumers European corridors �10 and 7 pass through Serbiatrade preferential status �with the Eu and uSAStrong GDP and �purchasing power growth

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logistics hub of the European union

Being at the doorstep of the EU, Serbia is the place to be for all those wanting to start a business in SEE

Strategic neighbor As a logistics base, Serbia is a perfect place for a company to locate its operations if wanting to closely and most efficiently serve its EU, SEE or Middle Eastern customers. It borders the EU offering a possibility of production outside the European Union. At the same time, businesses can enjoy all the benefits of working outside the EU, while being able to provide services and transport goods in projected and flexible time frames.

fast and cost Effective By using highly developed road connections a shipment from Serbia can reach even remotest parts of Europe, in less than 72 hours. Products can also move rapidly cross–country: the road network of the Republic of Serbia is 40,845 km (25,380 miles) long, out of which 415.7 km (257 miles) of highways with toll collection, 246.5 km (153 miles) of semi–highways with toll collection, 5,525 km (3,433 miles) of arterial roads, 11,540 km (7,171 miles) of regional roads, and 23,780 km (14,776 miles) of local roads.

river Efficiency Serbia offers an outstanding potential when river transportation is concerned. A highly cost effective way of transport can be pursued on three rivers giving a total of 959 km of safe navigable routes. 588 km of the international River Danube, represents the most reliable navigable route that can be used for transportation throughout the year. In addition, artificial canals Rhine–Main–Danube, an international canal that allows barge traffic between the North Sea and the Black Sea, and Danube–Tisa–Danube create a network of routes providing access to all Danube basin countries. The Sava River links the following countries in the region: Slovenia, Croatia, Bosnia & Herzegovina and Serbia, and it is in the process of gaining the status of International Navigable Route.

Air Express Air transportation is the fastest and the most convenient way of transportation. Serbia can be reached by air using one of two available international airports in Serbia – Belgrade Airport and Nis International Airport. Also, there is a Civil Airport Bor and 16 sports airports. Transportation by air to and from Belgrade is possible to almost every destination in the world, either directly or by layover.

upgraded railways Transport of goods via railroad is very cost effective and through Pan European Corridors X and VII, Serbia offers an access to all European destinations. As in many countries, the railway system in Serbia suffered due to lack of investments in previous years, but serious efforts have been made by the Government of Serbia in order to restructure and modernize railway network in Serbia. Serbian Government has signed a Declaration on Reinforcement of Railway Cooperation with the European Commission and adopted the plan for construction of the railway network in a period from 2007 to 2011. In addition, Serbian Railways plan to invest €172.5 million for the rehabilitation of railway infrastructure and procurement of new locomotives and freight cars. Based on a loan contract with the European Investment Bank, €80 million will be provided for modernization of the route on the Corridor 10.

Duration of flight city

up to one hour

BucharestIstanbulLjubljanaRomeViennaZurichSarajevo

up to two hours

BerlinDüsseldorfFrankfurtKievMilanMunichParisPrague

up to three hours

LondonMoscowStockholmAmsterdam

More than three hours New YorkToronto

GEoGrAPhIc locAtIon | DoInG BuSInESS In SErBIA | 13

“There are huge potentialities in Serbia as it is located on major European transpor-

tation corridors, it represents one of the largest fast growing markets in South East Europe, while regula-tory and business conditions are improving everyday. Foreign inves-tors have huge support from all relevant Ministries, on equal basis as Serbian entities.”Mr. kamil BeffaCEO, Lafarge BFC …on Serbia s regulatory system

14 | DoInG BuSInESS In SErBIA | GEoGrAPhIc locAtIon

Bucharest641 km

Kiev1302 km

Warsaw1067 km

Berlin1255 km

Hamburg1547 km

Copenhagen1659 km

Oslo2109 km

Stockholm2154 km

Prague907 km

Stuttgart1155 km

Frankfurt1282 km

Munich930 km

Paris1766 km

London1982 km

Dublin2435 km

Amsterdam1721 km

Brussels1672 km

Minsk1658 km

Riga1768 km

Moscow2218 km

Helsinki2083 km

Tallinn2075 km

Vilnius1505 km

So�a403 km

Belgrade

Sarajevo291 km

Zagreb390 km

Salzburg797 km

Graz575 km

Vienna612km

Bratislava578 km

Rome1289 km

Milan1009 km

Zürich1175 km

Marseille1518 km

Barcelona1956 kmMadrid

2566 kmLisabon3142 km

Budapest384 km

Ljubljana520 km

Istanbul980 km

Skopje423 km

Thessaloniki630 km

Igoumenitsa924 km

Tirana612 km

Athens1132 km

EU Countries

Non EU Countries

CEFTA

10th Pan–European Corridor

7th Pan–European Corridor

full Access to the European Market

Take advantage of duty-free access to all major markets

regional Strengths South East Europe is the region with one of the highest growth rates in Europe, and among the fastest growing regions globally. Regional free trade agreement (CEFTA) integrates the countries of the South East Europe, thus creating a possibility for companies to place their goods customs free to a market of close to 60 million people. Furthermore, Serbia is the only country outside the CIS that has a free trade agreement with Russia, providing access to another market of 150 million people. At the same time, preferential status in trade with EU and USA is an additional incentive for investors, as they can freely export to these markets.

central Europe without Borders In December 2006, Serbia has signed the CEFTA (Central European Free Trade Area) Agreement, which will substitute the existing bilateral agreements between the following countries: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, FYR Macedonia, Moldova, Montenegro, Romania, Serbia, and the United Nations Interim Administration Mission in Kosovo. The Agreement stipulates that no already existing import customs shall be increased nor the new ones will be imposed other than those prescribed by the existing bilateral Free Trade Agreements. Also, it is envisaged to come into force in September 2007.

russian Market coming closer A Free Trade Agreement with Russia signed in August 2000 makes Serbia particularly attractive to foreign investors and manufacturers. The Agreement stipulates that the importing country regulates the rules of origin in accordance with the WTO principles. Meaning, goods produced in Serbia with prevailing value added in Serbia are considered of Serbian origin, therefore free of customs when entering the Russian market. In addition, Serbia is the only country in the Balkans and SEE that possesses the free of customs trade with Russia.

Eu Exceptional trade Measures European Union has allowed Serbia exceptional trade measures enabling export of all products originating from Serbia without customs and other fees, with exception of wine and baby beef. In addition, the EU Agreement abolished customs duties and quantitative limitations for import of Serbian textile products and guarantees to maintain the same policies in the future (based on the EU Autonomous Trade Measures). Using this strategy the Serbian export of mentioned products is entirely free. In reciprocity, the Republic of Serbia obliges itself to gradually, until 2008, liberalize customs tariffs for import of EU textile products.

uSA trade Benefits Currently trade benefits provide preferential duty-free entry for more than 4,650 products including most finished and semi-finished goods and selected agricultural and primary industrial products. Certain sensitive goods are not eligible for duty-free entry including most textile products, leather goods and footwear. The list of eligible goods is reviewed and adjusted twice per year with input from U.S. industries.

wto Almost there Serbia is not a member of the World Trade Organization but is expected to join WTO by end of 2008.

Outside the Commonwealth of Independent States, Serbia is the only country having a Free Trade Agreement with Russia

U.S. grants duty-free entry to the majority of export products from Serbia

frEE trADE AGrEEMEntS | DoInG BuSInESS In SErBIA | 15

SIEPAwww.siepa.sr.gov.yu

State grants up to �€10,000 for new employmentEurope’s second lowest �corporate tax of 10%A 10-year corporate �profit tax holiday for large investmentstax credits for investing �in fixed assets of up to 80% of the asset’s valuenumerous government �subsidies, tax exemptions, and other incentives for creating new jobs

Ef

fIc

IEn

cy

the national Bank building–through economic measures set for 2006 a record amount of foreign currency reserves was achieved

Ideal Setting for Growing Profits

Achieving strong performance with highly competitive investment incentives and corporate taxes

Investor Support By investing in Serbia, businesses can take advantage of a wide array of investment incentives.

financial Incentives

State Grants Based on the Serbian Government Decree, financial incentives are offered for Greenfield and Brownfield projects. Eligible companies are those involved in manufacturing activities, internationally marketable services sector, and research and development excluding trade, tourism, hospitality, and agriculture.

Program criteria State funds are awarded to investment projects which are evaluated and scored based on the following criteria:

participation of domestic suppliers in the final product and the investment ��effect on local companies,investment’s sustainability and viability,��the effect related to R&D,��the effect on human resources,��the environmental impact,��international turnover of services for investment in this area,��the effect on the development of the local community, and��municipality support related to the deduction of local fees.��

Pay-out Scheme Applications are to be submitted to the Serbia Investment and Export Promotion Agency (SIEPA). All necessary documentation is available at the Agency’s web-site www.siepa.sr.gov.yu. Upon assesment of investment projects, the funds for selected projects are awarded in accordance with the number of points, and paid out in four increments throughout the project’s lifetime:

1st increment - after concluding the contract for sale or lease of land;2nd increment - after obtaining the construction approval;3rd increment - after obtaining the right-to-use permit;4th increment - after achieving full employment envisaged by the

investment project.

tax Incentives

tax holiday Companies are exempt from corporate profit tax for a period of 10 years, starting from the first year in which they report taxable profit if:

They invest in fixed assets an amount exceeding approximately €7.5 million, and��During the investment period they employ at least 100 additional employees.��

tax credits The amount of tax due can be reduced by 20% of the amount invested in fixed assets for the respective tax period. This reduction cannot exceed 50% of the total tax liability of a current year. If not used entirely in the course of one year, this tax credit can be carried forward for a maximum period of 10 years.

IncEntIvES AnD tAXES | DoInG BuSInESS In SErBIA | 17

“Our message to potential investors is that Serbia is a very relevant location for foreign investment.

There are huge potentials in Serbia as it is located on major European transportation corridors. It represents one of the largest and fastest grow-ing markets in South East Europe, while regulatory and business conditions are improving every day. Foreign investors have huge support from all relevant Ministries, on an equal basis as Serbian entities.”Mr. kamil BeffaCEO, Lafarge BFC

Summary of financial support schemes and tax relief forms.

financialIncentives

Grants from €2,000 up to €10,000 per new job created

Numerous support schemes offered by the National Employment Service

taxIncentives

A 10-year corporate profit tax holiday for large investments

Corporate profit tax credits up to 80% of the fixed assets investment

Tax Reduction for New Employment

A 5-year corporate profit tax holiday for concessions

Carrying forward of losses over up to 10 years

Salary tax and social insurance charges exemptions for employees under 30 and over 45 years

Annual income tax deductions up to 50% of the taxable income

other Incentives

Accelerated depreciation of fixed assets

Customs-free imports of equipment based on foreign investment

Sector Specific tax credits A number of sectors (agriculture, fishing, production of textile yarn and fabrics, garments, leather, base metals, standard metal products, machines, office machines, electrical machines, radio, TV and communication equipment, medical instruments, motor vehicles, recycling, and video production) are entitled to receive a tax credit totaling 80% of investment made in fixed assets. The unused part of any such investment can be carried forward for up to 10 years.

Enhancing SME Sector In case of a small company, a tax credit is also granted for fixed assets amounting to 40% of the investment made in the current year. The credit may not exceed 70% of the tax due. A foreign tax credit granted to a company (based on corporate tax paid abroad by its nonresident affiliate) can be carried forward for 10 years.

Incentives for Employing new workers A two-year tax reduction amounting to 100% of gross salaries and related employee contributions is available for the employment of new workers, providing that their number is not reduced during this period.

carrying forward of losses The tax loss stated in the tax return can be carried forward and offset against future profits over a period up to 10 years.

Accelerated Depreciation The taxpayer has the right to accelerated depreciation of fixed assets at rates up to 25% above the prescribed ones. This relief is provided for fixed assets that are used for ecological purposes but also scientific research, education and staff training, and computer hardware.

tax Exemptions for concessions A 5–year tax holiday is granted for concession–related investments, from the day the concession investment has been completed. No tax is due if income is derived before the completion of the concession investment.

Salary tax Exemptions An employer hiring new workers for an indefinite period is exempt from paying salary tax for newly employed workers them over periods of 3, 2 and 1 year. Exemptions for periods of 3 and 2 years depend on the category of workers hired, while the one year period tax exemption is applicable to all persons, regardless of age or any other criteria.

Social Insurance charges Exemptions The employer is exempt from paying social insurance contributions over the periods of 3 and 2 years depending on the category of workers hired.

Imports of Equipment Customs duties are not paid in the following import cases:Equipment, other fixed assets and building material based on foreign investment;��Goods not manufactured in Serbia and used as a replacement for equipment ��destroyed by a natural disaster, scientific research, education, health care, and immediate environmental protection.

tax System

Attractive tax rates Serbia’s tax regime is highly conducive to doing business. Corporate profit tax is the second lowest in Europe, while VAT, salary tax, and social insurance contributions are among the most competitive ones in Central and Eastern Europe.

18 | DoInG BuSInESS In SErBIA | IncEntIvES AnD tAXES

Principal tax rates in the country

vAt Standard rate – 18%Lower rate – 8%

corporate Profit tax Flat rate – 10%

withholding tax

20% (for dividends, shares in profits, royalties, interest income, capital gains, lease payments for real estate and other assets)

Personal Income tax Salaries – 12%Other income – 20%

Annual Income tax10/15% (for annual income below or above 8 average annual salaries)

Social Insurance contributions

Pension and disabilityinsurance – 11%Health insurance – 6.15%Unemployment insurance – 0.75%

Property taxProgressive rates ranging between 0.4% to 3% plus a fixed amount

Salary tax ratescountry tax rate

Serbia 12%

Bulgaria 12%-24%

Croatia 15%-45%

Romania 16%

Slovakia 19%

Source: PricewaterhouseCoopers

Social Security contributions rates

countrycontributions rate

Employee Employer totalSerbia 17.9 17.9 35.8

Poland 18.71 17.23-20.12 35.94-38.83

Bulgaria 12.43 23.98-24.68 36.41-37.11

Croatia 20.0 17.2 37.2

Slovenia 22.1 16.1 38.2

Hungary 13.5 33.5 47

Czech Rep. 12.5 35.0 47.5

Slovakia 13.4 34.4 47.8


Social Security contributions Exemptions

3 years

Apprentices aged under 30 who have been declared as unemployed by the National Employment Service

Disabled persons

2 years

Persons aged under 30 who have been declared as unemployed by the National Employment Service for no less than 3 monthsPersons aged 50 or older who have been declared as unemployed by the National Employment Service for noless than 6 months and received compensation for unemploymentEmployees aged between 45 and 50 (an 80% exemption)

vAt highly competitive rates The value added tax rates are as follows: The standard VAT rate–18% (for most taxable supplies);��The lower VAT rate–8% (for basic food items, daily newspapers, utilities etc.).��

In addition to these tax rates, there is a 0% tax rate with the right of deduction of the input VAT, which applies to export of goods, transport and other services in direct relation with export, international air transport, etc. A 0% tax rate without the right of deduction or the input VAT applies to trading in shares and other securities, insurance and reinsurance, and the lease of apartments, business premises, etc.

Exceptional corporate Profit tax rate Corporate profit tax is paid at the uniform rate of 10%. The tax base is the taxable profit shown in the tax balance sheet. Capital gains are recognized for the purpose of corporate income tax assessment. Capital gains are generated by the sale or transfer of real estate, rights related to industrial property, as well as shares, stocks, securities and certain bonds. In addition, the withholding tax is calculated and paid at the rate of 20% on various forms of income (dividends, shares in profits, royalties, interest income, capital gains, lease payments for real estate and other assets) by a non–resident.

Personal Income tax The personal income tax rate is 12% for salaries, while other personal income is predominantly taxed at the rate of 20%. Personal income tax is payable by individuals on different sources of income generated throughout the calendar year. In case of personal income tax on salaries, the person taxed is the employee, but the employer is responsible for calculating and paying personal income tax on behalf of his employees. The taxable base is the gross salary, which includes the net salary and social security contributions.

Annual Income tax For non-Serbian citizens, the annual income is taxed if exceeding the amount of 5 times the average annual salary in Serbia. The tax rate is 10% for the annual income below the amount of 8 times average annual salary in Serbia, and 15% for the annual income above the amount of 8 times average annual salary in Serbia. The taxable income is further reduced by 40% of an average annual salary for the taxpayer and by 15% of an average annual salary for each dependent member of the family. The total amount of deductions cannot exceed 50% of the taxable income.

Property tax The rate of the property tax depends whether the taxpayer maintains business accounts. For taxpayers maintaining business accounts, the rate is 0.40%. For taxpayers who do not maintain business accounts, the rate is progressive and depends on the tax base. Legally, the property tax applies to immovable property where an individual has rights of ownership, usufruct, residence, utilization, a long term lease holding (for a period longer than 1 year), and utilization of city building land with an area of more than 10 acres. In this case, immovable properties are considered to be residential and commercial buildings, office space, garages, buildings, and recreational space.

Social Insurance contributions Rates for mandatory social security contributions are:

11% for pension and disability insurance,��6.15% for health insurance, and��0.75% for unemployment insurance.��

Social security contributions are paid by both the employer and the employee. The base for social security calculation contributions is the gross salary. The minimum base for contributions is 40% of the average monthly salary in Serbia, while the maximum base is 5 times the average monthly salary.

Double taxation treatiescountry In effect as of

Belgium 1981

China 1997

Croatia 2004

Cyprus 1986

Czech Republic 2005

Finland 1987

France 1975

Germany 1988

Great Britain 1982

Hungary 2001

Italy 1983

Netherlands 1982

Norway 1985

Korea 2001

Russia 1995

Slovakia 2001

Slovenia 2003

Sweden 1981

Switzerland 2005


IncEntIvES AnD tAXES | DoInG BuSInESS In SErBIA | 19

Corporate Pro�t Tax Rate


Serbia 10%

Bulgaria 10%

Romania 16%

Hungary 16%

Slovakia 19%

Poland 19%

Croatia 20%

Czech Republic 24%

financial Grants overview

Eligible Sectors

Manufacturing Activities

Internationally Marketable

ServicesSector

R&D

Available funds per every new employee

€2,000 -€5,000

€2,000 -€10,000

€5,000 -€10,000

the Minimum InvestmentAmount

€1 mn - €3 mn depending

on the unemployment

rate in the municipality

where the investment is

made

€0.5 mn €0.25 mn

the Minimum number of new Jobs created

50 10 10

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Strong labor �force–highly qualified, multilingual, and It skilledEmployee’s rights �harmonized with Eu standardsoverhead costs among �the most favorable in the regionA sharp annual increase �in university-level population

nikola tesla (1856–1943)world-renowned Serbian inventor, physicist, mechanical and electrical engineer, the greatest achievements in areas of rotating magnetic field, the complete system of production and distribution of electrical energy and post-mortem recognized as the inventor of radio.

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A fundamental Difference

With a unique combination of high quality and low cost skill set, labor plays a vital role in business performance enhancement

labor Quality Labor productivity in Serbia has been on a steady rise in recent years. The growth was particularly impressive in 2006 with an increase in industrial productivity of 13.5%. There is a strong relation between foreign investment and labor performance–industries with largest FDI inflow, such as tobacco, food and beverages, and chemicals were among the leaders in productivity improvement.

Modern Education Since 2001, universities in Serbia have produced around 15,000 graduates, 1,000 Masters of Science, and almost 400 PhDs annually. Out of the total number of graduates, technical universities account for approximately 33%. Leading institutions in this field, e.g. School of Electrical Engineering or School of Mechanical Engineering in Belgrade, are recognized internationally for their expertise. High-quality technical education is largely based on elementary and high schools offering more advanced curriculum in technical sciences than is the case in most other countries.

Abundant Supply The labor market in Serbia has become truly vibrant as an increasing number of international investors have relocated their businesses to the country. As part of the employment support strategy, the National Employment Service provides an attractive incentive package for potential employers. The available forms of financial assistance range from subsidies for new employment in underdeveloped regions and for certain population categories to sharing retraining costs. In addition, head-hunting agencies cover all major cities in Serbia offering a full range of consulting services including executive search, staff training, and salary surveys.

competitive labor costs Average salaries in Serbia are low enough to ensure cost-effective production. Total costs for employers stand at merely 40% of the level in Eastern European EU countries. Currently, salary tax and social insurance contributions are already among the lowest in Central and Eastern Europe. Additional tax cuts, introduced in 2006, reduced total labor costs for employers from 73% to 63% of the net salary.

Salaries and Salary compensations The minimum salary has to be at the statutory minimum wage determined by mutual consent of the Serbian government, labor unions and the association of employers currently standing at €0.53 per hour. In addition, the employee has the right to receive additional percentage of the salary based on the overtime, public holidays, night work, and work in shifts. Also, salary includes compensations during sick leave.

huMAn fActor | DoInG BuSInESS In SErBIA | 21

Ministry of Laborwww.minrzs.sr.gov.yu

“There are a lot of opportunities to exploit, especially for sourcing quality row materials and

entering new markets. Also, Serbia has high potential people resourc-es, coming from quality education and current increase of repatria-tion. All of this, together with highly developed consumer habits gives me a confidence that this market could be one of the most potential markets in the region.”Mr. Stefanos vafidisGeneral Manager, Coca-Cola HBC Serbia …on labor quality in Serbia

Graduates, Masters of Science, and PhDs

year 2001 2002 2003 2004 2005

PhDs 389 303 359 394 468

Masters of Science 965 835 1,101 978 1,154

Graduates 11,879 12,099 13,224 14,968 19,678Source: Statistical Office of the Republic of Serbia

Total Monthly Labor Costs in 2005 (EUR)

Source: EUROSTAT, Croatian Central Bureau for Statistics,Statistical O�ce of the Republic of Serbia

Serbia 363

Hungary 944

Slovakia 700

Poland 818

Croatia 844

Czech Republic 954

flexible working hours Working hours in Serbia are flexible in order to provide maximum support to companies and small businesses. Statutory working hours in Serbia are 40 hours per week, whilst time over the statutory hours is considered overtime and may amount up to 4 hours per day or 8 hours per week.

leave and Absence Annual leave can be used after a minimum of 6 months from the employment contract starting date and totals a minimum of 18 days per year. Maternity leave lasts up to 3 months starting from the date of delivery. Upon the expiry of the maternity leave, the mother or father of the child may use a paid leave for infant care for a total of 365 days which includes maternity leave. The paid leave is financed by the State Health Insurance Fund together with the employer.

termination of Employment Employment may be terminated based on the employee’s or the employer’s initiative, and the expiration of the contract.

22 | DoInG BuSInESS In SErBIA | huMAn fActor

“We have built one of the most technologically advanced facilities

of it’s type in our industry sector, and we established in the very early

days a very rigorous recruitment process. We have found plenty

of candidates available with the necessary educational background,

with the necessary personal development to fulfill our needs.”

Mr. Anthony Barnett, Plant ManagerBall Packaging Europe

The employee is obliged to give a 15 days advance notice in writing to the employer, while the employer has to give a one month notice to the employee. In addition, the statutory retirement age for men is 63 years and for women is 58 years of age.

layoff regulations Layoffs can be individual and collective. An individual can be dismissed for just cause related to the employee’s work ability, qualifications, behavior and/or employer’s requirements. If the employment contract has been terminated due to unsatisfactory performance or lack of required qualifications and ability, an employee is entitled to a severance pay. Also, a collective layoff is at effect if the employer is dismissing at least 10% of a minimum of 50 employees within one calendar year. The employer is obliged to present a ‘preservation plan’ to the labor authorities and labor union representatives.

huMAn fActor | DoInG BuSInESS In SErBIA | 23

uS Steel – today employs 793 engineersuS Steel – today employs 793 engineers

Industrial Productivity Growth Rate

2002 12.7%

2003 10.9%

2004 12.5%

2005 9.0%

2006 13.5%

A great number �of investment and acquisition opportunities in different industriesfast growing capital �marketEffective and flexible �banking sectorAll–in–one approach �within free zones and industrial parksnumerous Greenfield �and existing sites alternativesIn

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Belgrade – the city of the future in Southern Europe for 2006 by the financial times

Ideal climate Serbia has an ideal climatic condition for the growing of fruit. Its soil is still one of the cleanest in Europe, most of the fruit is grown in perfect conditions, hand picked, carefully stored and packaged. Serbian fruit cultivation, which places an emphasis on quality and flavor, contrasts the large industrialized farms of the West. In fact, most fruit in Serbia is still grown on small, family owned farms.

Increasing Demand from Eu Serbia’s fruit processing industry is well developed and poised to lead export growth for the country. Currently, the industry exports juices, concentrates, purees, jams, and frozen and dried fruit. Demand for Serbian fruit is growing steadily, with exports showing an upward trend not just in quantity, but also in the number of countries which are becoming importers. The vast majority of Serbian exports go to the European Union, and as the EU’s health standards become stricter, many companies have quickly responded by introducing quality standards such as Hazard Analysis and Critical Control Point (HACCP) and others.

recognized Partner Investment opportunities in the fruit processing sector are provided primarily by the quality of raw materials that can be used in production. In addition, potential investors have all the necessary support from Serbia’s recognized fruit research institutes, as well as, a broad base of highly skilled technologists at their disposal. Years of experience in this particular sector, which we can confidently consider to be one of the Serbia’s finest, do make a difference when competing in markets throughout the world.

Substantial cost Savings Quality products, made from the finest raw materials will find their loyal buyers anywhere in the world. Since agriculture has always been an important part of Serbia’s economy, there are a large number of fruit processing plants operating in the country. Due to sanctions and underinvestment during 1990s, most of the plants work with outdated technologies, which have not been modernized since the 1980’s. However, Serbia still has qualified labor with valuable experience, fertile soils and quality fruit. Investing in the modernization of Serbia’s fruit processing plants offers foreign investors an opportunity to create substantial cost savings in the industry and recover the cost of their investment quickly.

Major Players Mondi Foods has more than 40 years of experience in the fruit business and today is one of the major European processors of red fruit products. Within its strategy of backwards integration, in 2002 Mondi launched a Greenfield investment in central Serbia–the freezing and sorting of red fruit for the European market, mainly raspberries, blackberries and cherries. It was the first foreign investment in the Serbian fruit processing industry. Today, Mondi Serbia’s turnover amounts to approximately €4.5 million. Mondi Serbia has a new Frigoscandia flow freeze tunnel that is already processing Individually Quick Frozen (IQF) fruits in combination with a new laser sorting line. Moreover, in 2004 this company became the first Serbian fruit cold store to attain high level BRC–certification (British Retail Consortium) and is producing according to the HACCP quality system.

Juicy competitors

World leader in raspberry production, other key fruits �are apples, plums, grapes and cherriesTotal fruit production in Serbia in 2006 was around �24.8 million tons Main export markets are Germany, France, Bosnia �and Herzegovina, Austria and BelgiumMain export products by the quantity processed are: �frozen fruit, fresh fruit, juices and fruit concentrates, preserved fruit and dried fruit, respectively

fruIt SEctor | DoInG BuSInESS In SErBIA | 25

Perfect natural conditions Serbian’s diverse climate and good land resources have created unique opportunities for the development of primary vegetable production. Vegetables are grown on more than 10% of arable land in Serbia, in small scale and primarily for individual needs. Surplus occurs only on the farms selling vegetables in bigger consumer market centers. Vegetable crops for industrial processing and for the mass market are grown on larger areas near large industrial centers.

top Quality The biggest producers of vegetables are located in the northern region and central parts of Serbia. Serbia is equally known for the production of high quality crops with year round supply (potatoes, pepper, onions, tomatoes, mushrooms, cabbage, carrots, and beans) and seasonal vegetable crops such as lettuce, leek and spring onion. Other major vegetable crops are also widely grown (spinach, carrots, zucchini, radish, red radish, horseradish, parsley, parsnip, and celery).

Advanced research Creation of improved varieties and development of new cultivation methods are undertaken by a very compound network of state owned institutes, development organizations and universities. Research is focused mainly on technologically advanced vegetable production and leads to high quality environmentally friendly seed and vegetable crop production. Research programs are of great importance responding to the needs of commercial farms, and improving profitability of primary production and food industry.

Development opportunity The vegetable processing industry has significant development potential. Besides the annual vegetable production of approximately 2 million tons, there are significant surpluses used for processing and export. The vegetable processing industry in Serbia encompasses roughly 25 companies with the capacity for production of frozen, canned and dried vegetables in compliance with globally established quality standards, HACCP and ISO.

Major Players Frikom is Serbia’s largest producer and distributor of frozen food – mainly ice cream and frozen vegetables. The company was acquired by the Croatian Agrocor Group in early 2003 for €11 million. Due to Serbia’s preferential status in trade with the Russian Federation, Agrocore now uses this investment as a launch pad for winning this rapidly growing market. Marbo Product is one of South Eastern Europe’s leading companies in snack food industry. With an annual processing capacity of 700 tons, the company is a leader in the Balkans in the terms of capacity. Marbo Product is also an absolute leader on the domestic market in snack food industry and the production of instant potato puree. Marbo Product brands present in the Serbian market are: “Chipsy “(potato chips), “Minut” (instant potato puree) and “Pardon “(sticks, pretzels, crackers). In addition, Marbo Product is a member of American and European Association of Snack Producers, European Snack Association (ESA) and Snack Food Association (SFA). The company will soon be certified under ISO 14001 and HCCP quality systems.

fresh recipe

The agricultural area totals 6.12 million ha of which �60% are arable landAccess to top quality seeds on naturally rich soil �Total export of vegetables was 66 million tons in 2006 �The top five export products were: mushrooms, �peas, peppers, potatoes, and onionsThe average net monthly wage in 2005 totals €145 �

26 | DoInG BuSInESS In SErBIA | vEGEtABlE SEctor

current Production There is a wide range of organically produced raspberries, sour cherries, prunes, organic frozen products like strawberries, blackberries, apples, vegetables and other juice concentrates, dried prunes and other dried fruit, wheat, barley, sunflower, corn, pumpkin seed.

Great Perspective Organic food production has a long standing tradition in Serbia. This is especially true in the field of fruit and vegetable production. As organic food is considered to be healthier than conventionally grown food, with an emphasis on the EU market, it is considered to be a field of agriculture with a great perspective for growth. There is an existing production of 200,000 ha and a strong inclination towards expansion. As Serbia is considered to be a country with one of the lowest rate of pesticides utilization in Europe (40 kg per ha), the growth of organic food production will be easy to achieve.

“wild fruits” collecting Industry Forest communities in Serbia are abound with wild berries and collecting is traditionally present in rural economies. Wild fruits are processed in households as a part of tradition, particularly in hilly and mountainous regions, but also in lowland rural areas. In mountainous regions, the population mostly gathers blueberry, juniper blackberry, roseberry, dog rose, forest strawberry and, in hilly region, walnut, hazelnut, pomes and drupes etc. In lowlands, quite often they use elderberry and alike. Most of the harvested organic food is exported to foreign markets where this type of Serbian good is highly rated.

Export Potential Organically grown food has a high export potential and it is estimated that 90% of all locally produced organic food is exported. Only smaller quantities are sold on the local market in specialized shops or food fairs. In addition, the Serbian Ministry of Agriculture, Forestry and Water Management has stipulated the new Organic Agriculture Law defining regulations, practices and production according to standards of the European Union.

Major Players Golden Falcon is a joint venture company of Tradin Organic Agriculture B.V., from Amsterdam, Netherlands and its Serbian partner Den Juro. This project was cofinanced by the Dutch Government PSO program. As there was an increased demand for high quality organic IQF (Individual Quick Frozen) fruit, Tradin and his partner were motivated to invest in a new factory. It was decided to build it in the heart of the organic project soil, that Tradin and Den Juro developed 10 years ago, using the latest technological standards. This is the first HACCP operated IQF freezing plant in Serbia. Overall, the success of the Golden Falcon contributed to the further development of this region and its full dependence on the organic fruit production.

nature at Its Best

Good climate and land potential for organic �productionThe lowest usage rates of artificial pesticide in �EuropeSubstantial areas for expanding organic production �on more than 200,000 haWide range of organic products �

orGAnIc ProDuctIon | DoInG BuSInESS In SErBIA | 27

keystone Industry There are about one hundred companies directly involved in production of automotive components and many of them are exporters to markets in Europe and wider. With total exports of about €100 million, this sector proves its international competitiveness in several key fields. Having FTAs with all countries in the region and Russia – fast growing automotive markets are at the doorstep of potential investors and trade partners. The most distinctive feature of Serbia’s automotive industry is that it was rather strong for a number of years with peak production of as much as 250,000 cars in 1989 and exports to the USA. This separates Serbia from all other countries in the region. The accumulated knowledge and experience is easy to build on and Serbia has all the potential to once again become the automotive centre of the Balkans.

competitive Advantage The location of Serbia allows for the establishment of just–in–time supply mechanisms with partners in Western and Central Europe. Given the eastward shifts of production and assembly of passenger vehicles, it is certain that domestic companies will increase their visibility as suppliers and partners to the foreign OEMs and Tiers.

Strong labor force Apart from location, Serbia’s great advantage lies in qualified and competitively priced labor. With age structure closely following trends of those in Western Europe, labor force can be considered sufficiently experienced with enough young graduates to sustain a steady flow of qualified labor. In Serbia, around one third of all graduates from University graduate from technical faculties. This fact alone proves that technical sciences are still popular among young people in Serbia.

waiting Potential The great potential of the sector lies in its current operation under–capacity, combined with competitive and experienced labor. This attracted many foreign companies to establish cooperation with domestic companies and there are number of major players in both exports and investments. Serbia can be seen as an open door to many neighboring markets in which the automotive industry is either developing or will develop in the following five to ten years.

Major Players FAS Sombor Battery manufacturer from Sombor has proved, once again, that innovation brings about great results when it comes to sales. In 2003, the company invested in the latest state–of–the–art machinery for production of car batteries and, two years later, the result was a new hybrid battery. The batteries have proved excellent performance in extreme conditions and their reliability has earned trust of customers worldwide. Jucit Invest Company closely specializes in production of car jack leavers was established in 2001 and is already Tier 1 supplier for major French OEM's. The company is ambitious, planning to play an important role in the world car jack leaver market. The company has gradually expanded its production to plastic housings for the jacks and developed set of solutions to reduce noise in the toolboxes provided with the car.

Gear up the Development

One of the cornerstone industries of Serbian �economy, employing 36,000 peopleLong tradition in cooperation with western OEMs �Existing capacities sufficient to support production �of more than 250,000 vehicles annuallyHigh percentage of labor with adequate �qualificationsLocation of the country allows servicing of all major �growing OEMs in the region with JIT and JIS

28 | DoInG BuSInESS In SErBIA | AutoMotIvE InDuStry

long history The aviation industry in Serbia has one of the longest traditions in Europe, with first developments in this field dating back as early as 1909 and first serial production of piston engine powered aircraft starting in early 1920's. Today, the aviation industry has established a continuous tradition in this field which is matched by only 15 other countries in the world.

Self Sufficient Industry This industry sector employs mostly high skilled labor, and it is estimated that total number of people related to this industry is close to 10,000 in 19 highly specialized companies. One of the most distinctive features of the industry is that it has capabilities in every stage of production of aircraft – from design and engineering to testing, maintenance and repair services. This makes the domestic industry very self sufficient allowing for complete development of own products which are often successfully marketed for exports.

Encompassing Education Serbia has great potential for continuous development in this industry, because the education system provides opportunities for specialized education of workers on all levels. All education facilities for technical sciences related to aviation industry are located in and around Belgrade. University of Belgrade, on its Mechanical Engineering Faculty has separate Aeronautical Department and there are several specialized schools available for lower level of education in this field. In addition, the training of engineers, and pilots is done in Serbia.

Available capacities The position of the country, as well as the competitive labor rates make Serbia a good competitor in the field of aviation maintenance and repair. Servicing Europe comes naturally to many Serbian companies, but nevertheless efforts

are made to export products and services worldwide. In addition, many companies still have significant free capacities which can be easily utilized and could, for example, provide much faster turnaround times than some other companies.

Major Players Jat Technical is one of the oldest Maintenance, Repair and Overhauls (MRO) in Europe and one of the most reputable. Today, JAT Technical is EASA 145 certified and has all the potential to become leading MRO in Central and Eastern Europe. Its 1,000 employees have significant international experience and are primarily responsible for developed relations with companies like Boeing, CFM and Pratt & Whitney. JAT Technical was one of the first to receive FAA certification from Boeing. It has celebrated 250,000 engine flight hours with CFM International and over 3,000,000 jet engine flight hours on Pratt & Whitney JT3D–3B and JT8D–9/9A engines. Currently, JAT Technical is also capable of offering one of the best turnaround time, which makes the company additionally interesting for those seeking competitiveness and speed. VTI has been responsible for designing and developing aircraft for the last 60 years. These models included J–1 Jastreb, G–2 Galeb and G–4 Super Galeb, J20 Kraguj and J22 Orao. VTI still provides expert consultation in the production of spare parts for servicing of the aircraft. VTI’s testing equipment and air–tunnels are one–of–a–kind in the region. There are five air tunnels, measuring from 0.05 to 4 Mach in which a whole range of measurements can be preformed. Facilities also include two experimental halls for dynamic, static and propulsion testing which are monitored by modern digital equipment. The company’s computer center is equipped with fully licensed Unigraphics NX, I–Deas, Nastran and a set of software solutions that were designed in–house by VTI experts for research and development purposes.

A way to new heights

Country with the most extensive tradition in aviation �industry in the regionAvailability of design, engineering, manufacturing, �testing and maintenance companies in one country Cooperation and production experience with both �European and American companies Education system allows for continuous �development with new skilled workers at competitive pricesPosition of the country is vital for quick servicing of �many growing markets

AvIAtIon InDuStry | DoInG BuSInESS In SErBIA | 29

untouched Beauty Serbia represents a unique, unexplored and unsaturated destination with a rich history and vibrant culture. Numerous attractions that can generate significant tourist demand can be found all over the country: from stunning nature and specific microclimatic spas to peaceful villages and busting cities. Medieval monasteries housing beautiful frescoes and modern galleries represent Serbia’s real treasures. One can also experience senses of Serbia through enjoyable national cuisine, authentic wines and famous brandy.

human capital The tourism industry directly employs around 8% of the active population in Serbia. Compared to other regional economies, Serbia offers very skilled and experienced labor at reasonable costs and higher degree of flexibility in terms of labor relations. Furthermore, as the ease of communication with hotel staff is crucial for guest’s satisfaction and vital for providing quality tourism service, it should be emphasized that the knowledge of foreign languages has always been an advantage of the Serbian workforce when compared to other SEE countries.

Investment Potentials There are numerous tourist attractions along 588 navigable kilometers of the River Danube in Serbia. Historical monuments, national parks and natural reserves makes perfect environment for cruising and fishing, but also represent investment potentials. Moreover, the costs of transportation on this waterway are much lower than those associated with any other form of transport.

Greenfield locations At present, a number of Greenfield projects in the tourism industry are well underway. Yet, many premium locations in downtown Belgrade are still waiting for

potential investors. Many attractions for city breaks and MICE tourism will attract an increasing number of tourists, but international hotel chains are still not sufficiently present in Serbia to meet this increasing quality demand.

congress tourism In the late 1980’s, Belgrade was one of the key destinations in terms of congress tourism. Nowadays, Serbia has emerged as a new prospective destination for many reasons: existence of one of Europe’s largest plenary spaces, good hotel packages for up to 1,000 rooms, good accessibility by air, number of tourist attractions, etc.

Major Players After Hotel InterContinental Belgrade, Hyatt Regency Belgrade was the second international hotel chain that set up its operations in Serbia and the Balkans. Shortly after the establishment, it became the leading hotel for business and leisure travel in Serbia. Small, privately owned Hotel Aleksandar Palace, close to Kalemegdan fortress in Belgrade has been awarded as one of the best small hotels in South East Europe by US Newsweek. Recently privatized Hotel Balkan, in the center of Belgrade represents a good example of the privatization of tourism in Serbia. After just few months hotel was completely renovated to suit the needs of demanded foreign clients, mainly businessmen.

Discover Different Serbia

Excellent climate conditions for year round tourism �Wide variety of tourism alternatives: ethno, history, �city, spa, mountain, event and congress92% increase in the number of tourists since 2000 �Total revenues amounted to $409 million in 2006 �Average growth – 20% per year of arrivals and �overnights

30 | DoInG BuSInESS In SErBIA | tourISM InDuStry

Educated and Economic labor The textile industry of Serbia boasts with highly qualified labor, which has its base in the extremely developed educational system that includes education both at secondary and university level. Sewers and technicians are educated in specialized secondary schools, evenly spread throughout the country. Higher levels of education, at specialized university departments, offer post graduate education in related fields.

high Standards For many years, the textile industry has been the base for economic and regional development of Serbia. Throughout this time, a tradition of quality manufacturing, competitiveness in prices and controlled expenses, shaped the industry. Serbia has traditionally cooperated with many foreign partners and has been one of the leading garment manufacturers for high selling brands. Fashion industries of France, Italy and Germany intensively used production capacities in the country together with highly qualified and low priced labor. Clients have included Zara, Mango, Benetton, Tommy Hilfiger, Hugo Boss and many more.

competitive transportation costs The strategic position of Serbia provides quick delivery, while transportation costs are extremely competitive. Hanging transport cost from Serbia to the EU is approximately €0.23 per garment. The true competitiveness of the price can be seen in comparison with other transportation costs: prices range from €1 to €3 per garment for goods from Ukraine, Belarus and Moldova and go as high as € 5 per garment for goods originating from China.

Expanding opportunities Serbian textile companies can effectively serve as secondary sources of high quality textile for European retailers. They can react quickly to smaller orders with quick turnaround times. The relatively low cost labor force, as well as the strong tradition of textiles in Serbia ensures high quality products at very competitive prices. Furthermore, many business opportunities can be found in yarn and fabric production, together with the ready–made garment production. The industry has large capacities for Cut–Manufacturing–Trim (CMT), with quality and delivery times which can suit even the most demanding clients.

Major Players Trikotaza Ivko was founded in Belgrade, during 1986, as a family–owned vertical retailer and wholesaler. Ivko specializes in novelty knitted garments for women by using the highest quality Italian yarns. As a result, the company is present with 20 stores in Croatia and Bosnia. Up to date, they have exported to Germany, Austria, Japan, Norway and Denmark. In the future, the company has signed contracts and committed to raise its production 5 times in order to satisfy the increasing popularity and demand. Dragana Ognjenovic is a fashion designer whose brand D.O. offers clothes, shoes, jewelry, leather goods and home accessories made of wood, metal, glass, porcelain, paper and wax. She successfully presented her work in Italy, France, Austria, Mexico, Cyprus, Romania, Bulgaria, America and England. Magazines such as Book Moda, Elle, La Republica, Der Standard, Wall paper, Herald Tribune, Nylon, published articles about her work, while a number of international TV stations aired her creations. During 2005, alone, she presented her work in five fashion shows, out of which three were international. She also presented her designs at Institute for Modern Art in London (ICA).

Stylish flexibility

One of the most price competitive in Europe �Quick and flexible delivery and low minimum orders �Exports reach €200 million, 70% absorbed by the EU �marketMany business opportunities in yarn, fabric and �ready–made garment productionAmong the lowest average net monthly salaries in �the Serbian economy – €80

tEXtIlE InDuStry | DoInG BuSInESS In SErBIA | 31

Generic Drugs Strategy Serbian pharmaceutical companies have strategically positioned themselves to take advantage of the generic drugs trends. Many of these companies have invested substantial capital into R&D and are capable of producing quality low–cost generic drugs. If in–house manufacturing capacities, want to outsource small–batch production, reduce manufacturing costs, or delay/avoid capital investments in manufacturing, they should consider manufacturing in Serbia.

cost Efficiency Significantly lower labor and utility costs in comparison to major FDI recipients in Central and Eastern Europe safeguard excellent prospects of reaching targeted profitability. The average monthly salary of the industry in 2004 was €326.

Intellectual capital The pharmaceutical industry is the one with the best qualification structure of all industries in Serbia. The number of college and university graduates as percentage of total number of employees in the sector is around 30%. Moreover, medical universities produce close to a thousand university graduates annually. This creates an excellent base for recruitment of an educated workforce.

Market Potential Decades of presence in the Russian market has built trust and loyalty towards Serbian drugs and pharmaceuticals. Serbia enjoys an FTA with the Russian Federation which applies to almost all drugs and medical devices. Furthermore, based on the free trade agreements signed with other South East European countries, a producer is entitled to market its goods to a 60 million people market customs free.

commitment to Quality Most of the manufacturers within the sector comply with the ISO 9000 quality system. Some of them acquired ISO 14000 certificate, while the leaders of the industry comply with GMP, GLP and GCP.

Major Players Companies like Hemofarm and Galenika, which have invested substantial capital into development, are expanding the frontiers of pharmaceutical industry in the Region. Other companies like the Zdravlje Actavis (owned by Actavis company from Iceland), which is one of the leading manufacturers of generics in Serbia, provide access to low cost drugs. Hemofarm is a company with decades of experience in drug production. Today, the Group comprises of a parent company and 21 subsidiaries, 12 are located in Serbia and the rest are abroad. Galenika has been producing drugs for 60 years. It was established in 1945, and quickly became the fourth company in the world producing penicillin. Currently, the company accounts for 30% of the domestic market.

healthy Investment

The value of sector’s annual production is €308 million �Annual growth of the sector in 2004 was 15% �Comprised of 49 companies (production of �pharmaceutical products) Intensive R&D and drug discovery �

32 | DoInG BuSInESS In SErBIA | PhArMAcEutIcAl InDuStry

Software and hardware Expertise Highly skilled engineers are competent in a broad range of methodologies, technologies and tools while supporting efficient development of high quality software, systems integration and hardware. Likewise they are proficient in developing front–end, back–end and middle–ware components, together with creating customized software and systems. Today, modern hardware (LCD monitors, memory modules, toners cartridges for printers, etc) is made in Serbia. Moreover, software developers’ main expertise is managing and enhancing client’s entire information technology process. Furthermore, subcontracting Serbian engineers includes creative web design development work for major international companies such as Philips Semiconductors, Carl Zeiss, Raytheon and NCR.

human capital As a young industry, the IT sector does not suffer from the labor inflexibility of many traditional industries; therefore companies have confirmed no labor disruptions. The average age of staff is early thirties. Overall, this industry has highly skilled workforce where 70% completed a university level of education. Finally, the labor force can be hired at very competitive prices. Net salary costs vary from €500 to €1,500 per month for qualified and experienced personnel. The overall salary cost of a programmer/systems expert is in the range of €850–2,500 per month.

Academic framework Because of the openness of the region prior to 1990s, the education standards in the technical departments of universities in Serbia benefited from greater exposure to Western influences than other countries in Eastern Europe. Since 1968, students from a high school specialized in Mathematics, Physics and Informatics have won over 80 medals at the World Science Olympiads. Lastly, in 2003 over 878

graduates of electrical engineering, organizational sciences, and mathematics institutes specialized in computer sciences.

legal framework Serbia has done a great deal to align businesses in the IT sector closer to the standards of the EU. In order to aid the quick development of the Information Society, numerous important laws have been adopted: Electronic Signature Law, Patent Law, Trademark Law, Copyright and Related Rights Law, Legal Protection of Design Law, Protection of Integrated Circuits Topographies Law, Protection of personal data, Protection of consumers, Access to information, and Amended Criminal Code.

Major Players After UK, China and India, Microsoft Corp opened its fourth international development centre, the Tablet PC Software Development Extension, in Belgrade, Serbia. The Centre was created to continue expanding language support for handwriting recognizers within Microsoft® Tablet PC technology and develop recognizers for the languages of Central and Eastern Europe (CEE). FinSoft London and TeleTrader, originally from Vienna, both have more than 50 developers in Belgrade – that number increases over hundred during peak production times. Austrian S&T signed an agreement for the takeover of IT banking solutions provider SITO Inc. Information Systems Engineering and Design Company. This year ComTrade Group, the largest domestic IT company, opened its technology center in Belgrade worth €12 million. Micronas NIT, R&D house from Novi Sad, has generated exports reaching €3 million in 2005, and won the Exporter of the Year Award in the SME category from Serbia Investment and Export Promotion Agency. Bozic i Sinovi, fast growing domestic IT company, has developed a partnership with a UK–based company, Gowigroup Ltd. and signed a long term annual contract worth over €700,000.

Smart Solutions

70% of skilled workforce completed a university level �of educationMicrosoft opened its 4 � th development center after China, India and UK1,500 innovative IT companies �Expertise in custom high-end IT development �services for SME'sSubcontracting extensive, including web design, �hardware and software solutions

It InDuStry | DoInG BuSInESS In SErBIA | 33

Demand Boost Production of forest based industry is closely linked to the construction industry, matching its outputs to the demand of the construction industry. The Serbian real estate market is growing and many new buildings (residential areas, office buildings, etc.) are rising, increasing the domestic market demand. In addition, many Serbian construction companies are employed in Russian Federation causing the demand, in furniture industry, to further increase.

Skill Set The necessary skill set for wood processing industry is being constantly built on. There are twenty two high schools specialized in wood processing, while the Forest Sciences Faculty at the Belgrade University educates thousand of young people each year. Serbian companies have a long standing tradition of collaboration with foreign buyers. Exceptional human capital available at very competitive prices, as the average monthly salary is €194, together with high quality raw materials provides equal opportunities on the domestic and foreign markets.

forest Protection In order to achieve sustainable forest development and root out illegal logging, lumbering is managed by public enterprises Srbijasume and Vojvodinasume. These enterprises determine the quality of wood, and establish quantities for companies and individuals engaged in lumbering.

Main types of trees Broad leaves dominate the forest in Serbia with 87%, while the remaining part consists of all kinds of conifers. The main tree groups of Serbian natural forests are beech (30%), followed by oak (27%) and other broadleaves.

key Markets Most of the furniture companies are able to produce all categories of furniture and furnishing. They often team up with construction companies and provide full service for buildings throughout Serbia and Europe. According to official statistics, export of furniture and parts has increased 12% in 2005 in the main export markets such as: Italy, Greece and Germany.

Major Players Simpo is a leader in the production of furniture in the country, as well as one of the leading companies from this part of Europe. Besides production, the company has its own well organized network of 80 outlets and department stores throughout the country and employs nearly 7,000 workers within 80 small, middle–sized and large factories and enterprises. Simpo has established two joint venture companies with Italian and Russian partners, Gesim Industry and Lagado, respectively. In 2005, they achieved export of over €30 million in EU, Near East and Asian countries, as well as USA, Canada and Australia. Enterijer Jankovic was established in 1992 and has grown from small craftsmanship to an internationally recognized company, while producing interior furnishing and joinery. Currently, they are present in Croatia, Russia, Italy, France, Holland, Uzbekistan, Kazakhstan and other countries. The main references are numerous, including a range of luxurious buildings in Belgrade such as Serbian Government building and President’s Residential Palace. Major hotel chains required their expertise in cases of Hotel Hyatt Regency Belgrade, Holiday In and Esplanada, Croatia. Also, many objects have been reconstructed in Russia including Constitutional Court and villas in Moscow, together with hotel Belvedere in St. Petersburg.

wood, Green, natural

Top quality raw base materials �Over 2,000 companies are engaged in wood �processingMany opportunities in sawn wood, engineered �wood products, furniture, and paper96% of companies are privately owned �

34 | DoInG BuSInESS In SErBIA | wooD AnD furnIturE InDuStry

Improved legal framework Foreign investors started entering the Serbian Energy and Mining sector on a large scale during 2001. In the last three years more than 80 laws have been adopted or modified in order to facilitate the inflow of foreign investment in this sector. Two of the most important laws are the Energy Law and the Law on Concessions, established on the basis of the European Union laws. All activities concerning planning, technical and other regulations, concessions and construction of facilities must be in accordance with the above mentioned laws. In order to assure better implementation of these laws two Government agencies were established: Serbian Energy Agency and Serbian Energy Efficiency Agency. Thanks to the improvement of the overall business environment and significant support of the legal framework, the Serbian energy sector is faced with positive challenges and the presence of major world players in country.

Energy Power The energy sector in Serbia is primarily based on large deposits of lignite mostly used as a main fuel for thermal power plants. Copper production is the primary economic branch in Eastern Serbia. Key comparative advantages of nonrenewable industry in Serbia are skilled staff, low shipping costs, and prosperous and unexplored copper deposits. In the near future, state owned companies from this sector will be reconstructed and privatized, existing energy systems will be modernized and the new ones will be built, new energy efficiency system, and technology networks will be introduced.

renewable Energy Renewable energy systems are specifically attractive for standalone applications in Serbia. Installation of generators supplied by hydro, solar or wind energy is cost effective and currently one of the most attractive investment opportunities

in the Serbian energy sector. In addition, construction of small hydro plants (up to 10 MW) with production of 1,800 GWh/year is possible on almost 900 locations on the flows of rivers Morava (2,300 GWh), Lim (1,900 GWh) and Danube (1,000 GWh).

key companies The largest companies are state owned, with main business activities in electricity production, transmission and distribution. Furthermore, managing the electricity system and exports–imports of electricity is powered by the same companies. In 2006, Serbia is seeking to restructure the energy sector. The biggest company in this sector is “NIS”, the state–owned oil company planned to be privatized, renovated and modernized in the area of its infrastructure, as well as, the business environment.

Major Players OMV Yugoslavia was established in June 2001 and the first gas station was opened in March 2002. Since then 23 gas stations have been opened, while the plan is to reach 70 by the end of 2006 and to expand its local network up to 100 gas stations in near future. In addition, OMV as a leading oil and gas group in Central and Eastern Europe has invested in Serbia, since 2001, more than €50 million. OMV plans to invest additional €200 million which will create more than 4,000 new jobs. Lukoil, the 6th largest oil company in the world, overtook Beopetrol in September 2003. Beopetrol joined Russian company with its 207 gas stations, storage capacities of 74,000 cubic meters, 1,700 workers and sales of 400,000 tons of oil. With Beopetrol acquisition, worth €210 million, Lukoil positioned itself as the second largest supplier of oil derivates and controls 16 percent of the Serbian market, whilst having the ambition to reach 23–25% in a short time period.

Source of renewable Growth

A variety of unexplored energy potential: hydro, solar, �geothermal, wind and biomass Construction of small hydro plants (up to 10 MW) �with production of 1,800 GWh/year possible on almost 900 locationsGreat variety of renewable energy solutions �Big potential for further technological improvement �with low operating cost

EnErGy AnD MInInG InDuStry | DoInG BuSInESS In SErBIA | 35

Pamper your capital

Serbian capital market continues to exhibit clear proof of continuously increasing demand for intermediation, investment and trade services

key Institutions The main institutions of the Serbian capital market include the Securities and Exchange Commission which is the main regulatory body, the Central Securities Depository and Clearing House and the Belgrade Stock Exchange. Central Securities Depository and Clearing House clears all trades in T+0 and is electronically connected to both the Belgrade Stock Exchange and its members.

Belgrade Stock Exchange Over 1,600 companies are presently quoted on the Belgrade Stock Exchange (BELEX). These companies have very diverse ownership structures from virtually no free float to free float of 100%. Most of the liquid companies are the ones privatized by the so–called “insider privatization” scheme, whereby their majority shareholders became present and former employees. The other major shareholder of companies that have a majority of private ownership structure is the Republic of Serbia Share Fund. In the vast majority of cases, the Share Fund holds minority stakes (less than 50% of voting shares) and periodically sells these shares on the open market. According to the Law on Privatization, the Share Fund will have to sell its ownership stakes by the end of 2008.

rising Prices and Stronger volumes The total turnover on the BELEX in 2006 amounted to RSD 100.6 billion or approxi-mately €1.2 billion representing 108% growth year-on-year. The total turnover was made through 141,499 transactions. Out of the total volume, shares accounted for 87%, while the shares traded using continuous trading method participate with 58% in share trading.

BElEX15 index The most liquid securities index gained 58% in 2006, contributing in total share turnover with 37.5%, which makes him one of the best performing indices in the world.

foreign Investor Participation Foreign investors began to invest in the Belgrade Stock Exchange quoted companies in the last two quarters of 2004. On an average day, foreign institutional investors accounted for over 50% of the overall turnover and for the most part they have been long–term investors practicing “a buy and wait” investment strategy. In addition, the growth of net foreign investments in 2005 represents the long–term perspective of the Serbian capital market and the proof that foreign investors foresee a continual uprising trend of the Serbian equity market. Net foreign investments in 2005 grew monthly and by the end of the year shares worth €160 million were sold, showing the long–term commitment to the Serbian market.

Electronic trading The BELEX Trading System is the electronic and remote system of the BSE. It is an order driven system and supports different types of trading methods. The Belgrade Stock Exchange plans to launch FIX Protocol System in early 2007. The project is already in its execution phase and the BSE is receiving support from the Luxemburg Stock Exchange. At this point no regional exchanges use this trading system.

Expected Positive Developments Companies will have to publish more detailed financial statements, according to the International Accounting Standards–IAS. Furthermore, some legal system changes are in process, which will result in simplification and improved legal insurance of real estate investments. Also, the Investment Funds Law, passed in 2006, was an additional boost to financial market development and entrance of new big investors into the Serbian capital market. After signing data vending contracts with Tenfore, Teletrader, Reuters and Bloomberg, Belgrade SE will continue to develop its information products in order to improve public visibility of trading data. Moreover, after Tigar a.d. Pirot applied and was adopted to the Listing A, it is expected that more companies will apply for the listing A of the Belgrade SE.

36 | DoInG BuSInESS In SErBIA | fInAncIAl MArkEt

Belgrade Stock Exchangewww.belex.co.yu

Acquisitions Made Simple

Serbian companies have proven to be a winning option to a number of very famous and successful companies

Successful Partnerships Over the past five years a total of 1,889 companies have been bought by foreign and domestic investors. As a result, almost 75% of Serbia’s socially–owned companies offered for sale have found strategic partners. Total privatization inflow has reached € 3.6 billion including future investment guarantees. Philip Morris, Lukoil, Lafarge, British American Tobacco, and Henkel are a small sample of the blue-chip companies that have set-up their operations in Serbia through privatization.

A Brief Guide The Law on Privatization envisages the sale of 70% of the capital in state and socially owned companies and institutions responsible for carrying out this process are the following:

The Privatization Agency, tasked with promoting, initiating, carrying out, ��safeguarding and controlling the process;The Share Fund, conducting the sale of company shares partially privatized ��under the previous privatization laws;The Central Securities Register, representing a unified database on the ��status of all issued shares;The Privatization Register, containing data on the capital shares, which are ��to be issued at a later date and free of charge to citizens who have not taken part in the free distribution of shares.

Privatization Procedure The privatization process begins with an initiative for privatization, which can be raised by the company concerned, the Ministry of Economy and Regional Development or, in certain cases, by a potential buyer. The Law provides two privatization models: the sale of socially- or state-owned capital and the transfer of capital free of charge.

the Sale of capital Sales may be performed by using two basic methods – public tenders and public auctions. A Public Tender applies to the sale of 70% of socially or state owned capital, and is done by collecting bids. This method mostly applies to the privatization of large and, to a lesser extent, medium–sized companies. The tender procedure is comprised of subsequent steps starting with preparation for sale, then submission and acceptance of bids, opening and ranking of bids, and, finally, closing of purchase and sale agreements. The decisive factors for winning a tender have to include the best price offered for the state–owned capital, as well as the proposed investment plan and the layoff program. A Public Auction is designed for small and medium socially–owned companies. At an auction, a company is sold to the highest bidder.

the transfer of capital Being free of charge it is carried out in two ways:Transferring shares to the employees of the company undergoing the ��privatization process, andTransferring the capital to the citizens of Serbia. ��

PrIvAtIZAtIon | DoInG BuSInESS In SErBIA | 37 | DoInG BuSInESS In SErBIA | 37

Privatization Agencywww.priv.yu

• Enterprise• Ministry• Buyer

Initiative

Prospectus

Basic information about entity being privatized

Publication

Preliminary Letters of Interest

Decision on method

• Tender• Auction• Restructuring

Monitoring targets

• Investment program• Social program• Environmental protection program

Source: The Privatization Agency

The Privatization �ow

Sale contract

15%

15%

10-30%

Tran

sfer

of s

hare

sto

em

ploy

ees

and

pens

ione

rs

Tran

sfer

of s

hare

sto

citi

zens

(priv

atiz

atio

n re

gist

ry)

Free transfer of capital(up to 30% of sale price)

State ownedcapital/assets

Privatization subject

Privatization subjects, models and methods

Socially ownedcapital/assets

Privatization model

Methods

Sale of capital(up to 70%)

Publictender

Publicauction

Corporaterestructuring

Source: The Privatization Agency

38 | DoInG BuSInESS In SErBIA | frEE ZonES In SErBIA

Border free operations

Take advantage of the VAT exemption for production of goods within the Serbian free zones

tax free Zones Income generated through commercial activities in the free zones is exempted from Value Added Tax. The new Law on Free Zones envisages foreigners to be able to establish a privately-owned free zone based on the project approved by the Government.

choose your favorite Site The geographic location of Serbia provides significant advantages to the Serbian free zones. There are three free zones which are currently operating in Serbia: Pirot, Subotica, and Zrenjanin.

unlimited Scope of Activities In general, all kinds of business and industrial activities can be performed in Serbian free zones including manufacturing, storing, packing, general trading, banking and insurance. Investors are free to construct their own premises, while zones also offer available office space, workshops, or warehouses on rental basis with advantageous terms. All fields of activities open to the Serbian private sector are also open to joint ventures of foreign companies.

Significant Advantages Imports into and exports from the free zones are unlimited. Goods that are imported from the free zones into the domestic market are subject to foreign trade regime. However, if goods are produced out of minimum 50% domestic components, they are considered to be domestic goods.

rights and regulations Free zones may be founded and governed by either domestic or foreign companies. There are no restrictions on export and import of goods and services from and into the zones or on other transactions. The proportion of foreign capital participation in investment within the free zone remains unlimited. Earnings and revenues created within the free zone can be transferred to any country, including Serbia, freely without any prior permission, and are not subject to any kind of taxes, duties and fees. This creates many opportunities for cooperating with domestic and foreign industries.

optimal utilization of resources

Utilizing Serbian concessions offering can add a competitive edge to your company

lease up to 30 years Concessions present a strategic opportunity for foreign investors to be engaged in the utilization of Serbian natural resources or goods, in a form of a lease, with a maximum duration of 30 years. The utilization must be in compliance with the Concession Law allowing general use or public interest.

concession Process The process starts with a domestic or a foreign company submitting an application in the form of the Concession Act. The application could be submitted to the Government of Serbia, the Ministry in charge of the particular field, authorized body of an autonomous province, or the local government, depending on the land size and state interest. The Government makes a final decision that is to be verified by the authorized committee of the Serbian Parliament.

Investment opportunities Concessions may be granted to investors for utilization of generally used goods (e.g. roads, railways etc.), natural resources (e.g. mining, water resources etc.), or for carrying out activities of public interest, all in accordance with the Law. In addition, a separate law allows investors to use B.O.T arrangements (build, operate and transfer).

contract terms Concession contract is signed between the concessionaire and the Government of Serbia within 60 days from the day it was awarded. If the concession approval is specified for the construction of public utility facilities, and will be used for public utility activities, the contract is signed between the concessionaire and the authorized local government body. The contract is registered at the Central Concession Registry held by the Ministry of Finance. In addition, concessionaires are required to pay the concession fee determined by the type, quality, purpose and market price of the natural resource or asset in question – and with respect to the type of activity, market terms, duration of the concession, estimated risk and expected profit.

concessionaire obligations All interested parties are allowed to apply for concession through the process of a public tender. A public tender is conducted by the Tender Commission, which submits a report to the Government after carrying out the tender procedure. The Serbian government gives permission to a concession within 30 days from the time the proposal is received. A concessionaire must establish a company within 60 days from the day of signing the concession contract. The company must be registered as a Limited Liability Company (d.o.o.) or a Joint Stock Company (a.d.).

concESSIonS | DoInG BuSInESS In SErBIA | 39

Ministry for International Economic Relationswww.mier.sr.gov.yu

“The role of banks is fun-damental in all economies in transition and in

Serbia in particular, as they con-tribute to stabilizing the economic system and attracting foreign investments. Serbia has outstand-ing growth prospects, both on the market point, relative to consumer goods demand, and on the bank-ing system level. In the near future Serbia will benefit from a wave of foreign investments, especially in the fields of insurance, real estate and production.”Mr. Massimo PierdicchiHead of International Subsidiary Banks Division – EuropeBANCA INTESA …on Serbia’s financial strength

EA

Sy

St

Ar

t u

P new business �registration completed in 18 daystransparency and low �registration costsEfficient institutional �framework for business registrationvisas and work permits �easily obtainable

In line with rapid developments in all spheres of business, A class office space is in abundanceIn line with rapid developments in all spheres of business, A class office space is in abundance

Quick Start your Business

Company registration done in 18 days with a minimum capital, do you know of a better offer?

transparent Process Business Registration Agency has the competence for registration of business entities, which was transferred from commercial courts and local authorities. After establishing the Agency, the registration procedure was simplified by reducing the time for registration from previously estimated 51 to 18 days and enabling enterprises to be registered in one place, with the future possibility of an online registration. This register has been designed as a centralized electronic database of registered business entities, contracts on financial leasing, and pledges.

variety of company types According to the Serbian Company Law there are eight types of most commonly founded companies in Serbia. The process of establishment of all these companies requires an application form (obtained at the Serbian Business Registration Agency) and an Enactment of Establishment (decision or contract). Other documents are more specific to the type of a company to be established, however the procedure and requirements have been recently simplified becoming business friendly.

coMPAny rEGIStrAtIon | DoInG BuSInESS In SErBIA | 41

“An increasing number of the local companies are now shifting their headquarters

from the old part of the city to New Belgrade. Our company is strong enough to face the rising competition in New Belgrade and erect a competitive real estate development, not only in terms of standards, but also in terms of pricing.”Mr. Gili DekelCEO, Airport City Belgrade …on Serbian real estate market

Basic company typeslimited liability co. Joint Stock co. General Partnership limited Partnership

legal Abbreviation d.o.o. a.d. o.d. k.d.

key Advantages Easy to establish Easy to establish Easy to establish Easy to establish

Size Regardless of size Big–two or moreowners

Smaller–two or more owners

Smaller–two or more owners

Minimum capital €500 in CSD equivalent €10,000 for Closed, €25,000 for Open No minimum No minimum

reimbursement fee to the registration Agency €43 €120 €24 €35

Directors Appointed by Enactment of Establishment

Appointed by Enactment of Establishment



Partners / Shareholders

Established by maximum 50 shareholders,

individuals or legal entities, whose

Closed joint stock company – maximum of 100 shareholders,

and Open joint stock company – unlimited

number of shareholders

2 or more 2 or more

Blocking Minority According to Enactment of Establishment

According to Enactment of Establishment



liability of Partners Limited to the value of ownership shares

Limited to the value of ownership shares Partners are jointly liable

General partner is jointly and severally liable,

while limited partner(s) bear(s) the risks and

obligations only up to the percentage of his or her ownership shares.

SpecificsClosed Joint Stock can

trade shares only among partners

tax regime Corp. Profit Tax, VAT Corp. Profit Tax, VAT Corp. Profit Tax, VAT Corp. Profit Tax, VAT

Insurance companies These types of companies must be in the form of a Joint Stock, and besides regular documentation needed for the Business Registration Agency, an operating license issued by the National Bank of Serbia is required.

Different minimum capital requirements are set for the following types of companies:Life Insurance��· Life insurance, except voluntary pension insurance: €2 million (in CSD)· Voluntary pension insurance: €3 million (in CSD)· All types of life insurance: €4 million (in CSD)Non–life Insurance��· Accident and voluntary health insurance: €1 million· Motor and railway vehicles total insurance and obligatory traffic

insurance: €2.5 million· Other forms of asset insurance, risk insurance, and other types of

non–life insurance: €2 million· All types of non–life insurance:€4.5 millionRe–insurance: €4.5 million��

leasing companies A Limited Liability or a Joint Stock Company can be used as a legal form for a leasing company. Also, the National Bank of Serbia must issue an operating license that is submitted to the Business Registration Agency with other necessary documentation. Minimum founding capital for the leasing company is €100,000.

representative office This business form can be founded in Serbia, but with the obligation of a foreign mother company to take over the responsibility for all obligations that may occur as a result of the representative office’s performance. The office has to be registered with the Business Registration Agency.

Acquiring Equity The following business forms can carry out the acquiring of equity: the Privatization Agency (acquiring socially owned majority stake through tender and auction procedures), or acquiring socially owned minority stake from the Serbia Share Fund, and Belgrade Stock Exchange for all types of ownerships. In addition, mergers, joint ventures, strategic partnerships, as well as full or partial takeovers, are ways of taking part in the company’s capital.

Acquiring Property Both legal and physical foreign persons are permitted to acquire property for real estate and/or business industrial facilities. However, industrial land and construction land is given with the “Right of Use” and the details on this law can be found within the chapter “Land Categories”.

taking over a troubled company Acquiring this type of a company is done through the Privatization Agency.

Administrative formalities The official procedure, apart from opening a business bank account and registration of a legal entity in Serbia (for example, a company), also includes residence and work permits. These permits are handled by the Ministry of Interior and in depth procedure can be found within the chapter “Visa Requirements.”

42 | DoInG BuSInESS In SErBIA | coMPAny rEGIStrAtIon

Commercial Courtswww.trgovinski.sud.srbija.yu

National Bank of Serbiawww.nbs.yu

Atrium of the National Bank of Serbia

welcoming your Stay

On visiting of our country mixing business with pleasure comes naturally

Business visa Easy to obtain Persons, who are not citizens or permanent residents of Serbia and Montenegro and are coming to Serbia for business purposes or permanent employment, may obtain a business visa from an Embassy of Serbia and Montenegro that is valid for up to 1 year. Until the expiration of the visa, they have the right to temporary residence in the country. The visa will be cancelled in case of employment termination or the completion of business activities before visa’s expiration date.

citizens not requiring a visa Those that do not need a visa to enter Serbia are citizens of EU member countries, EU membership candidate countries and other highly developed countries, if staying in Serbia less than 90 days. Also, nationals of Argentina, Australia, Belarus, Bosnia and Herzegovina, Canada, DPR Korea, Iceland, Israel, Japan, Korea, FYR Macedonia, Mexico, Norway, New Zealand, Russia, Singapore, Switzerland, Tunisia, Turkey, Ukraine, and USA may visit at any time. For other countries it is necessary to obtain invitation letters approved by the authorized institution in order for their citizens to obtain visas for Serbia.

Acquiring a residence Permit Apart from a business visa, expatriates employed in Serbia are also required to obtain a business or residence permit. Within 3 days of arrival in the country, they are obliged to submit an application to the Police Office in the territory of residence. It takes a month for the Police Office to process the application, and the temporary residence permit is issued for a period of up to one year. A temporary residence permit may be extended on a yearly basis upon its expiration. Furthermore, the holder of a residence permit is obliged to notify the local municipal police of any change of address.

obtaining a Business Permit Foreign persons eligible for this type of permit are: company founders, directors of companies with foreign shareholders, directors of (foreign) representative offices, directors of (foreign) banks, (foreign) banks’ representative offices, (foreign) insurance companies, and their representative offices. The application and all other necessary documents are to be submitted to the Directorate for Foreigners.

work Permit A work permit for temporary residence is issued for a period of at least 3 months, but not more than 12 months. The validity of a work permit is not limited to persons who have been granted the right of permanent residence. To find employment in Serbia a foreigner must be granted approval for permanent or temporary residence, as well as approval for employment. In addition, a foreign person may be employed even without the latter approval if he is to be engaged in specialist work under a contract for business–technical cooperation, technology transfer or foreign investment.

transparent Process An application for a work permit is submitted by a company to the National Employment Service, in Belgrade, either in person or by mail. The work permit must be granted or rejected within a maximum of 30 days, yet in practice, the average time required for granting a work permit is 2 days. What is more, in emergencies it can be issued immediately. The procedure relating to the renewal is identical to the application process for the first work permit.

vISA rEQuIrEMEntS | DoInG BuSInESS In SErBIA | 43

A Residence Permit Issued by theMinistry of Interior

A Work Permit Issued by theNational Employment Service

An Application by the Company

An Application by the Individual

Steps for Obtaining a Work Permit

firmly on the Ground

The award “2006/07 European City of the Future” given to Belgrade shows high marks for infrastructure and construction potential in internationally recognized reviews

legal Definition Serbian legal framework recognizes two land categories most commonly used for investment purposes. These categories are the following: Construction land and Agricultural land. Construction land is the land on which structures have been built, as well as the land that serves for regular use of these structures, or the land designated for construction and regular use of structures envisaged by the Urban Plan. Construction land can be categorized as Public Construction Land or as other Construction Land.

Public construction land Legally, the land is defined by the General Act in accordance with the Law and the Urban Plan. Construction land is defined as public construction land after its acquisition by the state, in accordance with the Law, and can not be expropriated from state ownership. Overall, public construction land is categorized as developed or undeveloped and constructed or non–constructed. The municipality prepares public construction land and controls its use according to the Urban Plan.

legal characteristics Public construction land has the following characteristics: it is state owned, it covers land area where structures of public interest have been constructed, and it is a land area designated for construction of public structures, as well as public areas (public roads, parks, squares, streets, etc.) according to the Urban plan. Also, public construction land is exclusively state property and, as such, is solely intended for construction of structures of public interest (roads, schools, hospitals, infrastructure, etc).

other construction land Other construction land is land where structures already exist, as well as land predefined for construction of structures. It is previously not declared as public construction land. The structures which can be built on other construction land are: residential, commercial, industrial structures, etc. This classification is in accordance with the Urban Plan.

legal characteristics Other construction land is transferable and can be found in all types of ownerships. The municipality is responsible for rational use of other construction land. Therefore, it may propose programs for its development, especially for the purpose of developing larger areas envisaged by the Urban Plan. The municipality may acquire construction land, develop it, rent it or alienate it in accordance with the Planning and Construction Law.

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Zepter building

Land

Construction land Agricultural land

Land Categories in Serbia

Cultivable

Other

Public

Uncultivable

Acquiring land for construction

construction land There are 3 ways of acquiring Other Construction Land for construction, in specific: by leasing land, by acquiring a “right to use” the land and by acquiring OCL through conversion of agricultural land into construction land (according to the Urban Plan).

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leasing right to use conversion of agricultural land

OCL under state ownership, municipality land, can be leased for 99 years under conditions prescribed by municipal authorities. The land is leased through either public bidding or a public tender.

Duration of a leasing contract is determined based on the land area, land purpose, depreciation period, etc. Before the expiration of a leasing contract a lesser and a lessee can extend the contract period by a mutual agreement. The lessee automatically obtains a right to build structures. Once he has the structures built on the land previously acquired, he becomes the owner of a built structure, and is obliged to use the land according to its designated purpose. Signatures of contractual parties are verified at court, and the contract is registered in the Public Book (Land Ownership Register).

The “right to use” is the land granted for an indefinite period of time by the newly adopted Law on Urban Planning and Construction. It is based on either:

Ownership of a structure built on the �urban land in accordance with the Urban Plan (in which case the land has the same status as the structure)Intention to construct a building �on urban land.The “right to use” the land is related to the ownership of the structure located on the urban land. It entitles the user to permanently use the land as long as the previously acquired structure remains on the land acquired.

The “right to use” the land is irrevocable and permanently “attached” to the ownership of the structure located on a particular land lot.

A plot of agricultural land may be converted into OCL only by approbation by competent bodies and payment of the conversion of a land fee.Agricultural land under private ownership included in the Urban Plan is easily converted into OCL by a simple procedure after the payment of the land fee conversion. For the conversion of agricultural into OCL land an investor must submit a formal application which includes:

Description of the current and �intended use of the land in question; A certificate of ownership or the �“right of use”; An extract from the Urban Plan �which provides grounds for obtaining a building permit.

By acquiring agricultural land in private ownership with a possibility of conversion into a construction land, an investor automatically obtains the right to build a structure on it, according to the Urban Plan.

Airport City Belgrade – the winner of the largest Greenfield investment in the region, awarded by OECD

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obtaining construction Approval

Building the future In line with the tendency to simplify the construction procedure, Urban Permits and Building Permits have been abolished and replaced with a Construction Approval. The new law reduced the number of phases required by the construction procedure to seven steps and considerably lessened amount of time needed to carry out the whole procedure:

trends and Developments in construction

highlights The introduction of VAT is a large help for businesses able to utilize the “write off/refund” option. At the same time, demand remains steady for quality office space in the capital of Belgrade. As the airport and highways are strategically positioned close to New Belgrade, this part of the town will continue to be in the highest demand compared to other neighborhoods.

thriving Supply Over the first half of 2005, a total of 55,000 square meters of international standard Class A office space became available in the Central Business District of New Belgrade. Also, additional 75,000 square meters will continue with construction. In the capital, the most important Class A completions in 2005 included GTC House, Usce Tower and Atrium Durst office buildings.

flourishing Prospects According to Colliers International office in Serbia, it is expected that in 2006 approximately 50,000 square meters of newly constructed Class A office space will be delivered to the Belgrade market. The Airport City Belgrade and the European Business Center are just some of the great projects currently under way that will continually increase the value and strategic position of this part of New Belgrade. In addition, the longer–term prospects for the office market remains favorable, as there is plenty of room for further expansion. Double digit returns still inspire and encourage new investors. However, downward pressure on the prime yields is expected in the coming years, when economic recovery and strategic location will become the driving forces of business growth. Until now, investment activities have been largely confined to the office and residential sectors, while in 2006 a development boom in the retail sector will commence.

Acquiring Construction Approval

Assessment of Urban Conditions

Acquiring Construction Land

Obtaining a Construction Approval

Notice of the Start of Construction

Construction

Technical Inspection of the Structure

Probation Occupancy

Obtaining an Occupancy Permit

Registration in the Real Estate Cadastre

Safe Ground for your Ideas

New ideas and innovations are safely protected and guarded with the Serbian legislation system

Equal rights for All The local institution responsible for registering industrial property rights is the Intellectual Property Office. Foreign and domestic companies enjoy equal rights, with regards to registration and protection of their trade marks, industrial design, patents and other intellectual property forms.

trade Marks The procedure for the protection of a trademark is initiated by filing an application with the Intellectual Property Office. Upon receiving the application the Office carries out its formal review. If the application contains all necessary documentation, it is registered with the Application Registry and forwarded to the Trade Marks Department for additional evaluation. Although it takes 12 to 18 months for the Office to complete the procedure, the applicant is entitled to use the trade mark from the application filing date. The duration of a trade mark registration is 10 years from the date of filing a complete and accepted application. Also, it may be renewed for an additional 10 year period upon payment of the appropriate fee.

Patents Serbian law acknowledges two types of patents: a patent and a petty patent. A patent may be a product such as: device, substance, composition, microorganism, plant or animal cell culture or a process. At the same time, a petty patent can only be considered as a product device.

Advanced Procedure The procedure for the protection of inventions is initiated by filing an application with the Intellectual Property Office. Upon receiving the application, the Office carries out its formal review. If the application is assessed as correct to be formally accepted, it is published in the Gazette of Intellectual Property. The decision to grant a patent is based on detailed evaluation.

Patent length The maximum term of a patent is 20 years, while a petty patent is valid for 10 years from the accepted application filing date.

Industrial Design Any new product can be registered as a model or a sample. A model registration is the right that protects a new exterior of a product or a part thereof, and represents a 3–dimensional creation. Enlisting a sample protects a new image or a drawing which can be applied to a product or part thereof, and represents a 2–dimensional creation.

transparent Procedure The following procedure has to be followed in order to register a model or a sample. Firstly, an application needs to be filed with the Intellectual Property Office, which is followed by a formal review. Subsequently, the formally accepted application needs to be registered with the Registry of Applications and then the examination of a novelty is conducted by the Models and Samples Department. The same department makes the final decision on registering a model or a sample.

legal Duration The duration of a model or a sample registration is 5 years, with protection starting from the officially accepted application date. It may be renewed for a period of 10 years upon payment of the appropriate fee.

Patents, trade marks and industrial design are registered with the Intellectual Property Office for the periods of 20, 10 and 5 years, respectively. The registration of trade marks and industrial design may be renewed for a period of 10 years

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Intellectual Property Officewww.yupat.sr.gov.yu

Filing an Application

A Formal Examination of an Application

Registering an Application

Evaluation

Decision

The Examination of an Applicationfor Registering a Trade Mark

Investment friendly tax �environmentfDI in 2006: $4.4 billion �Major investor countries �are norway, Germany, Greece, Austria, and uSArapidly improved �legislative system in accordance with the Eu legal frameworkrecognized as the �largest Greenfield investment in Southeast Europe by oEcD

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DIn Q1 2007, total fDI reachedalmost $1 billionIn Q1 2007, total fDI reachedalmost $1 billion

Equality in Every Sense

Foreign investors enjoy national treatment, full legal protection, and expropriation is not legal or tolerated

the legal Privileges The Law equalizes the rights and responsibilities of domestic and foreign investors, which are given a national treatment and provided full legal security and protection in respect to rights acquired by virtue of investment. A foreign investor (foreign legal entity whose seat is abroad, foreign natural person, or national of Serbia having domicile or residence abroad for a period exceeding one year) has the right to:

control or take part in the management of the enterprise founded or in ��which capital was invested; transfer the rights and obligations (set out in the investment contract or the ��founding act) to other foreign or domestic persons;share and freely dispose of the profit accumulated from the investment;��inspect the books and business operations of the enterprise in which one has ��invested;audit the interim and annual financial statements or through an authorized ��representative;freely and without delay transfer abroad all financial and other assets related ��to the foreign investment (profits, dividends, additional payments, property upon dissolution of the enterprise etc.) in a convertible currency.

Property rights A foreign investor is also allowed to buy real estate – business premises and apartments, provided the reciprocity condition is met. Urban construction land is still state–owned, indicating that a foreign investor, as well as a domestic investor, may be given only the right to use it, for which a fee has to be paid.

variety of Investment types Investment may be in the form of founding a new enterprise, or expanding the capital of an existing domestic enterprise. In addition, a foreign investment represents acquisition of shares of the initial enterprise capital, or any other property right through which a business interest in Serbia is realized.

firm legal Protection Any foreign investor enjoys full legal security and legal protection with regard to the rights acquired on the basis of investment. The rights acquired by a foreign investor at the moment of registration may not be disparaged by subsequent changes in laws and regulations. Furthermore, a foreign investor’s investment and assets of an enterprise may not be subjected to expropriation or other measures producing the same effect.

Insurance Protection In the process of ensuring the full protection of foreign investments, Serbia established standard schemes of insurance against various types of risks.

Specialization The insurance covers political risks only, i.e. against losses in the investment country due to war and civil war, expropriation, confiscation and nationalization, inconvertibility of profits and dividends and transfer inability of currency. The latter two refer to measures taken by the host government.

All enterprises, including those founded using foreign person’s assets, are obliged to register through the Agency for Registration of Businesses

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“Serbia, together with the region of South East Europe, is the main growth market in the next

period and therefore, we expect that the trend of investment in this area will be continued with more intensity. As the final result of such creation of positive business atmo-sphere, new investments will follow and METRO Cash & Carry will real-ize them by opening its outlets in other cities.”Mr. Damir firštPresident of the Board of DirectorsMETRO Cash & Carry Serbia …on market potential in Serbia

Investment insurance agenciesAgency risks covered Eligibility for a guarantee Insurance cost other conditions

Austria – oEkBwww.oekb.at

War, revolution, transfer risk, non payment by public buyers, expropriation (95% cover)

Austrian or non–Austrian companies, consortia and banks

The premium depends mainly on the type of insurance and the classification of import-ing/host country

Maximum repayment term – 5 years, with the limit on the size of an individual transaction of €3.8 million and a guarantee of a domestic bank

france – cofAcEwww.coface.com

Impairment of assets (confiscation, expropriation, nationalization, deprivation, non–repossession, forced abandonment, selective dis-crimination, business interrup-tion); property damage cover; non–payment or non–transfer

All French investors willing to set up business abroad in industrial, commercial or services fields

The premium is set according to the type of insurance and the host country rating

Risk can be covered up to a maxi-mum of 5 years

Italy – SAcEwww.isace.it

Expropriation or any other Government restriction, general moratorium, cur-rency transfer restrictions, exchange rate fluctuation due to law provisions, embargo, war, civil unrest, or natural disasters

Italian enterprises or their foreign subsidiaries involved in overseas investment transactions (equity contribu-tion, licensing agreements, technical assistance, manage-ment contracts, shareholders’ loans, loan guarantees issued by equity holders)

n/a n/a

Slovenia – SIDwww.sid.si

Risks of wars and other civil disturbances, riots; expro-priation and other forms of dispossession; conversion and/or transfer risks; breach of contracts by the Host Country Government; denial of justice (as independent cover or additionally to breach of contract cover); natural disasters that can be added to the standard insur-ance package

Direct (new) investments in cash and other investments, expressed in monetary value, in the form of real estate or mov-ables, especially equipment and various rights, such as patents, licenses, trademarks, securities, retained profits, and others, invested into a project company, other legal entities or business units, and/or financial investments abroad on behalf of those companies

Investment insurance premi-ums are determined case–by–case in accordance with the risk rating of individual investments and close exami-nation of factors arising from investment projects and the host country

The investor is free to choose the percentage and/or the amount of the insurance cover for each individual risk, and the insurance can last from 3 to 15 years

uk – EcGDwww.ecgd.gov.uk

Expropriation, nationaliza-tion, confiscation, war (politi-cal violence), restrictions on remittances (transfer and inconvertibility) and also, where appropriate, breach of contract

In case of Serbia, ECGD can provide cover for foreign direct investment, available to the UK investor in respect of: shareholder equity, share-holder loan and shareholder guarantee

The premium rate for Serbia amounts to 1.93%

The initial duration of ECGD’s cover is 15 years, while the investor must intend to keep the capital in the overseas company for at least three years

uSA – oPIcwww.opic.gov

Political violence (war, revolution, insurrection, politically motivated strife, terrorism or sabotage); expropriation (expro-priation, nationalization, confiscation); currency inconvertibility (90% cover, except for loans and capital leases – 100% and equity investments – 270%

Citizens of the United States; corporations, partnerships or other associations created under the laws of the United States or territories and beneficially owned by U.S. citizens; foreign corporations at least 95% owned by inves-tors eligible under the above criteria; other foreign entities that are 100% U.S. owned

Premium rates are determined on a project–by–project basis, and, once determined, are fixed for the duration of the coverage term, and paid annually in advance

OPIC can insure up to $250 million per project and up to $300 million for projects in the oil and gas sector with offshore, hard currency revenues; projects in the oil and gas sector with offshore, hard currency revenues may be approved for an exposure limit of up to $400 million if the project receives a credit evaluation (“shadow rating”) of investment grade or higher; OPIC has no mini-mum investment size requirements.

worlD BAnk – MIGAwww.miga.org

Currency inconvertibility; nationalization; confiscation; expropriation (full, partial and ‘’creeping’’); war and civil disturbance (revolution, insurrection, sabotage, ter-rorism); breach of contract

An eligible applicant must be a national of a member coun-try other than the country in which the investment is to be made, yet MIGA may also insure an investment made by a national of a host country, provided the funds originate from outside the host country and the host government approves the investment

Premium rates are decided on a per project basis, usually ranging between 30 and 100 basis points per risk (up to 150 in some cases) per year, and are paid at the begin-ning of each contract period

MIGA provides coverage for up to 15 or, if justified by the nature of the project, 20 years, with a maximum of $200 million of coverage

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Success of Strategic Investments

In 2006, FDI in Serbia hit an all-time high with $4.4 billion of net inflow and $5.5 billion of inward investment

record fDI A major portion of FDI in 2006 stemmed from privatization and acquisition deals in telecommunications, banking, insurance, and manufacturing industries. In an all-time largest single transaction, Norwegian Telenor won a tender for the mobile phone company Mobi 63 offering €1,513 million. As for the manufacturing sector, Serbian Privatization Agency reported 327 contracts with the total sales price of €332 million and investment commitment of €247 million. Added to this are three privatization deals in the banking sector for a total of €521 million. In summary, privatization accounted for 60% of the total FDI stock between 2002 and 2006, while Greenfield investments were estimated at about $1 billion in 2006.

leading investors In 2006, the structure of FDI by country of origin remained mostly in the line with that in the previous years. Investors from the European Union top the list, with the increased portion of South East Europe countries. Thus, as a result of the local mobile phone operator privatization by the telecom giant Telenor, Norway took the first place, followed by Greece, Germany, Austria, and Hungary. Throughout a 6-year period, largest FDI came from Norway, Germany, Greece, Austria, the Netherlands, Slovenia, France, Great Britain, Hungary, and Luxembourg. The actual amount of U.S. investment is significantly higher than the official figure due to their companies investing primarily through European affiliates. This also holds for Germany, Italy, Belgium, and a number of other countries.

Major Sectors According to the statistics currently available, the banking sector recorded the biggest FDI inflow in the past two years. Apart from privatization deals totaling $996 million, large acquisitions brought additional $1,579 million. In 2006, the banking sector was followed by telecommunications with more than $1.5 billion of FDI as a result of investment by Norwegian Telenor and Austrian Mobilkom. Furthermore, manufacturing industries attracted a significant amount of foreign capital last year following a takeover of the local pharmaceutical market leader Hemofarm by German Stada for €475 million.

Going forward While the largest investments are expected through privatization in insurance, and state-owned monopolies, the Government will be focused on attracting new Greenfield projects. The FDI-related legal framework is expected to be upgraded by implementing new business-friendly regulations including the law on industrial parks and land-related laws.

Some of the top investors in 2006 were Telenor, Stada, National Bank of Greece, OTP Bank, San Paolo IMI, and Japan Tobacco International

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Net FDI (USD million)


2006 4,387

2005 1,550

2004 966

2003 1,360

2002 475

2001 165

net fDI in cash by countries in 2006 (000 uSD)

country Investment value

Norway 1,546,993

Greece 923,698

Germany 905,824

Austria 520,356

Hungary 244,045

Slovenia 201,241

France 159,085

Great Britain 135,915

Bulgaria 54,270

Italy 52,752Source: National Bank of Serbia

Assisting your Success

Meet the team of experts that can provide you with a complete guidance in law, economy and business opportunities

Serbia Investment and Export Promotion Agency (SIEPA) is a government organization dedicated to successfully helping foreign investors and buyers. Created in 2001 by the Government of the Republic of Serbia, SIEPA’s mission is to support foreign companies seeking to set up or expand in Serbia and Serbian companies when doing business internationally.

Major services offered to potential investors are free-of-charge and readily available:

Providing statistical and economic data, as well as information on the ��investment-related legal framework,Linking companies to Greenfield and existing sites opportunities, including ��site visit organization,assistance with registration, licenses, permits and other documentation, ��identifying local partners and suppliers,��presenting ready-to-invest projects.��

Our assistance resulted in some of the largest recent investment projects in Serbia totaling more than €400 million. The list of SIEPA clients includes companies, like US Coca Cola and Ball Corporation, German Knauf, Japanese Japan Tobacco International, and many others.

To help potential investors speed up the completion of their projects, SIEPA networks with all FDI-related public and private sector bodies, including ministries and other governmental bodies, municipal authorities and local self-government, building land agencies, tax and customs authorities, statistical bureaus, chambers of commerce and the National Bank of Serbia.

SIEPA publications and materials on doing business in Serbia, as well as detailed sector analyses and studies feature numerous business opportunities in our country. They are available in hard copy and can be downloaded from our web-site at www.siepa.sr.gov.yu.

We would like to invite you to contact our expert staff ready in assisting you and your business interests. Package information about law, industries, sectors, business practices, and general doing business in Serbia is tailored based on your company’s needs and requests. If you would like the best access to the opportunities and intelligence gathered by our knowledgeable team, do not hesitate to contact us. Working with us is simple, safe and costs nothing.

SIEPA | DoInG BuSInESS In SErBIA | 53

Serbian Government

office of Prime Minister11, Nemanjina St., 11000 Belgradephone: +381 11 3617 719fax: +381 11 3617 609e-mail: [email protected]

office of Deputy Prime Minister11, Nemanjina St., 11000 Belgradephone: +381 11 3617 593fax: +381 11 3617 597e-mail: [email protected]

Ministry of Economyand regional Development15, Blvd. Kralja Aleksandra, 11000 Belgradephone: +381 11 3347 231fax: +381 11 3346 770www.mpriv.sr.gov.yu

Ministry of finance20, Kneza Milosa St., 11000 Belgradephone: + 381 11 3614 007fax: +381 11 3618 961e-mail: [email protected]

Ministry of Energy and Mining36, Kralja Milana St., 11000 Belgradephone: +381 11 3631 595fax: +381 11 3616 603e-mail: [email protected] www.mem.sr.gov.yu Ministry of Infrastructure22-26, Nemanjina St., 11000 Belgradephone: +381 11 3616 431fax: +381 11 3617 486

Ministry of trade and Services22-26, Nemanjina St., 11000 Belgradephone: +381 11 3618 852fax: +381 11 3610 285e-mail: [email protected] www.mtu.sr.gov.yu

Ministry of labor and Social Policy2, Blvd. Mihajla Pupina, 11070 Belgradephone: +381 11 3112 916fax: +381 11 3114 650e-mail: [email protected]

Ministry of Agriculture, forestry,and water Management22, Nemanjina St., 11000 Belgradephone: +381 11 3065 038fax: +381 11 3616 272e-mail: [email protected]

national Bank of Serbia12, Kralja Petra St., 11000 Belgradephone: +381 11 3027 194, 3027 343e-mail: [email protected]

Government Agencies

Privatization Agency23, Terazije St., 11000 Belgradephone: +381 11 3020 800fax: +381 11 3020 828e-mail: [email protected]

Serbian Business registration Agency5, Nikola Pasic Sq., 11000 Belgradephone: +381 11 3331 400fax: +381 11 3331 410e-mail: [email protected]

Agency for the Development ofSmall and Medium-sized Enterprises and Entrepreneurship19, Toplicin venac St., 11000 Belgradephone: +381 11 3346 107fax: +381 11 3346 601e-mail: [email protected]

Deposit Insurance Agency2-4, Knez Mihailova St., 11000 Belgradephone: +381 11 3287 738fax: +381 11 3287 741e-mail: [email protected] www.aod.srbija.yu

chambers of commerce

Serbian chamber of commerce and Industry13-15, Resavska St., 11000 Belgradephone: +381 11 3240 611fax: +381 11 3230 949e-mail: [email protected] chamber of commerce and Industry, Belgrade12, Kneza Milosa St., 11000 Belgradephone: +381 11 2641 355fax: +381 11 2642 029www.kombeg.org.yu chamber of commerce and Industry, vojvodina11, Hajduk Veljkova St., 21000 Novi Sadphone: +381 21 557 433 fax: + 381 21 557 364e-mail: [email protected]

other State Institutions

national Bank of Serbia12, Kralja Petra St., 11000 Belgradephone: +381 11 3027 100fax: +381 11 3027 394e-mail: [email protected] Belgrade Stock Exchange1, Omladinskih brigada St., 11000 Belgradephone: +381 11 3117 311fax: +381 11 138 242e-mail: [email protected] republic Development Bureau4, Makedonska St., 11000 Belgradephone: + 381 11 3345 233fax: +381 11 3345 531e-mail: [email protected]

Statistical office of the republic of Serbia5, Milana Rakica St., 11000 Belgradephone: +381 11 2412 922fax: +381 11 2401 284e-mail: [email protected]

Intellectual Property office5, Kneginje Ljubice St., 11000 Belgradephone: +381 11 2630 499fax: +381 11 3112 377e-mail: [email protected]

Share fund of the republic of Serbia15, Blvd. Kralja Aleksandra, 11000 Belgradephone: +381 11 3331 800fax: +381 11 3331 831www.share-fund.co.yu

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[email protected]

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