the european times - serbia

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SERBIA © S

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SERBIA.GET CLOSER,PERFORM BETTER.

Discover why Serbia is ranked a global third in Pwc's Manufacturing Index and is among the top 10 worldwide services destinations in 2008! *

Located at South East Europe’s investment hot spot, featuring impressive growth in the number of hosted FDI projects! **

They already did – Michelin, FIAT,Microsoft, Coca-Cola, STADA, Telenor, Henkel, Ball Corporation and more than 200 companies from around the globe.

* PricewaterhouseCoopersBalancing Risk & Reward, June 2008

** Ernst and YoungSEE Attractiveness Survey, June 2008

Serbia Investment andExport Promotion Agency

+381 11 3398 550o�[email protected]

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ContentIntroduction

Prime Minister Outlines Priorities 4• Building a Modern Nation 6• Serbia’s Fact File 10• Stabilisation and Association Agreement: Giant Step • toward EU Accession 12

Meeting the Challenges of EU Integration 14• Useful Addresses 15•

Business & Investment OpportunitiesMinister of Economy Discusses Serbia’s Investment Appeal 17• One of World’s Fastest Growing Economies 18• Serbia Investment and Export Promotion Agency 20• Outstanding Investment Incentives 21Outstanding Investment Incentives 21• Deloitte 22• AmCham President: Serbia Is a Safe Bet for Greenfield • Investments 23

City of BelgradeBelgrade: City of the Future 25• Luka Beograd 26•

International FundersEBRD Biggest Investor in Serbia 29• World Bank Playing Key Role 30• IFC Supporting Financial Sector and More 31•

Finance & BankingPrime Minister Discusses Effects of Global Financial Crisis 33• Tighter Monetary Policy to Protect Financial Sector • Stability 34

Central Bank Anticipates Even Stronger • Fiscal Policy 36

Hypo Group Alpe Adria 37• Belgrade Stock Exchange Seeing Rapid Growth 38• Overview Key Banks 40•

Trade & IndustrySignificant Attractions for Export-Oriented Companies 42• Minister of Trade and Services Cites Advantages for • Investors 44

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Avala Ada 45• Dynamic Foreign Investors Helping to Build a Better Serbia 46• Trade Hub for South-Eastern Europe 48•

Health & PharmaceuticalsFast-Growing Health Sector Scores High in Exports 51• Minister of Health Cites Priorities for Health Care Sector 54• Roche 55• Health Care Sector Transformed with EU and • EAR Support 56

Jugoremedija 58•

InfrastructureInfrastructure Hub of South-Eastern Europe 60Infrastructure Hub of South-Eastern Europe 60• National Investment Plan Ministry Works to • Generate Development 62

National Infrastructure Plan Details Ambitious Projects 63• Key Infrastructure Projects in the Works 64•

IT & TelecomTelecom Minister Discusses Top Priorities 66• Outstanding Opportunities in Fast-Growing • Telecom Sector 67

Serbia Positioning Itself as ICT Hub 68•

Real EstateRobust Real Estate Sector Set for Continued Growth 70• New Ministry Focuses on Environment and • Urban Planning 72

Media & CommunicationsMedia and Communications Sector Working toward • EU Standards 74

Ekonomist Media Group 76•

Business & LeisureSerbia, One of the Undiscovered Gems of Eastern Europe 79• Belgrade, the Perfect Combination of Business • and Pleasure 82

Regional Director:Lieve LuytenProject Coordinator:Desiree BrouwersBusiness Analyst:Rachael Donovan

Production Coordinator:Cindy Thys, Vicky Kox

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Introduction

Prime Minister Outlines Priorities

Stimulating Serbia’s economic growth, raising the standard of living and completing the major Corridor 10 road and rail project are among top priorities for Serbia’s government today, according to Prime Minister Serbia’s government today, according to Prime Minister Mirko Cvetkovic.

The Prime Minister also mentioned the govern-ment’s commitment to increasing social programmes, stepping up efforts to fi ght crime and corruption, promoting local culture, adhering to international laws, and working toward EU integration.

Preparing country for EU membership

The new government is particularly focused on preparing Serbia for eventual EU membership. According to the Prime Minister, “Full-fl edged EU membership is the core interest of Serbia and its citizens. Joining the EU would enable Serbia to become a full-fl edged member of the European family

Mirko Cvetkovic, Prime Minister

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of nations from which Serbia has been excluded for a long time due to unfortunate historical circumstances.”

As the Prime Minister points out, Serbia has already made a number of substantive reforms in its regulatory environment over the past seven years to bring the country more in line with EU criteria, but more reforms still need to be made. He says, “It is necessary to introduce additional reforms over the next couple of years which will further approximate Serbia’s legal and economic systems to EU standards. One of the fi rst moves of the new government was to submit the EU Sta-bilisation and Association Agreement to Parliament for ratifi cation.” The parliament has since given its stamp of approval to the SAA.

Macroeconomic fundamentals solid

While more reforms need to be made, Serbia has made great strides forward over the past seven years and, as the Prime Minister explains, the country’s macroeconomic

Former Parliament Building

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Prime Minister Outlines Prioritiesfundamentals are solid. He says, “We have seen a strong rise in GDP over the year, reaching more than 8% in the fi rst quarter and above 6% in the second quarter, for an average of 7% for the year. Last year we achieved 7.5% average growth, but even with the global fi nancial crisis and other issues this year, Serbia still has a very high growth rate for the region.”

The government has also been successful in reducing infl ation, but the Prime Minister explains that the global fi nancial crisis may prevent Serbia from reaching its infl ation targets as soon as the government had hoped. “Serbia had 10.1% infl ation last year, and our plan for this year is to go into one digit infl ation. I am sure we can reach this goal.”

Proactive measures to cope with global crisis

To cope with the effects of the global economic downturn, the government recently adopted a package of short-term measures designed to “boost stock exchange activity and stimulate savings,” according to the Prime Minister, who adds that customs duties will be reduced beginning from January 2009. He says that the government’s 2009 budget includes the possibility of emergency intervention by the Central Bank if necessary. “The crisis will affect Europe and our region, and we want to make our region more secure than others,” he says.

Key projects still going forward

Meanwhile, the government is pushing ahead with key projects. Financing for the road portion of the Corridor 10 project is already in place, the Prime Minister explains, and this project is sure to add to Serbia’s investment appeal. Attracting foreign investors is “of crucial importance for Serbia.”

Another potential project is a pipeline between Serbia and Russia. Prime Minister Mirko Cvetkovic explains, “While the EU is our main focus concerning trade and international business ties, we are also pursuing part-nerships with the Russian Federation, including a gas pipeline now under discussion. This would be a huge project, probably around €1 billion to €1.5 billion. It

Introduction

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Beli Dvor (White Palace)

would be a transit pipeline, and Serbia would benefi t greatly in fees as well as in having a larger quantity of gas for our own use.”

Boosting international image

One focus for Serbia is to improve its international image. As the Prime Minister explains, “Serbia’s image is not as good as it should be, and those who visit here are pleasantly surprised. The government wants to do more than just advertise Serbia; we want to complete major projects to demonstrate the country’s potential. I welcome foreign investors to come here and take advantage of Serbia’s many opportunities and fantastic human resources.”

The Prime Minister concludes: “The new government aims to create a better quality of life in Serbia while preserving the singularity and dignity of all citizens. Implementing the government’s strategy will ensure higher earnings, higher pensions, increased social responsibility, better employment opportunities, less corruption, better basic infrastructure, and a stronger position for Serbia in defending its sovereignty.”

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Building a Modern NationSerbia is growing into an economic leader of the fast growing South Eastern European region in the 21st century.

Serbia has a long history that reaches back to when it was first settled in the 6th and 7th centuries. In 1166, Stefan Nemanja, a Serbian warrior and chief, founded the first Serbian state. By the 14th century, under the rule of Stefan Dusan, Serbia was the most powerful country in the Balkans, and throughout the country monasteries were built in which Serbian and Byzantine works of art celebrated the Christian faith and demonstrated Serbia’s advanced culture.

Part of Ottoman Empire

In 1389 the country was defeated in the Battle of Kosovo and was absorbed into the Ottoman Empire.

Hundreds of years of Ottoman rule followed, and many remnants from the long Turkish reign remain in Serbia today, including Turkish baths and distinctive archi-tectural landmarks. In 1878, Serbia fi nally gained its independence from the Ottoman regime after Russia defeated the Ottoman Turks in the Russo-Turkish war of 1877-1878. During the Balkan wars (1912-1913), Serbia and other Balkan states took control of more former Ottoman lands on the peninsula. After World War I, Serbia became part of the Kingdom of the Serbs, Croats, and Slovenians (1918), which included the former kingdoms of Serbia and Montenegro; Bosnia- Herzegovina; Croatia-Slavonia, a semiautonomous region of Hungary; and Dalmatia.

Creation of Yugoslavia

The new kingdom’s first king was Peter I of Serbia; his son, Alexander I, succeeded him in 1921. Alexander

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Introduction

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was assassinated in Marseilles in 1934 and his cousin, Prince Paul, served as regent for Alexander’s young son, Prince Peter. As World War II developed, Prince Paul supported the Axis powers and Yugoslavia signed the Axis Pact on March 25, 1941. Opponents overthrew the government two days later, but in April Nazi troops occupied the country.

Socialist Federal Republic

In 1943, Tito established a provisional government, and in 1945 he won a federal election. The monarchy came to an end and the Socialist Federal Republic of Yugoslavia, with Tito as prime minister, was born. Tito broke with the Soviet regime in 1948 and Yugoslavia took its own path by combining Communist control of politics and economy with a more open approach to the arts, travel and private enterprise. Tito became president in 1953 and president for life in 1963.

Intensifying ethnic tensions

After Tito’s death in 1980, tension between Yugo-slavia’s many ethnic groups intensifi ed; a rotating presidency was devised to calm dissent. In 1991, two years after Slobodan Milosevic became president of the Serbian republic, Croatia declared its independ-ence in May and Slovenia and Bosnia followed in December. After a four-year-long war with great losses of life on all sides, Bosnia, Serbia, and Croatia signed the Dayton Peace Accords in November 1995.

Milosevic’s rule

Two years later, Slobodan Milosevic became president of the Federal Republic of Yugoslavia (Serbia and Montenegro). More ethnic conflict began in 1998 between the Kosovo Liberation Army, which supported the Albanian Muslims who made up 90% of Kosovo’s population, and Yugoslav federal troops defending the territorial integrity of Serbia. In June 1999, a UN-approved peace agreement was signed that ended these conflicts. A year later, Vojislav Kostunica, a law professor, won the presidency of Serbia, replacing Milosevic, who was charged with war crimes. In March 2002, Yugoslavia decided to change the name of the state to Serbia and Montenegro, as

of February 2003. In June 2004, Democratic Party leader Boris Tadic was elected Serbian president and announced his plan to work toward gaining EU membership for Serbia. Serbia’s committed drive to become a productive member of the EU had begun.

Independent modern Serbia in 2006

In May 2006, Montenegro voted for independence from Yugoslavia. Serbia declared its own independ-ence on June 5, 2006. On that date, Serbia became an independent state, under its own name, for the first time since 1918. In early 2008, Mr. Tadic won his second term as the President of Serbia, which confirmed the commitment of the majority of Serbia’s population towards EU membership.

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Introduction

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President Tadic confirms goal of EU membership

President Tadic has confirmed his goal of achieving EU membership for Serbia. After the resignation of Prime Minister Vojislav Kostunica in March 2008, President Tadic called for early elections in May and his coalition achieved a majority in parliament with 38.7% of the vote. In July, parliament approved Serbia’s new government, which is composed of the Democratic Party, led by President Boris Tadic, the Socialist Party, G17 plus and a coalition of minority parties. The Democratic Party’s Mirko Cvetkovic is prime minister and Socialist Ivica Dacic is deputy prime minister and interior minister. The new government is

making good on its promises that Serbia would reach out to other countries throughout the world, open its economy, and will work on meeting all the criteria for joining the EU.

6% GDP growth for 2008

While the Kosovo issue remains a problem, Serbia has steadfastly promoted peaceful solutions and has opened its economy to the world. Under the current government, the Serbian economy achieved an impressive 7.1% GDP growth rate in 2007 and 6% growth in 2008. Building on this success story, the government is focusing on infrastructure development, social services, continued privatisa-

tion, attracting foreign investment, and boosting exports. Serbia aims to carve out a role for itself as a trade and transport hub for the region, and it is rapidly developing its private sector.

Implementing EU standards

Making good on its promises, Serbia is implementing EU and international standards in all aspects of its economy, social programmes, health and education, and financial system. It is also continuing its extensive privatisa-tion programme, for example in the telecom sector, while pursuing major infrastructure develop-ments like the European Corridor 10 project. All these efforts are

Sveti Bor

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proof of Serbia’s commitment to becoming a productive EU member. As the Prime Minister Mirko Cvetkovic commented in a recent speech, “The new government of the Republic of Serbia will continue to pursue the policy of strict observance of international law and prompt compliance with all inter-national obligations. This is the only way our country can become a fully fledged and respected member of the international community.” The Serbian government has also proved its ability to adapt to global challenges, and has devised new programmes to cope with the inter-national economic downturn. As companies throughout the world search for less costly ways of doing business in high potential markets, Serbia is attracting attention for its many advantages, which include a highly skilled workforce, a business friendly government, a strategic location, and a market oriented economy. Clearly Serbia is well on the way to achieving its ambitious goals. After its long and often turbulent history, Serbia has positioned itself today as a stable country that offers significant attractions for foreign investors.

Introduction

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Karlovci Crkve

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Petrova Crkve (St. Peter’s Church)

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Introduction

Serbia’s Fact File

SERBIA

Offi cial name: The Republic of Serbia. It contains two autonomous provinces: Vojvodina and Kosovo-Metohija. It was part of the ex Yugoslavia

Area: 88,361 sq km

Location: Central Balkan peninsula in South Eastern Europe

Climate: Temperate continental climate, with a gradual transition between the four seasons of the year.

Terrain: Extremely varied; to the north, rich fertile plains; to the east, limestone ranges and basins; to the southeast, ancient mountains and hills

Population: 7,498,001 (according to the latest census, taken in 2002, excluding Kosovo-Metohija)

Language: The offi cial language is Serbian and the script in offi cial use is Cyrillic, while Latin script is also used. In the areas inhabited by ethnic minorities, the languages and scripts of the minorities are in offi cial use, as stated by law.

Capital: Belgrade (Beograd), with a population of 1.6 million, is the administrative, economic and cultural centre of Serbia.

Other large cities: Novi Sad, population 299,294; Nis, population 250,518, and Kraguijevac, population 175,802

Autonomous provinces: Vojvodina and Kosovo-Metohija.

Longest river: the Danube, 588 km in Serbia out of a total 2,783 km

Religion: The main religion in Serbia is Christian Orthodox. There are also other religious communities in Serbia: Islamic, Roman Catholic, Protestant, Jewish and others.

Currency: Serbian dinar (RSD). 1 dinar = 100 para. Banknotes: 10, 20, 50, 100, 200, 1000 and 5000 dinars. Coins: 50 para, 1, 2, 5, 10 and 20 dinars

Time: GMT + 1

Independence (from union of Serbia and Montenegro): June 5, 2006

National holiday: February 15 (National Day)

Historic landmarks and national treasures: Djerdap National Park, with the 8,000 year-old

Neolithic site of Lepenski Vir; Belgrade, Serbia’s capital, is one of the oldest European cities, dating back over six thousand years; Nis is the birthplace of Roman Emperor Constantine the Great (born in 274 AD); the Monastery of Djurdjevi Stupovi and the Monastery of Studenica were built in the twelfth century; The Miroslav Gospel, written in the twelfth century, is the oldest preserved Serbian manuscript.

GovernmentType of Government: Democratic republic. The president

and the parliament are elected every four years in general elections.

Chief of state: President Boris Tadic (since 11 July 2004)

Head of government: Prime Minister Mirko Cvetkovic (since 7 July 2008)

Cabinet: Federal Ministries act as cabinet Elections: president elected by direct vote

for a fi ve-year term (eligible for a second term); election last held 3 February 2008 (next to be held in 2013); prime minister elected by the Assembly

National Assembly: 250 seats;deputies elected by direct vote to serve four-year terms. Elections last held on 11 May 2008 (next to be held in May 2012)

Constitution: Adopted 8 November 2006; effective 10 November 2006

Legal system: based on civil law system; has not accepted compulsory ICJ jurisdiction

Suffrage: 18 years of age; universal

Infrastructure

Total length of railway network: 3,619 km

Total length of roads: 42,692 km (asphalt) and 24,860 km (concrete)

Telephones main lines in use: 2.993 million (2007)

Telephones mobile cellular: 8.453 million (2007)

European Corridor X (road and rail, under construction) passes through Serbia

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Energy

Energy: The Electric Utility Company of Serbia (EPS) encompasses coal mines, electric power sources (hydroelectric power plants, thermal power plants, heating plants) and grid distribution systems.

Electricity production: 33.87 billion kWh (2004)

Electricity exports: 12.05 billion kWh (2004)

Electricity imports: 11.23 billion kWh (2004)

Oil production: 14,660 bbl/day (2003)

Oil consumption: 85,000 bbl/day (2003 est.)

Oil proved reserves: 77.5 million bbl (2006 estimate)

Natural gas production: 650 million cu m (2005 estimate)

Natural gas consumption: 2.55 billion cu m (2005 estimate)

Natural gas imports: 2.1 billion cu m (2004 estimate)

Natural gas proved reserves: 46.17 billion cu m (1 January 2006)

Current account balance: €-5,359.2 billion (2007 estimate)

Exports: €6.86 billion (2007 estimate)

Exported commodities: manufactured goods, food and live animals, machinery and transport equipment

Imports: €14.28 billion (2007 estimate)

Leading industrial activities: mining of coal, building materials, copper; processing; production and distribution of electricity; production and distribution of petroleum products and water.

Introduction

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Economy

GDP (purchasing power parity): €60.12 billion (2007 estimate)

GDP (offi cial exchange rate): €32.42 billion (2007 estimate)

GDP - real growth rate: 7% (2008 estimate)

GDP - per capita (PPP): €8,090.5 (2007 estimate)

GDP by sector: agriculture: 12.3% industry: 24.2% services: 63.5% (2007 estimate)

Budget: revenues: €7.5 billion expenditures: €7.6 billion (2007 estimate)

Public debt: 37% of GDP (2007 estimate)

Labour force: 2.961 million (2002 estimate)

Labour force by occupation

agriculture: 30% industry: 46% services: 24% (2002)

Unemployment rate: 18.8% (2007 estimate)

Population below poverty line: 6.5% (2007 estimate)

Natural resources: oil, gas, coal, iron ore, copper, zinc, antimony, chromite, gold, silver, magnesium, pyrite, limestone, marble, salt, arable land

Agricultural land: 5,718,599 hectares, of which 4.6 million is arable land and 1 million hectares is in pasture, with the remainder in fi sh ponds

Agriculture products: wheat, maize, sugar beets, sunfl ower, raspberries, beef, pork, milk

Industries: sugar, agricultural machinery, electrical and communication equipment, paper and pulp, lead, transportation equipment

Industrial production growth rate: 1.8% (2007)

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Stabilisation and Association Agreement: Giant Step toward EU Accession

The Stabilisation and Association Agreement (SAA) that Serbia signed with the EU last spring shows that Serbia is right on track to become a member of the EU.

Stabilisation and Association Process

The Stabilisation and Association Process (SAP) is the EU’s policy framework for the Western Balkans: Albania, Bosnia and Herzegovina, Croatia, Macedonia, Serbia and Montenegro. The main elements of this long term commitment by the EU to the region were proposed at the Zagreb Summit in 1999. The SAP supports the Western Balkan countries’ development and prepara-tions for future EU membership by combining three main instruments: Stabilisation and Association Agreements, autonomous trade measures, and substantial fi nancial assistance; Serbia has benefi ted from all three. Regional co-operation constitutes a cornerstone of the SAP.

At a summit in Thessalonica in 2003, the EU strengthened SAP by forming so-called European Partnerships with Western Balkan countries. These partnerships identify

short and medium term priorities which each country needs to address on its way to the EU. The fi rst European Partnership for the then unifi ed Serbia and Montenegro was adopted in 2004, and in 2005 the European Commission determined that Serbia and Montenegro were suffi ciently prepared to negotiate an SAA.

However, the Commission called off SAA negotiations with Serbia and Montenegro the following year since they did not meet their commitments on co-operation with the International Criminal Tribunal for former Yugoslavia (ICTY). In 2006, Serbia and Montenegro split and the EU signed a revised European Partnership with Serbia later that year. In 2007, after successful parliamentary elections, the Commission resumed SAA negotiations with Serbia, and Serbia’s new government is making sure that this process continues to move forward toward EU membership.

Serbia living up to expectations

Serbia has been living up to the EU’s confi dence in its long term potential. Over the past seven years under

Belgrade Congress House

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Introduction

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democratic leadership, Serbia has maintained a buoyant economy with average GDP of around 7% and growing foreign investment; FDI for the fi rst quarter of 2008 reached €729 million, compared to €2 billion for the entire year in 2006.

In addition, Serbia’s recently re-elected government is strongly pro EU accession and is also focussing on EU approved policies to promote economic growth, infrastructure development and responsible social policies.

The new government faces many challenges, including high infl ation fuelled mainly by rising energy and food prices, excessive public spending, social inequalities and uneven regional development. The government must balance the need

for state spending on development (including infrastructure) and social programmes while also keeping infl ation under control in order to achieve long term macroeconomic stability.

Challenges the government faces

Serbia is also recording a high trade defi cit (around €5 billion last year), even though exports are growing strongly. Better results are expected as large strategic investors in the automotive, high-tech and energy sectors enter the market. Serbia benefi ts from several free trade agreements – with Russia, CEFTA (Central European Free Trade Agreement) countries and the EU – and needs to take better advantage of them in order to boost exports still further.

The country also needs to make rapid progress in its privatisation programme; state owned capital is offi cially supposed to be phased out by the end of 2008 according to Serbia’s privatisation law, but this deadline will not be reached. The government is still seeking strategic investors for several major enterprises.

Progress in privatisation drive

Much progress is being made, however. Zastava Kragujevac, a local car man-ufacturer, recently signed a ground-breaking agreement with Fiat, and a 51% stake in state-owned oil refi ning company NIS has been sold to Russia’s Gaspromneft.

The government is continuing to implement measures aimed at attracting foreign investment, and much is expected from the privatisation of other large state-owned companies. These include power company EPS, the biggest corporation in Serbia, which seems set for an IPO, as do Telekom Srbija (the sole provider of fi xed line services and the leader in mobile telephony), and Belgrade Airport.

The government has devised a plan to distribute 15% of its shares in the largest state-owned companies to the general public, which has proved a success. Other companies on the privatisation list include Galenika, a state owned pharmaceutical producer that is to be sold next year, and JAT, the Serbian national carrier, for which the tender was published in July 2008.

Serbia’s top revenue earners are both in the energy sector: NIS (oil) and EPS (electricity). These two companies combined achieve the same total revenues as Serbia’s remaining eight companies on its top ten list of enterprises. Another top enterprise in the energy sector is Srbijagas (Natural Gas). The telecom sector overall is the country’s leading sector in revenues. Investors will fi nd outstanding opportunities in Serbia in many sectors.

While many challenges remain, the EU’s confi dence in Serbia’s growth potential has clearly been justifi ed.

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Meeting the Challenges of EU IntegrationSerbia’s government and private sector are working hand in hand to achieve the country’s EU integration. In October this year, Serbian Prime Minister Mirko Cvetkovic, Deputy Prime Minister of European Integration Bozidar Djelic, National Bank of Serbia Governor Radovan Jelasic, 11 cabinet ministers and other government leaders and more than 150 local business leaders met in Belgrade to discuss Serbia’s development strategies and its progress toward EU membership.

New Serbian mission to EUAt the meeting, Bozidar Djelic announced that the European Commission will unfreeze €120 million in 2010 for developing the Danube basin, a project in which Serbia should play a central role, and he added that within a few months Serbia will open a new mission at the EU which will welcome Serbian business leaders.

Also in October, the Serbian Chamber of Commerce and Delta Holding, the fi rst Serbian company to enter the EU market when it acquired a retail chain in Bulgaria last year, brought together business leaders and EU stakeholders in Brussels to discuss Serbia’s EU integration and to promote the ratifi cation of the Sta-bilisation and Association Agreement (SAA) the EU and Serbia signed earlier this year.

Miroslav Miletic, the President of the Serbian Chamber of Commerce, pointed out that the recent ratifi cation of the SAA by Serbia’s parliament demonstrates to a wider public that the European agenda is by and for Serbia.

Meeting in BrusselsBozidar Djelic points out that Serbia has made signifi cant progress toward EU membership through the SAA and through such initiatives as new European style passports that Serbia began to issue on November 3.

At the Thessalonica Summit in 2003, the formal decision was made for Serbia to pursue EU membership, and Serbia is now a potential candidate country for EU accession.

On September 10, 2007, the European Commission and Serbia concluded their negotiations for the EU Sta-bilisation and Association Agreement with Serbia, an important step on the road to Serbia’s EU integration.

Ivica Dacic, First Deputy Prime Minister and Minister of the Interior, notes that Serbia is relaxing its visa regime to encourage more foreign investment and that the government has signed an agreement with Europole. He concludes, “The Ministry of the Interior is speeding up harmonising our legislation with that of the EU. We are on the road to Europe and stability, and we are keen to stay on this road.”

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SERBIA

Serbian Government

Offi ce of Prime Minister11, Nemanjina St., 11000 Belgrade phone: +381 11 3617 719 fax: +381 11 3617 609 e-mail: [email protected]

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

Ministry of Economy and Regional Development15, Blvd. kralja Aleksandra11000 Belgrade phone: +381 11 3347 231 fax: +381 11 3346 770 www.mpriv.sr.gov.yu

Ministry of Finance 20, Kneza Milosa St., 11000 Belgrade phone: + 381 11 3614 007 fax: +381 11 3618 961 e-mail: informacije@mfi n.sr.gov.yu www.mfi n.sr.gov.yu

Ministry of Energy and Mining 36, kralja Milana St., 11000 Belgrade phone: +381 11 3631 595 fax: +381 11 3616 603 e-mail: [email protected] www.mem.sr.gov.yu

Ministry of Infrastructure 22-26, Nemanjina St.11000 Belgrade phone: +381 11 3616 431 fax: +381 11 3617 486

Ministry of Trade and Services 22-26, Nemanjina St.11000 Belgrade phone: +381 11 3618 852 fax: +381 11 3610 285 e-mail: [email protected] www.mtu.sr.gov.yu

Ministry of Labor and Social Policy 2, Blvd. Mihajla Pupina11070 Belgrade phone: +381 11 3112 916 fax: +381 11 3114 650 e-mail: [email protected] www.minrzs.sr.gov.yu

Ministry of Agriculture, Forestry, and Water Management 22, Nemanjina St., 11000 Belgrade phone: +381 11 3065 038 fax: +381 11 3616 272 e-mail: offi [email protected] www.minpolj.sr.gov.yu

Government Agencies

Serbia Investment and Export Promotion Agency3, Vlajkoviceva St. 5th Floor11000 Belgradephone: +381 11 3398550fax: +381 11 3398814e-mail: offi [email protected]

Privatization Agency 23, Terazije St., 11000 Belgrade phone: +381 11 3020 800 fax: +381 11 3020 828 e-mail: [email protected] www.priv.yu

Serbian Business Registration Agency 5, Nikola Pasic Sq., 11000 Belgrade phone: +381 11 3331 400 fax: +381 11 3331 410 e-mail: [email protected] www.apr.sr.gov.yu

Chambers of Commerce

Serbian Chamber of Commerce and Industry 13-15, Resavska St.11000 Belgrade phone: +381 11 3240 611 fax: +381 11 3230 949 e-mail: [email protected] www.pks.co.yu

Chamber of Commerce and Industry, Belgrade 12, Kneza Milosa St., 11000 Belgrade phone: +381 11 2641 355 fax: +381 11 2642 029 www.pks.komora.net

Other State Institutions

National Bank of Serbia12, kralja Petra St., 11000 Belgrade phone: +381 11 3027 100 fax: +381 11 3027 394 e-mail: [email protected] www.nbs.yu

Belgrade Stock Exchange 1, Omladinskih brigada St.11000 Belgrade phone: +381 11 3117 311 fax: +381 11 138 242 e-mail: [email protected] www.belex.co.yu

Republic Development Bureau 4, Makedonska St., 11000 Belgrade phone: + 381 11 3345 233 fax: +381 11 3345 531 e-mail: [email protected] www.razvoj.sr.gov.yu

Statistical Offi ce of the Republic of Serbia 5, Milana Rakica St., 11000 Belgrade phone: +381 11 2412 922 fax: +381 11 2401 284 e-mail: [email protected] www.statserb.sr.gov.yu

Intellectual Property offi ce 5, Kneginje Ljubice St.11000 Belgrade phone: +381 11 2630 499 fax: +381 11 3112 377 e-mail: [email protected]

Share fund of the republic of Serbia 15, Blvd. kralja Aleksandra11000 Belgrade phone: +381 11 3331 800 fax: +381 11 3331 831 www.share-fund.co.yu

Useful Addresses

Introduction

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Business & Investment Opportunities

• Minister of Economy Discusses Serbia’s Investment Appeal

• One of the World’s Fastest Growing Economies

• Outstanding Investment Incentives

• AmCham President: Serbia is a Safe Bet for Greenfi eld Investments

“Serbia offers a much more attractive tax system, lower

labour costs, and subsidies to buy companies to create export driven industries and to create

gas.”Mladan Dinkic, Minister of Economy and Regional Development

and Deputy Prime Minister

17


Minister of Economy Discusses Serbia’s Investment Appeal

Mladjan Dinkic, Serbia’s Minister of Economy, discusses the government’s development strategies and Serbia’s attractions for foreign investors.

ET: What are trends in foreign investment in Serbia?

M. Dinkic: The biggest investment in Serbia to date is Norway’s Telenor. Overall, however, the EU is definitely the largest investor in Serbia, particularly Austria, Germany, Italy, and Greece. The EU (par-ticularly Germany and Italy) also accounts for 60% of Serbia’s foreign trade.

ET: What kind of investments are you hoping to attract today?

M. Dinkic: Our goal is to try to attract industries that are producing consumer goods, particu-larly for export; the biggest step in this direction is the establishment of Fiat, which will export almost 100% of its production. We are providing special incentives to attract investment in three

Mladjan Dinkic, Minister of Economy and Regional Development and Deputy Prime Minister

SERBIA

sectors in particular: the automotive sector, where the government covers up to 25% of the initial investment if the automotive companies employ over 1,000 people and the investment is larger then €200,000; the ICT sector, in which we have signed an agreement with an Indian company to build an ICT park between Belgrade and Novi Sad; and the electronics sector.

ET: Why should investors choose Serbia instead of another country in the region?

M. Dinkic: Serbia offers a much more attractive tax system, lower labour costs, and subsidies to big companies to create export driven industries and to create jobs. Serbia also has a more strategic location for exports, and benefi ts from its many free trade agreements. Fiat considered a number of countries for its recent investment, but decided to come to Serbia because we offered more attractive conditions.

ET: What are the government’s priorities concerning tourism development?

M. Dinkic: Serbia achieved €558 million from tourism in 2007 and we anticipate over €0.8 billion in 2010. We have launched a tender process for an investment of around €200 million in a Greenfi eld ski project, and we have already attracted investors from Germany and Austria. My goal is to partner with my Bulgarian colleagues to make Serbia a candidate in 2022 for the winter Olympics. We also anticipate a tender for a joint venture to develop spa tourism, which has exceptional potential. Another possibility is themed tourism, for example Danube cruises or tours of Roman monuments. JAT’s privatisation will open the market to low-cost carriers and boost tourism to Serbia.

ET: What are your ministry’s current key goals?

M. Dinkic: We want to maintain Serbia’s strong growth rate (by far the highest in the region at 7%), to focus on infrastructure upgrades, to attract more foreign investors, and to help improve Serbia’s international image.

18

One of World’s Fastest Growing Economies

18


With an average GDP growth rate of 7% over the past few years, “Serbia is one of the very rare countries in the world today with a high level of economic growth,” explains Mladjan Dinkic, Minister of Economy and Regional Development and Deputy Prime Minister.

In fact, Serbia’s economy grew by around 7.5% in 2007 to achieve per capita GDP of US$5,000 (€4,000), an impressive 35% increase over the previous year, largely thanks to the soaring output of the services sector. “This year, per capita GDP should reach US$7,000 (€5,600),” Mladjan Dinkic says.

Working toward EU membership

Thanks to significant political and economic reforms, Serbia’s economy operates according to free market principles and accords foreign investors the same rights and opportunities as domestic ones. Attractive investment incentives are guaranteed to keep FDI rolling in.

Last year, Serbia’s parliament approved the Stabili-sation and Association Agreement with the EU, an essential step toward the EU integration that will further stimulate the country’s economic growth. Serbia has already established close trade ties with the EU and has positioned itself as a preferred base for EU companies wishing to enter the fast growing markets with which Serbia has free trade agreements, including the CEFTA countries and Russia.

In addition, late last year Serbia signed the Instrument for Pre-Accession Assistance (IPA) from the EU for €1 billion in funding for Serbia from 2007 to 2011. These funds will be used for institution building, socio-economic development, quicker European integration, and cooperation

SERBIA

with neighbouring countries, all of which will strengthen the foundations for Serbia’s long term strong macroeconomic performance.

Economic challenges

Controlling inflation and boosting exports to achieve a trade balance are key challenges for Serbia’s economy. Last year the National Bank of Serbia hit the core inflation target of 5.4% by pursuing a tight monetary policy along with making utility and electricity price adjustments.

Meanwhile, exports last year surged to US$8.83 billion (€7 billion), or 37.3% over 2006. According to projections by the Serbia Investment and Export Promotion Agency (SIEPA) for the period 2008-2010, Serbia’s economy will continue to experience strong

Source: National Bank of Serbia

Note: Inward FDI = Total investment of foreign companies in SerbiaNet FDI = Inward FDI + Total infl ow from withdrawing domestic companies’ investment abroad – Total outfl ow from withdrawing foreign companies’ investment in Serbia – Total investment of domestic companies abroad(1) January – July

Inward and Net FDI (US$ ths)Year Inward FDI Net FDI

2000 52,219 50,252

2001 178,366 165,338

2002 503,791 475,454

2003 1,388,087 1,360,410

2004 987,239 695,690

2005 1,616,438 1,515,439

2006 5,425,147 4,264,380

2007 3,569,080 2,295,297

2008(1) 2,945,384 2,320,836

Total 16,665,751 13,348,146

19

One of World’s Fastest Growing Economies


SERBIA

GDP growth, moderate employment increases, further inflation curbing, and gradual reduction of the current account deficit, with an average GDP gain of 6.3% and a reduction in inflation to 4% by the end of 2010. Wages and productivity will continue to grow, and the public sector should achieve a surplus of 0.4% of GDP by 2010.

High growth rates in foreign trade are also expected, with exports growing faster than imports. The current deficit should drop from nearly 15% of GDP today to around 11% by the end of 2010.

Countering global crisis

The global financial crisis is certain to put a strain on Serbia’s economy and the government is developing strategies to meet this challenge. As Mladjan Dinkic points out, “We must work hard to maintain our strong growth in the midst of an international crisis; many other governments are fighting to have any kind of growth. We will focus on maintaining macro economic stability and strict economic and fiscal policies to keep the deficit to a minimum. Serbia already has high foreign currency reserves that other countries lack; in fact our reserves are triple our reserves of Serbian dinars. This is an anchor for the economy.”

Attracting more FDI is essential for Serbia to keep its economic success story on track. “We plan to provide even more incentives to stimulate greenfield investment. Fiat has already chosen Serbia for a major project and we have started negotiations with Ikea. We aim to do as much as possible to attract as many companies as possible. Serbia needs to be on foreign investors’ minds when they are looking to invest their capital,” Mladjan Dinkic says.

Privatisation programme nearly complete

Serbia’s Law on Privatisation calls for the sale of 70% of the capital in state-owned and socially-owned companies as well as the free transfer of capital to Serbian citizens. The ambitious programme has

been moving forward rapidly and over the past five years, over 2,180 companies have been acquired by foreign and domestic investors. Overall, privatisation investment inflows, including guarantees of future investments, totalled �4.1 billion in mid 2008.

Serbia’s privatisation programme is nearly completed, according to Mladjan Dinkic, Deputy Prime Minister and Minister of Economy and Regional Development. He explains, “Privatisation is nearing its end. We recently passed a decree streamlining the process of payments by eliminating the necessity of banks to be involved in the process. We still have around ten tenders to offer, some of which will be tenders for strategic partnerships.”

Source: Statistical Offi ce of the Republic of Serbia


* Estimation

■ GDP Growth Rate

2007* 7.5%

2006 5.8%

2005 6.2%

2004 8.4%

2003 2.5%

2002 4.2%

■ GDP per Capita in $

2007 5.641%

2006 4.207%

2005 3.526%

2004 3.285%

2003 2.720%

2002 2.112%

2020


Serbia Investment and Export Promotion Agency

Serbia’s FDI and Exports PowerhouseThe quality of SIEPA’s services has been refl ected in over €1 billion investment projects facilitated to date. Since the onset of economic reforms back in 2000, Serbia has grown into one of the premier emerging investment locations in Central and Eastern Europe. Over the past seven years, inward FDI in the country has exceeded €13 billion, with the EU members accounting for as much as 85% of the amount.

Investment benefi ts

Investors in Serbia can largely benefi t from the country’s strong economic performance, booming market potential, low overhead costs, attractive investment incentives, and highly qualifi ed workforce.

For years, Serbia has basked in robust GDP growth of approximately 7%, and the per capita fi gure has reached

more than €4,414, or almost four 4,414, or almost four 4,414times the amount in 2001. Further, Serbia offers tremendous sales oppor-tunities, as a result of customs-free access to the markets of the European Union, Russia, and South-East Europe, along with a soaring local market potential. Cost-effective operating in Serbia is ensured through extremely competitive tax rates, labor and utility costs. Corporate tax rates are among the lowest in Europe – corporate profi t tax rate stands at merely 10%, VAT is set at 18% or 8%, while the

Vesna Peric, Director


SERBIA

salary tax amounts to 12%. In addition, total labour expenses average below 50% of the level in EU members from Eastern Europe. On top of this, overhead can be further cut down by taking advantage of a variety of fi nancial and tax incentives. They include state grants ranging between €2,000 and €10,000 for a new job post, a 10-year corporate profi t tax holiday, or 2-3-year salary tax and social insurance charges exemptions. The former benefi ts are garnered with Serbia’s quality labour force, boasting high productivity, strong engineering skills, and excellent command of French.

SIEPA’s services

To be able to set up or expand your business at a low cost and in the minimum amount of time, you can rely on the services offered by the country’s central investment institution – SIEPA (Serbia Investment and Export Promotion Agency). SIEPA has had a track record in dealing with major foreign investors in the country, and facilitating the largest Greenfi eld projects. Their list of clients includes blue-chip companies, such as Indian Embassy Group, US Coca-Cola and Ball Corporation, Danish Grundfos, Austrian Knauf, and many others.

On the investment side of our business, we specialise in Greenfi eld ventures, providing assistance throughout the project’s lifetime. We act as a one-stop information shop, where you can get highly pro-fessional services, be it economic or legal information, plant location

3, Vlajkoviceva St. 5th Floor11000 Belgrade, Republic of Serbia

Phone: +381 11 33 98 55 0Fax: +381 11 33 98 81 4

E-mail: offi [email protected] www.siepa.gov.rs

advisory, permits obtaining assistance or investment after care.

In addition, for those of you seeking high-quality Serbian products, SIEPA will be happy to introduce you to their top exporters from a variety of industries, such as food, automotive, textile, and the IT sector. You can meet them yearly at world’s leading trade fairs or obtain specifi c information from the SIEPA Export Department.

The Agency’s expert staff is ready in assisting you and your business interests. SIEPA’s free-of-charge services are tailor-made to best match your company’s needs and requests.

21

Outstanding Investment IncentivesThe Serbia Investment and Export Promotion Agency (SIEPA), the foreign investor’s one-stop shop in Serbia, helps investors take advantage of Serbia’s outstanding incentives.

Financial incentives

Financial incentives include from €2,000 up to €5,000 in state grants per new job created in manufactur-ing; from €2,000 up to €10,000 in grants per new job created in internationally marketable services; and from €5,000 up to €10,000 in grants per new job created in research and development. These grants created in research and development. These grants are offered for Greenfi eld and Brownfi eld projects in all industries, except for trade, tourism, hospitality and agriculture.

Specifi c criteria required for investments in manufac-turing include a minimum investment of between €1 million and €3 million, depending on the unemploy-ment rate in the municipality where the investment is made, and a minimum number of 50 new jobs created.

For the services sector, the minimum investment is €500,000, and at least 10 new jobs must be created. In R&D, the minimum investment is €250,000 and at least 10 new jobs must be created. Funds are awarded to prospective investors through a points system based on the investor’s references, the participation of domestic suppliers in the fi nal product and the investment effect on local companies, the investment’s sustainability and viability, the effect on human resources, the environmental impact, the effect on development of the local community, and other factors detailed on SIEPA’s web site.

Tax Incentives

Serbia’s outstanding tax incentives include a 10-year corporate profi t tax holiday for investments over €7.5 million that create 100 new jobs; corporate profi t tax

credits of up to 80% of the fi xed assets investment; carrying forward of losses over a period up to 10 years; accelerated depreciation of fi xed assets; a fi ve-year corporate profi t tax holiday for concessions; a fi xed salary tax base deduction of €60 a month; salary tax exemptions for employees under 30 and over 45 years; annual income tax deductions of up to 50% of the taxable income; social insurance contributions exemptions for employees under 30 and over 45 years; and customs-free imports of equipment based on foreign investment. Non-residents are taxed only on their income generated in Serbia.

Various other tax breaks are offered for investment in certain sectors, for small companies, for the creation of jobs, and for investments in certain regions. And, as of July this year, amendments to the Law on Terms and Conditions for Attracting Foreign Direct Investment provide for new state support in the form of non-refundable donations worth 25% of total investment value to projects exceeding €200 million and creating 1,000 new jobs or more.

Net FDI In Cash by Countries (2000-2007)

CountryInvestment Value (US$ 1,000)

CountryInvestment Value (US$ 1,000)

Austria 2,157,972 Italy 268,058Greece 1,638,981 Switzerland 223,390Norway 1,550,565 Montenegro 209,288Germany 1,389,108 Croatia 153,259Netherlands 553,357 Bulgaria 112,013Slovenia 543,250 USA 78,073France 425,273 Slovakia 66,221Luxembourg 369,507 Latvia 52,920Hungary 322,449 Israel 48,867Great Britain 280,485 Belgium 47,701

Note: The National Bank of Serbia reports FDI data by country of payment and not by country of actual investment.


2222


Deloitte

Investors’ Partner of Choice Deloitte has been present in Serbia

since 1991 and has the longest track

record of any international business

services fi rm in the country. Deloitte

initially focused on auditing services

in Serbia and built up an extensive

client base. Today, Deloitte has

positioned itself as a market leader

with a wide range of consulting and

auditing services for local and inter-

national clients. Milos Macura, Offi ce Managing Partner Deloitte PannonAdria

SERBIA

In 2007, Deloitte’s offices from Serbia, Croatia, Slovenia, Macedonia, Montenegro and Bosnia and Herzegovina became one practice - Deloitte Adria; in mid 2008, the Hungarian office joined the group, now known as Deloitte PannonAdria. The group employs more than 900 highly trained professionals and serves multinationals, large national firms, and dynamically growing companies. Deloitte provides services with local, regional and international reach. Its client list in Serbia includes more than 300 companies.

Milos Macura, Office Managing Partner for Deloitte PannonAdria, explains that Deloitte has worked with the World Bank and the local privatisation agency in completing a number of high profile privatisation deals and has earned a reputation as the local specialist in making the pri-vatisation process transparent for investors.

Deloitte d.o.o.Makenzijeva 24, BelgradeTel: +381 11 3812 110www.deloitte.com/rs

In Serbia, the evolution of the local business sector has resulted in even more opportunities for Deloitte. As Milos Macura explains, “The economic rebound of recent years has been led in part by an influx of Foreign Direct Investments, and in part by rebuilding the old regional business ties and strengthening of the trade relations throughout CEFTA and other free-trade agreements with the EU and Russia. Great local experience, global standards and knowledge sharing, make Deloitte an investors’ reliable business partner.”

Investors’ Bridge into Local Market

Today, Deloitte is well known for its market expertise, and it has positioned itself as THE partner of choice for international firms investing in Serbia. As Milos

Macura says, “Our goal is to help investors succeed in this market. Through our in depth knowledge, we serve as the bridge between an investor and Serbia’s public or private sector, wherever the investor’s interest lies.”

Milos Macura is very positive about Serbia as an investment choice. He says, “Serbia is one of the most exciting and lucrative countries for foreign investors. Serbians are entrepreneurial and the system is being reformed in a very courageous way. The local market includes many healthy, competitive companies that are very interesting for foreign investors, and Deloitte has the know how to help investors succeed here.”

As for the future, Milos Macura concludes, “By being the first choice for the most sought after clients and talents, we plan to grow faster than the market, staying always one step ahead. We will continue to develop our consulting services, focusing our efforts especially on the fastest growing industries, and we will remain the standard of excellence in the Serbian business community.”

23


AmCham President: Serbia Is a Safe Bet for Greenfi eld InvestmentsDejan Cvetkovic, President of the American Chamber of Commerce in Serbia, discusses Serbia’s attractions for foreign investors.

Serbia needs an even larger sum of direct foreign investments every year. This statement, so often heard among business people, politicians and bankers, has become almost a proverb in Serbian, spoken countless number of times a day, in any opportunity.

SERBIA

Being attractive and unique, while surrounded by determined and ambitious competitors, is a tough and challenging task for any country. The formula that leads companies to invest in Greenfi eld developments is a fairly complex one. It is not just one or two factors that determine where this project or that will spring up. Sometimes it takes years to develop the particular market elements that are favourable to Greenfi eld investments and entities standing behind them. Once this is established, they tend to come in clusters.

My prediction is that we can expect to see more Greenfi eld investments once the effects of already established changes in the economy have had time to infl uence interna-tional fi nanciers. But, also, let’s not be too strict in seeing the number of Greenfi eld investments as an ultimate measure of a market’s attrac-tiveness to investors. There are many opportunities that will come with developing market resources and capacities, and many of them will be linked to investment in smart tech-nologies. Direct foreign investments facilitate Serbia’s integration into progressive world trading courses and at the same time create strong connections to local producers.

Success stories

There is no better investment promotion then a successful investment itself. One look at the success stories experienced by AmCham members and other investors say more than thousands of words spoken at any gathering. This

Ball Packaging - one of the largest Greenfi eld investments in Serbia

Dejan Cvetkovic, President of the American Chamber of Commerce

© SIEPA

is what other potential investors will believe, appreciate and trust. They make the difference between vague advertisements and reality.

Serbia has potential that has been proved by the variety of successful investors already operating here. We witness signifi cant regulatory improvement and the willingness of the government to make FDI promotion a priority.

Belgrade has already found its place on the World Edition Monopoly board. Let us all work hard to make Serbia a desirable destination on the global investment map, especially now when the world economy is facing challenges concerning the stability of the fi nancial industry. The liquidity and stability of Serbia’s fi nancial system today sets it apart from many other investment destina-tions. Serbia is a safe bet.

City of Belgrade

• Belgrade: City of the Future

25

Belgrade: City of the FutureBelgrade, named “Southern European City of the Future” in 2006-2007 by Financial Times magazine, is Serbia’s capital and its business and cultural hub. This ancient city dating back to at least the sixth century BC is now home to 1.68 million people (24% of Serbia’s population), which makes it the second largest urban centre on the Danube.

Belgrade has the status of a separate territorial unit in Serbia, with its own autonomous city government. Belgrade’s mayor, Dragan Dilas, says that the city is currently involved in major projects to upgrade its infrastructure. Up-and-coming areas that are seeing signifi cant new construction, including new Greenfi eld sites, include New Belgrade and Zemun.

Attractions for investors

Belgrade is an ideal business base. In fact, the “City of the Future” award was given to Belgrade because of its investment appeal. The criteria for the award include economic potential, operating costs, human resources, transport, IT and telecommunications, and quality of life for foreign investors.

One of Belgrade’s advantages is that it has a vast pool of highly skilled workers. Over 60 university level educational institutions are located in Belgrade, and around 6,000 students graduate from Belgrade University each year, around a third of them as engineers. Belgrade’s workers are known for being multilingual as well. In fact, according to Gallup International, the percentage of English speakers in Belgrade is the highest in Central and Eastern Europe.

Belgrade Chamber of Commerce

Milan Jankovic, President of the Belgrade Chamber of Commerce, explains that a top priority for Belgrade is to position itself as a hub for services. He says, “Services will be the future of Serbia, and our job is to educate people in services, because the services sector accounts for 70% of the city’s revenues.” He adds that he anticipates extensive new employment opportunities from multinational companies that set up operations in Belgrade, and that Belgrade aims to make sure that local residents will be qualifi ed to take these jobs.

The Chamber of Commerce offers free classes in English as well as research support for individuals and companies, and welcomes the chance to assist foreign investors looking into opportunities in Belgrade. “We can help them with how to start a business and with whom,” Milan Jankovic says, noting that Belgrade takes a broader perspective than other municipalities and always keeps regional and European markets in mind. Internationally oriented Belgrade welcomes visitors and investors.

Where Danube and Sawa meet

Monument of the Unknown Soldier

2626

City of Belgrade

Luka Beograd

Visionary Transformation of Belgrade’s RiverfrontBelgrade now has a unique opportunity to reconnect with the Danube. Once the city’s port and related facilities are relocated, Danube. Once the city’s port and related facilities are relocated, a 450 hectare site along the river – the biggest waterfront in Europe – will be developed in the Luka Beograde project, which includes a 6.5 km stretch of prime river frontage.

Ivana Veselinovic, Luka Group President

SERBIA

planning. “Normally they work with governments and city institutions, but with us, they are working with a private company. We hope they will have an impact on other parts of the city. We believe Belgrade’s current development strategy is not visionary. It needs to be taken to another level,” Ivana Veselinovic says.

Partnering with the city

The Luka Group is very aware of the importance of this project to the future of Belgrade. “We know that this is a huge opportunity not to be missed, and we want to avoid the kind of approach taken recently in Belgrade in which things are developed without any long term overall perspective. We are working very closely with the city of Belgrade to make sure this project is done correctly,” Ivana Veselinovic explains.

Bearing in mind the signifi cance of the project for the city, Studio Libeskind has, for the fi rst time, offered three options for the Master Plan of the Belgrade Danube Waterfront, to be submitted for considera-tion to responsible city and expert institutions, as well as Belgrade’s and surrounding areas. The fi nal choice will include specifi c features such as city’s topography, to highlight its historic landmarks, and in general to emphasise all the factors that make Belgrade unique. Ivana Veselinovic explains, “Today’s cities compete with other cities, not other countries. We will compare Belgrade with Vienna, a similar city on the Danube, or

This ambitious endeavour will forge a link between Belgrade’s historic city centre and one of Europe’s greatest rivers. It will replace industrial facilities and warehouses with residential developments, restaurants, shops, entertainment, sports facilities, educational institutions, a riverfront park, and much more.

The search is underway for the ideal concept and design for the new project, which is set to transform downtown Belgrade. The Luka Group, owner of the site, has taken an innovative approach by requesting input from experts in many fi elds. Planning authorities, traffi c consultants and architects from Belgrade; Studio Libeskind creating Master Plan from New York, Gehl Architects from Copenhagen; Aristotle University in Thessalonica; the University of Belgrade; and others have all been asked to submit their proposals for the new development. Ivana Veselinovic, Luka Group President, says, “Our aim is to ensure that the development proceeds according to international best practices.”

From industrial port to attractive riverfront

Belgrade was founded as a port where the Danube and the Sawa rivers meet, and over the centuries its port operations, shipyard and related activities and infra-structure have dominated the riverfront. The Luka Group aims to change this. Ivana Veselinovic points out, “This project includes a very large area along 6.5 km of riverfront that must be planned strategically and with a vision. It also must have fl exibility embedded in it, to create options that can be adapted to different economic situations and needs.”

The fi rst phase of the project for the Luka Group was to hire experts to complete analyses of environmen-tal issues, traffi c patterns and other factors related to the site. The group then contacted Gehl Architects, who are known for their expertise in innovative urban

27

Luka Beograd

Visionary Transformation of Belgrade’s Riverfront

City of Belgrade

SERBIA

Copenhagen, Lisbon, Barcelona, and other waterfront projects in the world.”

While the guiding principle for the Luka Group in its Luka Beograd project is to focus on the Danube, the group is also looking at other European waterfront cities. “The Danube is our key, but we are also studying other urban waterfront projects of a similar size that had to go through a similar process, like Hamburg’s and Lisbon’s,” Ivana Veselinovic explains.

Public-private collaboration

Public-private collaboration is essential for making the Luka Beograd project a success, according to Ivana Veselinovic. She says, “We cannot complete this project without public-private collaboration, and yet this kind of collaboration has not yet been tried in our country.”

Internationally renowned New York based architect Daniel Libeskind decided to get involved in the project after visiting Belgrade many times and “falling in love with the city,” Ivana Veselinovic says. The architect, who is also involved in major projects – he is Master Planner for the World Trade Center in Manhattan and the Jewish Museum in Berlin – has already presented three concepts for Luka Beograd. “We want the world to recognise that Serbia has attracted great international talents like Daniel Libeskind,” she adds.

The Belgrade Danube Waterfront project will be divided in two phases and will take around 20 years to complete, with a budget of around €5 billion. The construction of planned 2.5 million square metres will include 98,000 people and 44,000 new jobs. This will have a major impact on the city economy, so the city budget revenues from the Port of Belgrade modernisation project will total about €906 million, or €76 million a year on average. It is estimated that the project implementation will result in an additional increase of the GDP growth both for the city and the Republic.

In this visionary project, Luka Group wishes to combine knowledge, equity partners, and best practice from all over the world into a transparent process in order to add “something really new” to Belgrade, Ivana Veselinovic concludes.

Luka BeogradZorza Klemansoa 37, 11000 Beograd

www.port-bgd.co.yu

International Funders

• EBRD Biggest Investor in Serbia

• World Bank Playing Key Role

• IFC Supporting Financial Sector and More

29


EBRD Biggest Investor in SerbiaThe European Bank for Reconstruc-tion and Development (EBRD) is the biggest investor in Serbia, having committed €2.9 billion in 79 projects in the country as of January 1, 2008. The net business volume of these projects is €1.3 billion. EBRD has a 50% share in Serbia’s private sector.

Infrastructure has been EBRD’s main focus in Serbia but the bank has also supported a range of other sectors. The sector breakdown of EBRD’s investments in Serbia at the beginning of 2008 was 38% for municipal and environmental infra-structure and transport; 26% for the corporate sector (including agri-business, manufacturing, property and tourism, and telecommunica-tions); 19% for the fi nancial sector (including banking, non banking, equity funds and trade fi nancing); 13% for the energy sector; and 3% for micro and small business fi nancing.

Helping to attract interna-tional investment

According to a recent EBRD report, the bank expects to increase its private sector operations in Serbia as the privatisation process gains momentum. “New investment will help to create clearer ownership and corporate governance of companies. In addition, a large part of Serbia’s debt has been restruc-tured through an agreement with the Paris Club. Improvements in the investment climate should contribute to greater investor confi dence in the country and speed up the integration of Serbia into

SERBIA

the regional and world economies,” the report explains.

Last year alone EBRD committed€212 million to new projects in Serbia. The bank is gradually shifting its focus away from infrastructure and energy to focus more on the private sector, and its commitments to fi nancial insti-tutions increased to €298 million last year. EBRD is also stepping up its support for small and medium-sized enterprises through its Turnaround Management (TAM) and Business Advisory Services (BAS).

According to a policy statement it released last year, EBRD’s current strategy is to continue to provide fi nancing for privatisation and

post privatisation restructuring to both local and foreign enterprises, and to focus increasingly on large enterprises in their consolidation and future expansion plans, including further regional penetration.

The new EBRD-Italy Western Balkans Local Enterprise Facility enables the bank to support smaller, fast growing companies through debt, quasi debt and equity fi nancing, still relatively scarce in Serbia. The report states, “The biggest number of transactions is expected to be generated in agri-business, but opportunities should arise in other sectors undergoing privatisation and restructuring, par-ticularly in natural resources and general industry.”

Infrastructure has been EBRD’s main focus in Serbia

© SIEPA

3030


World Bank Playing Key Role

The World Bank is playing a major role in supporting Serbia’s on going economic development and reforms. Its priorities are to help ensure Serbia’s macroeconomic stability, promote the growth of the private sector, help control corruption, reduce poverty, improve quality of life, and make Serbia more competitive.

As the bank’s mission statement for Serbia explains, “The World Bank aims to help develop an economy that creates jobs, a fi nancial system that operates effi ciently, laws that make sense, and a justice system that is honest.”

Bank involved in financial sector reform, privatisation

Simon Grey, Head of the World Bank office in Serbia, says, “We at the World Bank are proud to be associated with key reforms in Serbia. The World Bank has been involved, for example, in Serbia’s

SERBIA

reforms of the financial sector and in its privatisation process. Now Serbia needs to continue to move forward to meet EU standards.” He says that Serbia needs to focus on both productivity and profitability to make sure that private investors will reinvest there.

Key challenges Serbia faces, according to Simon Grey, are its currently inadequate pension system, the need for more focus on developing high quality human resources and educational opportunities, and the need to make the country more competitive, for example through privatising infrastructure and tele-communications. In addition, public expenditure needs to be reduced.

Wide range of projects

Simon Grey explains that the World Bank is providing funding for a wide range of projects in Serbia that include regional development initiatives, development loans for both the public and private sectors, infrastructure, and health care. Overall, the World Bank is providing around €104 million in funding in Serbia per year, which is around 1% of its global funding.

Specific funding programmes include a €14 million credit for the development of Serbia’s health care sector; improvements in 650 secondary schools and 50 primary schools; and support for the Labour Redeployment Project and other employment initiatives.

The World Bank partners in Serbia with the European Agency for Reconstruction, the British Department for International Development, UNPD, EBRD, the US Agency for International Development and the governments of Canada, Japan, the Netherlands, Sweden and other bilateral donors.

Through supporting Serbia’s economic development the World Bank is creating opportunities for investors. As Simon Grey explains, “The government must follow a set of procurement procedures to select companies to be involved in projects, and bids above a certain threshold must be tendered internationally.”Worldbank is providing funding for a lot of projects in Serbia that include regional development initiativesWorldbank is providing funding for a lot of projects in Serbia that include regional development initiatives

© SIEPA

31


IFC Supporting Financial Sector and MoreThe International Finance Corporate (IFC), part of the World Bank, has been instrumental in helping Serbia establish a viable economy. As of June 2008, the IFC’s committed portfolio in Serbia totalled 286.1 million in 10 projects, the majority of which are in the fi nancial sector. In addition, IFC has fi nanced three regional funds which include Serbia.

SERBIA

Focus on SMEs

Giovanni Daniele, Chief of Mission at IFC, explains that IFC is mandated to invest only in the private sector, and that it has invested in a wide range of activities in addition to financial services, including residential real estate development, con-struction, agribusiness and retailing. “One key focus for IFC is definitely small and medium sized enterprises (SMEs),” he explains. He adds, “We would now like to move away from banks and support non-banking financial services enterprises, including leasing and insurance companies.”

IFC’s projects in Serbia include assistance in privatising the banking sector; supporting the entry of foreign investors (including Raiffeisen, Banka Intesa and NLB), which resulted in more mortgage, consumer and SME financing; supporting microfinance institutions;

and introducing new products, including credit lines to support energy efficiency investments through IFC’s investment in ProCredit Serbia.

In the corporate sector, IFC’s many projects include providing loan and equity investment and advisory services for Tigar Rubber Company, a leading regional producer of automobile tyres, and assistance to Mercator, Slovenia’s biggest food retailer, in establish-ing hypermarkets in Serbia.

Advisory services

IFC’s investment in regional private equity funds has benefited Serbia’s small and medium sized enterprises, and IFC has provided advisory services in many areas, for example concerning infra-structure development. It has also supported an alternative dispute resolution (ADR) programme and the creation of eight mediation centres in Serbia.

To help Serbia become more competitive internationally and to attract more international investment, IFC is working with the World Bank to assist the government in upgrading the country’s regulatory environment and quality standards. It is also working with four municipali-ties and has devised a corporate governance programme aimed at CEOs and managers. IFC also advised the National Bank of Serbia on the new securitisation law.

Projects in Serbia include assistance in privatising the banking sector and supporting entry of foreign investors

Giovanni Daniele is positive about Serbia’s investment potential and prospects for continued growth. He cites Serbia’s ability to serve as a gateway to Russia and adds, “At the end of the day, you have to factor in productivity, and I think that on this front the Serbian workforce performs very well compared to other countries in the region.”

Finance & Banking

• Prime Minister Discusses Effects on Serbia of Global Financial Crisis

• Tighter Monetary Policy to Protect Financial Sector Stability

• Central Bank Anticipates Even Stronger Fiscal Policy

• Belgrade Stock Exchange Seeing Rapid Growth

“The financial sector has made great progress since 2000.”

Radovan Jelasic, Governor of the National Bank

33

Finance & Banking

Prime Minister Discusses Effects of Global Financial Crisis Prime Minister Mirko Cvetkovic, Prime Minister Mirko Cvetkovic, Serbia’s former Minister of Finance, discusses recent developments in Serbia’s fi nancial sector.

SERBIA

ET: Foreign banks have a strong presence in Serbia. What is their impact on Serbia’s banking sector?

M. Cvetkovic: Our banking system is very competitive and banks from all over Europe are present here, including banks from France, Austria, Greece and Italy. The competition these foreign banks provide is great for consumers. The second positive thing is that overnight we have destroyed all non performing banks and we have created a banking system that is solid and making a profi t.

ET: Have foreign banks helped to boost Serbia’s economic development?

M. Cvetkovic: A very important role foreign banks are playing is through providing loans and other support from their mother banks. Foreign banks are also bringing foreign currency into the country via their international networks, which is helping us strengthen our foreign currency reserves.

ET: Are their any negative effects about having such a strong presence from foreign banks?

M. Cvetkovic: The only negative effect may be that demand for loans is increasing since these banks have issued loans. Generally, however, foreign banks have a very positive effect on Serbia’s economy.

ET: What are other benefi ts of having foreign banks in Serbia?

M. Cvetkovic: In addition to providing fi nancial support for individuals and companies, foreign banks are employing Serbian workers. We have a large pool of high skilled fi nancial sector professionals here in Serbia, and foreign banks are taking advantage. These banks are employing big; who cares whether they are foreign or not?

Mirko Cvetkovic, Prime Minister

ET: What are some of Serbia’s top performing foreign banks?

M. Cvetkovic: This is a very competitive market, as I pointed out, and generally speaking, all the banks now operating in Serbia are having a very positive impact on the economy.

ET: What are the prospects for 2009?

M. Cvetkovic: Due to effects of the global fi nancial crisis, we can expect Serbia’s rate of the economic growth to be around 4% next year, compared to 7% to 7.5% this year. The government will have to implement a more restrictive fi scal policy and control consumption. Financing for investments in Serbia’s economy will be more limited and more expensive next year. On a positive note, we expect that our budget defi cit should be below 2%. The budget for 2009 will include fi nancing for urgent interven-tions for the banking system if necessary. Serbia is not an isolated island. The international crisis is affecting us along with all other countries.

The National Bank building

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Finance & Banking

Serbia’s fi nancial sector is one of the country’s success stories. The National Bank of Serbia (NBS), the country’s central bank, has developed a stringent regulatory environment to keep Serbia’s fi nancial sector on track.

Strong growth in deposits and foreign reservesThe NBS’s foreign reserves rose from €1.3 billion in 2001 to €9.6 billion this year, while savings deposits by Serbians rose from €329 million to €5.8 billion over the same period. Meanwhile, Serbia’s dinar reserves grew from RSD41.4 billion (€0.5 billion) to RSD161.7 billion (€1.92 billion) and foreign investments from €184 million to €1.58 billion.

Nevertheless, major challenges remain for Serbia’s fi nancial sector, including infl ation and a growing current account defi cit that has increased from €976 million in 2001 to €1.4 billion this year. While the NBS and the government have shown their willingness to tighten monetary policy further to cope with these problems, the global fi nancial crisis has created a major new hurdle.

Coping with global crisis

In a speech he gave at the Serbian Economic Summit in Belgrade on November 4 this year, Radovan Jelasic, NBS Governor, explained, “The challenge we are currently facing comes from abroad and forces upon us a new set of rules, puts things into a different context, and requires a different perspective, if not to adopt a completely new

SERBIA

pattern, then at least to think and work faster and more effi ciently.”

Key issues facing the global fi nancial sector, according to Radovan Jelasic, include markets’ reduced tolerance of mistakes in macroeconomic policy. “We are still paying for the mistakes made in earlier years,” he says, noting that the implications of the current crisis for Serbia are far ranging. “The spreads are changing now, even the exchange rate, and we are receiving bills for all that we have not done.”

Policy change necessary

The Governor believes that Serbia has two choices: not to change anything of consequence or to go for a complete turnaround in its economic policy, freeze consumption and allow only for an increase in capital investment. He favours change. He adds, “I am convinced, however, that we not only want, but also can change the economic policy

in our favour. This shall not be popular, but shall certainly be useful for us.”

The NBS has proved to be productive in its response to recent events, and the banking sector overall has also performed well, according to the Governor. He says, “Banks have managed to withstand the pressure without resorting to either tax payers’ money or decreasing the volume of insured deposits.” A number of banks from throughout Europe have established a presence in Serbia, boosting competition and bringing in foreign reserves.

PBB plans share issue

Privredna banka Beograd AD (PBB), a successful Serbian bank, was restructured after its 2006 IPO into a universal commercial bank by a dynamic new management team. Building on the strong support it has received from the EBRD, PBB provides a range of lending products

Privredna banka Beograd AD

Tighter Monetary Policy to Protect Financial Sector Stability

3535

Tighter Monetary Policy to Protect Financial Sector Stability

Finance & Banking

SERBIA

and offers outstanding investment opportunities.

Cedo Petrovic, PBB’s Chairman of the Board, explains, “We aim to expand our activities and boost our deposits and number of clients. We can expand our level of lending, but we need additional capital; we are planning to issue preferential shares. PBB is a small bank with huge potential. Investors can benefi t from our well-established network and in-depth local knowledge.” He adds that PBB is looking into cross-border fi nancing.

“Only hard work counts now”

To maintain Serbia’s fi nancial sector success in this diffi cult period, the Governor calls for “additional measures to strengthen macroeco-nomic stability, but not necessarily

additional funds. There can be no more muddling through; only hard work counts now.”

Serbia’s entry into a Stabilisation and Association Agreement (SAA) with the EU as a step toward EU accession will give the country’s economy a boost but will not protect it from external shocks, Radovan Jelasic points out. He says, “The SAA does not mean that we will be able to relax. The agreement represents only a chance for a better life, not a guarantee.”

Putting this proactive approach into practice, the NBS recently intervened in the Interbank forex market by selling €20 million to prevent high daily oscillations in the exchange rate. As a result, the indicative exchange rate levelled off

at RSD86.7145 for €1 on the day of the NBS’s intervention.

The NBS will continue to cope with the current challenges by reinforcing its regulations and controls. The governor says, “Recent events confi rm that it pays off to be restrictive if you are a fi nancial sector supervisor like the NBS is. Our banking sector has proved in practice that it is solvent and liquid and can withstand the pressure. Moreover, when push came to shove, foreign majority investors were ready to support their institutions in Serbia.”support their institutions in Serbia.”

Zepter Building

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3636

Finance & Banking

Central Bank Anticipates Even Stronger Fiscal PolicySerbia’s fi nancial sector has made tremendous progress since 2000 and has received praise from international ratings agencies concerning its regulatory environment and performance. The National Bank of Serbia, the country’s central bank, has been instrumental in bringing the fi nancial sector up to international standards.

SERBIA

Today, as countries all over the world are working to combat current global fi nancial uncertainties, the National Bank is taking a proactive approach and focusing on implementing more stringent controls. Radovan Jelasic, Governor, explains, “Conditions in the international fi nancial sector are bad and no one can see the light at the end of the tunnel. Capital markets are turbulent, in spite of interventions. The global banking sector is facing major challenges, including capital adequacy, and yet banks must continue to provide loans if development is to continue. To survive such uncertainty, it is very important for a country’s fi nancial sector to have political support, as we do in the Baltic states. The devil is at our door, and we cannot afford higher pensions and higher salaries.”

Combating infl ation and public sector defi cit

The Serbian dinar has decreased in value by 5.8% because of the crisis, and infl ation remains a threat. Providing cheap credit will be impossible for Serbian banks in 2009, and the National Bank notes that the anticipated fall in the value-added tax will have a negative impact on the state budget. Next year, Radovan Jelasic says, “We will have to continue to deal with the two main challenges the fi nancial sector faces, which are infl ation and the current defi cit. Basically, structural changes are not a quick fi x. The main tool that we need to employ now is a strong fi scal policy.”

As for the coming fi ve years, the National Bank governor calls for “on-going structural changes and continuing privatisation” in order to ensure that

The National Bank building

Serbia can continue to achieve its development goals. In spite of the problems to be overcome, Radovan Jelasic is very positive about Serbia’s future, particularly because of the country’s strong performance over the past eight years. He says, “We need to be realistic. We do not expect to see the effects of our current strategies for another two to three years. Nevertheless, this is not the fi rst time that Serbia has faced such major challenges. We have achieved excellent results under very diffi cult conditions in the past, and can do so again.”

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37

Finance & Banking

Hypo Group Alpe Adria

Outstanding Track Record of Service for Leading BankThe Hypo Group Alpe Adria was an early investor in Serbia where it has developed a leading position in the fi nancial services sector. Hypo Alpe-Adria-Bank a.d. Beograd has a 15% share of the housing loans market and around a 14% share in both lending to small and medium size companies and agricultural fi nancing; its focus is on corporate banking. The bank anticipates profi ts of around €30 million for 2008 and around €40-45 million next year.

Hypo Alpe-Adria-Bank entered the Serbian market in 2002 and has benefi ted from the advantage of being one of the fi rst to invest in an emerging market. The bank maintains its competitive edge thanks to its strong track record of performance and service. As Chairman of the Executive Board Vladimir Cupic explains, “What matters most to customers is quality of service, defi ned by standards of operations and the quality of the people that a company employs. We are known for the quality of our service and for fi nding creative, fl exible solutions for our clients.”

Hypo Alpe-Adria-Bank in Serbia has an excellent track record in structuring mergers and acqui-sitions, real estate projects and targeted fi nancing. A recent project for the bank is Block 67, the

SERBIA

biggest real estate project currently underway in Serbia. Block 67 is a residential development that has been chosen to accommodate the participants of the Universiade 2009 sports games, and around 80% of the apartments in the project have already been sold. Hypo Alpe-Adria-Bank structured and fi nanced the project, working in partnership with the Delta Group.

Serving foreign investors

The bank provides a wide range of services to local and foreign investors, and a sister company is the biggest leasing operation in Serbia. “With our leasing capacity, banking operations and cross border portfolio combined, Hypo Group Alpe Adria is the second largest fi nancial services institution in Serbia,” Vladimir Cupic says. He adds, “In a market like Serbia, foreign investors need a stable partner they can rely on. That is where we come in.” He urges foreign investors to visit Serbia and see for themselves what the market can offer.

Vladimir Cupic foresees more part-nerships, mergers and acquisitions, increased fi nancing of investment projects and other services as growth areas for the bank in the future. He concludes, “Customers come to us for our fl exibility and reliability. At the end of the day, clients want to do business with a fi rm that can close the deal, and that fi rm is Hypo Group Alpe Adria. We offer the right kind of service and the right solutions.”

Hypo Group Alpe - Adria BankBulevar Mihajla Pupina 6

11070 Belgrade Serbia

Tel: +381 11 222 6713 www.hypo-alpe-adria.rs

Vladimir Cupic, Chairman of the Executive Board

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Finance & Banking

Belgrade Stock Exchange Seeing Rapid GrowthThe Belgrade Stock Exchange, founded in 1894, has achieved a number of milestones since it began trading foreign exchange savings bonds in 2001. The exchange is now a full member of the Federation of Euro-Asian Stock Exchanges and an associate member of the Federation of European Stock Exchanges, and it has signed a partnership agreement with several regional exchanges.

High quality products

Since 2000, the exchange has introduced several products to promote effi cient trading and import of orders and to boost market surveillance. The most important of these products is the BELEX system, which allows for brokers to trade from remote locations and enables trading in almost all trading materials and methods allowed on the exchange.

The new main board allows brokers to more easily monitor securities and to customise the appearance of the board and columns. Brokers can also monitor the exchange’s indices, follow their orders, and receive data on orders and executed transactions, which they can use in back offi ce applications to process the trading day.

The exchange offers continuous trading and monitoring through RSS online and through SMS and

Gordana Dostanic, Director of the Belgrade Stock Exchange

SERBIA

WAP services, and launched its new version of BELEX, the BELEXFIX information system, earlier this year. It is also helping to upgrade Serbia’s capital markets by organising various training and educational programmes to assist professionals in achieving best practices.

Planned privatisations to further stimulate market

Gordana Dostanic, Director of the Belgrade Stock Exchange, says, “Serbia’s capital markets activity has been growing rapidly and we see great potential for further development, especially because of the planned privatisations of several major companies whose combined capital will be around €6.5 billion. We anticipate signifi cant opportuni-ties in telecom, energy and pharma-ceuticals privatisations.”

Serbia has both regulated and unregulated markets, and foreign investors make up around half the total investors on the combined markets. Gordana Dostanic explains, “Around 30 to 40 companies fi t the criteria to be on the regulated market, and around 1,700 on the unregulated market. There are a certain number of companies on the unregulated market which, although they do not meet the requirements to be listed on the regulated market, are interesting for investors and have a high level of liquidity, for example for banks. We hope to attract more Serbian companies to the regulated market, which will in turn attract more foreign investors.”

New IPO legislation awaiting approval by parliament

New legislation is needed to allow for IPOs, Gordana Dostanic says, for example of Telekom Serbia, whose IPO has long been awaited, and for ComTrade, which has announced a plan to achieve an IPO in the near future. She says that this legislation has already been prepared and is now awaiting parliament’s approval.

The securities market is being stimulated by new measures. New government securities are being issued in dinars to promote the local currency, and the creation of new pension funds in addition to the national pension fund (currently valued at €38 million) could stimulate securities investments on the regulated market, Gordana Dostanic explains. She notes that the

39

national pension fund needs to be strengthened and reorganised.

Concerning the possibility of new pension funds, Gordana Dostanic says, “We estimate that there is a chance to open new pension funds and also to increase participation and investment in these funds. There are some limitations as far as securities are concerned as these funds can only invest in securities on the regulated market. If investors decide to invest in securities on the unregulated market, then the central bank requires a certain level of reserves.”

Brokerage fi rms providing world-class services

To assist investors looking to take advantage of opportunities in Serbia, the country now has a number of brokerage fi rms, including M&V Investment, KBC Securities, Citadel, and Sinteza Invest.

M&V Investments, founded in 1995, was one of the fi rst to enter the market. “The privatisation process created huge potential for

us,” Dragijana Radonjic Petrovic, Director, explains. She adds, “There is a lot of equity trading, and both foreign and local investors are looking for companies with liquidity and strong management. We mainly deal with institutional investors. With IPO activity, we will attract more investors. We are advising one company that is planning an IPO next year. As Serbia’s leading brokerage company with the longest tradition, we can offer the best quality of services. No one else can do it better.”

Dragijana Radonjic Petrovic is bullish on the Serbian market. She says, “Because of increasing IPO activity here, Serbia will be a market investors can get involved in. We will attract that hedge fund or mutual fund that wants to accept risk and has experience in this region. Our market will go higher much faster than more mature markets will.”

All the experts agree that once it changes its legal framework to make it more investor friendly, Serbia’s capital markets will continue to develop rapidly.

40

Finance & Banking

SOCIETE GENERALEAddress: Bulevar Zorana Dindica 50a i 50b, 11070 Novi BeogradPhone: +381-11-301-1400, 301-1555 Fax: +381-11-328-2230 Web site: www.societegenerale.co.yu

ERSTE BANK AD NOVI SADAddress: Bulevar osobodjnja 5, 21000 Novi SadPhone: +381-21-480-9402 Fax: +381-21-489-0651 Web site: www.erstebank.co.yu

BANCA INTESA AD BEOGRADAddress: Milentija Popovica 7 b, 11070 Novi Beograd Phone: +381-11-201-1441, 201-1200 Fax: +381-11-201-1207 Web site: www.bancaintesabeograd.com

EUROBANK EFG ŠTEDIONICA AD BEOGRADAddress: Kolarceva 3, 11000 Beograd Phone: +381-11-332-365, 333-2311 Fax: +381-11-302-7536 Web site: www.eurobankefg.co.yu

FINDOMESTIC BANKA AD BEOGRADAddress: Kosovska 10, 11000 Beograd Phone: +381-11-333-1717, 322-8886, 333-1711 Fax: +381-11-322-1526 Web site: www.fi ndomestic.co.yu

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HYPO ALPE - ADRIA - BANK AD BEOGRADAddress: Bulevar Mihajla Pupina 6, 11070 Novi Beograd Phone: +381-11-222-6000, 080-0303303 Fax: +381-11-222-6799 Web site: www.hypo-alpe-adria.co.yu

KOMERCIJALNA BANKA AD BEOGRADAddress: Svetog Save 14, 11000 Beograd Phone: +381-11-308-0100,308-0150 Fax: +381-11-344-1335,344-0033 Web site: www.kombank.com

MARFIN BANK AD BEOGRADAddress: Dalmatinska 22, 11000 Beograd Phone: + 381-11-330-6300 Fax: + 381-11-324-1448 Web site: www.marfi nbank.rs

PRIVREDNA BANKA BEOGRAD AD BEOGRADAddress: Bulevar kralja Aleksandra 70, 11000 Beograd Phone: +381-11-381-6555 Fax: +381-11-381-6700 Web site: www.pbb-banka.com

RAFFEISEN BANKAAddress: Bulevar Zorana Dindica 64a, 11000 BeogradPhone: +381-11-3202100 +381-113202777 Fax: +381-11-2207019 Web site: www.raiffeisenbank.co.yu

METALS BANKAAddress: 2 Strazilovska Stret, 21000 Novi Sad, SerbiaPhone: +381-21-488-4400Web site: www.metals-banka.co.yu

Overview Key Banks

Trade & Industry

• Signifi cant Attractions for Export-Oriented Companies

• Minister of Trade and Services Cites Advantages for Investors

• Dynamic Foreign Investors Helping to Build a Better Serbia

“The current government is committed to ensuring a stable,

investor-friendly business environment.’

Slobodan Milosavljevic,

Minister of Trade and Services

42

Trade & Industry

SERBIA

42

South Eastern Europe has the highest growth rate in

Europe and is one of the fastest growing regions in the

world. Serbia, in the heart of the region, is positioning world. Serbia, in the heart of the region, is positioning

itself as a key hub for trade and services. Serbia benefi ts

from its participation in the Central European Free Trade

Agreement (CEFTA), which allows companies to reach

markets with a total 30 million people, customs free.

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. Serbia

also has preferential trade status with the EU and the

US, providing an additional incentive for investors.

In addition to its free trade agreements and prefer-ential trade deals, Serbia, as a transitional economy, has an added advantage in that it offers skilled low cost labour, a fast growing domestic market, a strong GDP growth rate of around 7%, and a government committed to achieving EU membership.

Infrastructure investment

Signifi cant investment in infrastructure, particularly the key trans European Corridor 10 route that passes through Serbia, is increasing Serbia’s appeal as a trade and services hub.

Under the current government, Serbia is countering its negative international image by implementing rigorous EU and international standards, establishing regulatory bodies for key sectors, enhancing health care and education, focusing on social services, and combating corruption.

Serbia is also stepping up its trade activities. According to the Serbia Investment and Promotion Agency (SIEPA), Serbia’s overall foreign trade in 2007 reached €21.1 million, a 38.6% rise over the previous year, and the total value of exports in 2007 was €6.8 million, a 37.3% increase over 2006.

Top earning exports

Top earning exports last year were iron and steel (€0.78 billion, 12.4% of total exports), non ferrous metals (€539.1 million, 7.9% of total exports), fruits and vegetables (€362.9 million, 5.3% of total exports), garments (€345.9 million, 5% of total export), other metal products (€331.6 million, 4.8% of total exports), other miscellaneous manufactured articles (€297.4 million, 4.3% of total exports), cereals and cereal products (€266.4 million, 3.9% of total exports), electrical machinery, units and appliances (€250.6 million, 3.6% of total exports), rubber products (€222.7 million, 3.2% of total exports) and organic chemicals (€203.8 million, 3% of total exports).

Imports grew as well last year, reaching €14.24 million, a 39.3% increase over 2006, for a defi cit of €7.39 million, or 41.2% above the defi cit in 2006. Serbia’s main imports last year were petroleum and petroleum products, vehicles, iron and steel, industrial machines, electrical machinery and appliances, natural and manu-factured gas, non ferrous metals, specialised industrial machinery, telecom equipment, and metal products.

Key goals for Ministry of Trade

Obviously, the government is focusing on reducing the trade imbalance. Minister of Trade and Services Slobodan Milosavljevic recently commented that a priority of his new ministry will be to stimulate domestic trade so that Serbia can increase its presence abroad and place more Serbian goods in neighbouring markets.

The second goal for the ministry is investment in the trade and services sector, which will create new jobs, improve competition and give a new impulse to the development of the Serbian economy. The trade sector has signifi cant investment appeal, as its track record shows. In the period 2001 to 2007, Serbia’s trade grew 2.5 times faster than that of the overall economy, according to the minister, who pointed out that in 2007, Serbia’s trade GDP reached €3.3 billion and accounted for 10.8% of Serbia’s GDP.

To help attract more investment in trade oriented activities, Slobodan Milosavljevic says that the

Signifi cant Attractions for Export- Oriented Companies

43

Trade & Industry

SERBIA

Signifi cant Attractions for Export- Oriented Companiesgovernment will focus on maintaining macroeconomic stability, combating excess red tape, and creating even more incentives for foreign investors. Promoting trade oriented small and medium sized enterprises is a key goal for the government; Serbia now has some 105,000 registered SMEs.

The minister adds that the gov-ernment’s increased focus on ending monopolies (for example in the telecom and information technology sector) and on promoting free market principles in general is crucial in attracting international investors.

Enhancing competition and consumer protection

The Minister of Trade adds that Serbia has signifi cant EU funding to call on to upgrade its trade and services environment, for example through ensuring more competition and better protection for consumers. “We have instituted a new law against monopolies, and we will fi ght the grey market by stepping up our system of imposing taxation responsibilities. We also aim to harmonise our laws on value added tax and fi scal tax registers to meet EU standards,” Slobodan Milosavljevic says.

The Minister of Trade says he expects many new players to enter the trade sector in the near future and that he aims for Serbia to work to expand its wholesale and retail trade networks to enhance opportunities for trade oriented businesses.

New Belgrade Interchange

© SIEPA

Source: Statistical Offi ce of the Republic of Serbia

Foreign Trade in Goods (US$ million)

4444

Trade & Industry

Minister of Trade and Services Cites Advantages for InvestorsSlobodan Milosavljevic, Serbia’s Minister of Trade and Services, has held a number of important public and private sector posts before assuming his current ministerial role, including serving as Serbia’s Minister of Trade, Tourism and Services from 2001 to 2004, and as Minister of Agriculture, Forestry and Water Management from 2007 to July 2008. He discusses Serbia’s trade policies and investment attractions.

Slobodan Milosavljevic, Minister of Trade and Services

SERBIA

ET: What is Serbia doing to attract foreign investors?

S. Milosavljevic: Necessary legis-lation concerning some industries has been prepared and is awaiting the assembly’s approval. This government is very focused on attracting foreign investment, so we expect the process to move forward quickly.

ET: What are your priorities as minister?

S. Milosavljevic: One of my goals is to help foster positive relationships with both domestic and international companies, to reduce ineffi ciencies, and to bring more large international retail chains to Serbia to increase competition. This government will work with all countries to boost Serbia’s foreign trade.

ET: How will Serbia’s drive to gain EU candidate status affect trade and investment?

S. Milosavljevic: We aim to maintain the SME sector in the trade business, now with 105,000 registered companies; strengthen competition; and practice economic diplomacy to enter other markets. We have new laws, for example on e-commerce, which can create new jobs, and a law against monopolies to ensure competition. We also aim to use EU funds for consumer protection measures. We will fi ght the grey market by ensuring that companies pay their taxes, and we will harmonise our laws on VAT and on tax registries. We anticipate new players in our trade sector, and we aim to expand our wholesale and retail network.

ET: What has hindered investment in Serbia up to now?

S. Milosavljevic: One of the most harmful obstacles Serbia faces is its negative image. Many if not all investors that come to Serbia are shocked when they see just how

developed the country is, and how effi cient and productive our business sector is. The current government is committed to ensuring a stable, investor friendly business environment.

ET: How will the global economic slowdown affect Serbia?

S. Milosavljevic: This may benefi t Serbia. Now more then ever, companies need to be more prudent in their costs and operate where they can re-invest the maximum amount of profi ts as credit becomes scarce. Serbia has one of the most attractive corporate tax structures in the region, and this government is prepared to offer companies very attractive incentives for bringing business and jobs to Serbia.

45

Trade & Industry

Avala Ada

Reliable Partner in Packaging Industry Avala Ada has over 60 years of history, having been founded in 1946. The fi rm was privatised in 2003, and became a member of the KappaStar Group. Currently, the Avala Ada facility covers around 37,000m2, including the manufacturing plant, stores and management offi ces - all under the same roof, on the plot of ground that covers 115,000 m2.

Avala Ada supplies the largest food manufactur-ers in Serbia, but it is also a highly valued partner of other industries such as tobacco, pharmaceuticals, chemicals, confectionery, alcoholic and non-alco-holic beverages, cosmetic industry, and household equipment production. Avala Ada’s strategy is based around the delivery of a complete service to our customers. Its clients are major Serbian fi rms and big multinationals located in Serbia, such as Philip Morris, British American Tobbaco, Interbrew, Henkel, Japan Tobacco, Michelin, Efes Pilsen, Rauch.

Avala Ada has two separate production lines: commercial folding boxes (capacity 100 million m2) and corrugated board boxes (capacity 9,000 tonnes). Avala Ada can offer in-house CTP plate making as well as in-house CAD facilities that allow the company to create carton spreads to meet customers’ individual requirements. An in-house ELCEDE machine is used to produce test samples. One of the company’s biggest competitive advantages lies in the fact that Avala Ada has every key process in-house, which allows it to react quickly if a client needs an urgent change on their packaging.

In recent years, Avala Ada has made signifi cant investments in new manufacturing equipment. One of the biggest investments was in May 2007, when Avala introduced a new DRO 1628NT rotary die-cutter for the processing of corrugated board. This machine features four printing units and can achieve a mechanical speed of 11,000 sheets per hour. In 2008, the investments reached 25 million. Following the world market trends, Avala Ada’s management intends to continue investing in the most modern technical equipment.

SERBIA

Avala Ada was one of the fi rst companies in the region that received the ISO 9000 certifi cate in 1996, and all operations and procedures are conducted in line with defi ned quality management procedures. Today, the company has in place Total Quality Management, which includes certifi cates ISO 9001, ISO 14000 (ecology standards), HACCP (food safety) and OHSAS 18001 (safety at work). This makes Avala Ada the only company in Serbia which follows all four quality standards, and the only safe option for food packaging.

Avala Ada is increasingly active on the international stage, particularly in neighbouring countries. In the last few years, Avala Ada has opened up new markets starting supplies to Croatia, Slovenia and Bosnia and other markets in the region. Due to the high quality standards of their products and competitive prices Avala Ada is a good supplier to the most demanding West-European customers.

Prilazni put Adi Huji 9, 11000 Belgradetelephone: +381 11 2075 404

[email protected] - www.avalaada.rs

4646

Trade & Industry

Dynamic Foreign Investors Helping to Build a Better SerbiaSerbia’s proactive private sector is a key attraction for foreign investors, and the Foreign Investors Council foreign investors, and the Foreign Investors Council (FIC) is helping to make Serbia’s advantages better known worldwide. The FIC was founded in 2002 by 14 major foreign investors in Serbia, with the support of the OECD. Its main goal is to help improve Serbia’s investment climate.

Members account for more than 75% of FDI

The FIC is now widely known as a powerful, con-structive and respected reference concerning doing business in Serbia. It has more than 120 members from more than 20 countries representing a wide range of economic sectors. In fact, FIC members account for more than 75% of all foreign investment in Serbia. These companies have also become major employers of the local workforce.

As Serbia’s economy takes off, the FIC continues to grow. As it has from the beginning, the FIC works in close partnership with relevant government authorities, international organisations and institutions, with the overall aim of sharing positive international business practices with local authorities and supporting their reform activities.

Focus on establishing a dialogue

The FIC emphasises maintaining a dialogue, both formal and informal, with all who are involved in Serbia’s economic development. In the past year alone, the FIC has participated in several round table discussions, panels and conferences; participated in and supported many non FIC events; provided ongoing services for its members; and prepared the FIC White Book, an essential source of information on Serbia’s economy and on doing business in Serbia. The FIC worked with the Serbian Chamber of Commerce on this project, and it has also formed links with other foreign investor oriented organisations, including the American Chamber of Commerce in Serbia. Through its web site, the FIC brings its in-depth knowledge of the Serbian market to a global readership.

SERBIA

Platform for exchanges on wide range of issues

The FIC has specialised committees on legal issues, human resources, insurance, and the key sector of detergents and cosmetics, as well as three committees re-activated over the past year to focus on corporate social responsibility, exploration and mining, and taxation. All these issues are regularly discussed in meetings involving FIC members. Overall, the FIC provides a good platform for the exchange of experiences and opinions among its membership.

Beiersdorf, the well-known German beauty care brand, illustrates the potential of the Serbian market for foreign investors. Peter Koys, General Manager, explains that the company signed an agreement with Delta to handle the distribution, imports and marketing of its products in Serbia, coordinating with Beiersdorf’s central offi ce and logistics hub for South-Eastern Europe in Vienna.

Beiersdorf established a full operation in Serbia in 2002. It is also active in neighbouring Croatia and in Russia, but its market share in Serbia is greater than its share in Croatia. In fact, “Beiersdorf Serbia has, along with Austria and Switzerland, the highest market share in the Beiersdorf group,” Peter Koys says. He adds that Beiersdorf’s strategy has been to optimise its supply chain in Serbia, which it views as an excellent investment target. He explains, “Serbia defi nitely has the potential to be a hub for investment.”

Long-term commitment to Serbia

Beiersdorf has made a long-term commitment to the Serbian market. Peter Koys explains, “We are very present in Serbia, unlike some other companies. We did not have to think too long about whether to enter this market. We came in with people who had had experience in other similar markets. We believe that the Serbian market has great potential.”

Beiersdorf is also a strong supporter of community service projects in Serbia, particularly concerning education about health and family related matters. It takes its corporate social responsibility very seriously and aims to be a major force for economic and social

47

development in Serbia. “Corporate social responsibility is very important for us and we want to be even more active in this fi eld in Serbia,” Peter Koys says.

FIC Corporate Social Responsibility Manifesto

Beiersdorf thus adheres to a guiding principle of the FIC, which is to provide support for projects that benefi t the local community. As the FIC Corporate Social Responsibility Manifesto explains, “By promoting and

implementing the concept of corporate social respon-sibility, we are trying to build trust among citizens and demonstrate our ability and willingness to contribute to the society with our insight and expertise and, most of all, with our commitment to the local community.”

Companies like Beiersdorf refl ect the potential of the Serbian market for foreign investors, and the FIC is ready to assist potential investors explore opportunities in this fast growing market, which is well placed to serve as the trade hub of South-Eastern Europe.

© SIEPA

Airport City

Leading Foreign Investors (2002-2008)Company Country Industry Investment Type Investment Amount

( million)Telenor Norway Telecommunications Privatisation 1,602

Fiat Italy Automotive Joint Venture 700

Philip Morris USA Tobacco Privatisation 611

Mobilkom Austria Telecommunications Greenfi eld 570

Banca Intesa Italy Banking Acquisition 508

Plaza Centers Israel Real Estate Greenfi eld 500

Stada Germany Pharmaceutical Acquisition 475

Embassy Group India Real Estate Greenfi eld 428

InBev Belgium&Brazil Food Acquisition 427

National Bank of Greece Greece Banking Privatisation 425

U.S. Steel USA Metal Privatisation 250

Mercator Slovenia Retail Greenfi eld 240

Fondiaria SAI Italy Insurance Privatisation 220

Lukoil Russia Energy Privatisation 210

Airport City Belgrade Israel Real Estate Greenfi eld 200

Block 67 Associates Austria&Serbia Real Estate Greenfi eld 180

Holcim Switzerland Construction Privatisation 170

OTP Bank Hungary Banking Privatisation 166

Engel Group Israel Real Estate Greenfi eld 160

Source: SIEPA

48

Trade & Industry

SERBIA

48

Trade Hub for South-Eastern EuropeSerbia has undertaken an aggressive reform program with the intent to establish itself as a regional and inter-national trade hub and crossroads. To achieve this goal, the current government is creating new incentives for investors and is actively pursing policies that would enhance free trade between Serbia and all nations. The government is also committed to making Serbia an EU candidate country, and this drive is reassuring investors.

Customs free access to key markets

Serbia offers tremendous opportunities for trade oriented companies as a result of its customs free access to the markets of the EU, Russia, and South East Europe, along with a soaring local market potential; with a population of eight million, Serbia has the biggest domestic market in the region. Serbia has also been actively pursuing membership in the World Trade Organisation since 2005.

CEFTA opens doors to fast growing new markets

Serbia is a member of the Central European Free Trade Agreement (CEFTA), which includes Albania, Bosnia and Herzegovina, Croatia, Macedonia, Moldova, Montenegro, and Kosovo as well as Serbia. The agreement stipulates that no import duties can be increased nor can new ones be imposed other than those prescribed by the existing bilateral free trade agreements between parties of the agreement. CEFTA also stipulates that products exported from Serbia are considered of Serbian origin even if integrated materials originate from any other CEFTA country, the EU, Iceland, Norway, Switzerland (including Liechten-stein) or Turkey, provided that such products have undergone suffi cient processing in Serbia; the value added in Serbia must be greater than the value of the materials used.

Gateway to Russian market

Serbia also signed a free trade agreement with Russia in August 2000 that makes the country particularly attractive to foreign investors and manufacturers looking to enter the Russian market. The agreement stipulates that the importing country regulates the rules of origin, in accordance with World Trade Organisa-tion regulations. Therefore, goods produced in Serbia with prevailing value added in Serbia are considered of Serbian origin, thus free of customs when entering the Russian market. The list of products not covered by the duty free agreement is updated annually, and currently includes poultry, sugar, chocolate, alcoholic beverages, soap, cotton, carpets, wooden furniture, household appliances, and motor vehicles. The free trade accord with Serbia is the fi rst such agreement Russia has signed with any country outside the Commonwealth of Independent States.

Free trade with EU, US

Serbia’s free trade agreement with the EU is derived from the EU Stabilisation and Accession Process, which allows duty free exports (except for wine and veal) from Serbia to any EU country. The agreement also abolished customs duties and quantitative limitations on imports

4949

into the EU of Serbian textile products, and it includes a guarantee that the current policy will be maintained in the future. Serbia, in turn, has gradually liberalised its duties on imports of EU textiles products.

Serbia also has a benefi cial trade agreement with the US through the Generalized System of Preferences (GSP). The GSP programme currently provides preferential duty free entry to the US of around 5,000 products, including most manufactured and intermediate goods and selected agricultural and primary industrial products. Certain sensitive goods are not eligible for duty free entry under GSP, which generally includes most textile products, leather goods and footwear. The list of eligible goods is reviewed and adjusted twice per year with input from US industries.

International companies betting on Serbia

Extremely competitive tax rates, as well as low labour and utility cost and corporate tax rates that are among the lowest in Europe, add to Serbia’s investment appeal as a trade hub. International companies have been quick to take advantage of Serbia’s growing hub status. In the past year alone, DuPont, Intel, and Xerox have all established regional sales offi ces in Belgrade.

Regional energy hub

Serbia has been carving out a niche for itself as a hub in many sectors, particularly energy. In January this year, Russian and Serbian offi cials announced a multibillion dollar deal that would make Serbia a key centre for Russian energy supplies. The agreement, which Serbian offi cials have estimated as worth at least 1.7 billion, would include building a branch of the prospective South Stream natural gas pipeline in Serbia. South Stream would run under the Black Sea from Russia to Bulgaria, and then branch off.

The section through Serbia would carry at least 10 billion cubic meters a year. A major gas storage facility in Serbia is also planned. “This agreement has a huge strategic importance for Serbia,” says Serbia’s President, Boris Tadic. He adds, “It will strengthen Serbia’s strategic positions in South-Eastern Europe, since Serbia will serve as a transit point for gas supplies to the EU’s southern fl ank.”

The gas project is one example of Serbia’s growing status as a regional and international hub.

Victor’s Column, Belgrade

Health & Pharmaceuticals

• Fast-Growing Health Sector Scores High in Exports

• Minister of Health Cites Priorities for Health Care Sector

• Health Care Sector Transformed with EU and EAR Support

“We aim to improve the health care system in every way.”

Tomica Milosavljevic, Minister of Health

51


Fast-Growing Health Sector Scores High in Exports

Thanks to Serbia’s large domestic market and its free trade agreements with other CEFTA countries, Russia and the EU, Serbia’s health sector, including pharma-ceuticals, offers outstanding growth potential for EU investors. The government is in the process of upgrading health care facilities and services for the Serbian people -- focusing on preventive health care, health care infrastruc-ture, institutional reforms, and public health education and training -- while also supporting the continued growth of the country’s health care enterprises.

Pharmaceuticals sector thrivingSerbia’s pharmaceuticals sector is seeing signifi cant growth. The country’s advantages as a base for pharma-ceuticals production include its highly skilled, low cost workforce in pharmaceuticals and related industries. The average gross salary in Serbia’s pharmaceuticals sector in March 2008 was €788 (€567 net), much lower than the EU average, yet Serbian pharmaceuticals workers are highly trained and specialised institutions continue to train the qualifi ed pharmaceuticals workers of tomorrow.

The local pharmaceuticals market has been growing particularly rapidly, spurred on by a more stable political

SERBIA

JugoremedijaJugoremedija

52

environment and a reduction in value added tax on pharmaceuticals products (from 18% to 8%). In fact, Serbia’s pharmaceuticals market is expected to grow at an average rate of 8% per year until 2012.

As of mid 2009, all Serbian producers, including producers of pharmaceuticals, will be obliged to introduce GMP standards, which will further strengthen the industry and will increase the number of Serbian companies able to compete for the share of European markets. The pricing controls the government formerly set on pharmaceuticals products are being phased out, giving pharmaceuticals fi rms the possibility

to boost revenues and accelerate development. Serbia’s pharmaceuti-cals sector already achieves attractive profi ts. In 2006, revenues grew 18% compared to 2005 and reached €400 million.

Top fi ve Serbian pharmaceuti-cals fi rms

The leading Serbian pharmaceuti-cals fi rm is Hemofarm Group, which achieved consolidated revenues of €221 million in 2006, a 13% rise over the previous year. Hemofarm is also Serbia’s sixth biggest exporter, exporting some €60 million of pharmaceuticals products in 2006. Hemofarm has been introducing

GMP standards after being acquired by the Stada Group (Germany) with EBRD funding. Hemofarm is also investing in expanding its production capacity in Russia.

Galenika is number two on the list of leading Serbian pharmaceuticals fi rms. The company, set for priva-tisation, achieved a 25% growth in revenues in 2006 and a 30% rise in profi ts. Galenika is ranked among the top 50 exporters in Serbia.

Zdravlje, based in Leskovac and owned by Actavis (Iceland) since 2002, is Serbia’s third largest phar-maceuticals fi rm. It has been steadily upgrading its facilities, distribu-

53

tion centres and laboratories, investing €8 million in upgrades in 2006. Between 2001 and 2006, it has invested more than €30 million in all its operations and began producing pharmaceuticals that meet GMP standards last year. The company achieved a 14% growth in revenues in 2006.

The remaining two industry leaders are Jugoremedija and Habitfarm. Jugoremedija achieved €24 million in revenues in 2006, for a very impressive 33% growth over 2005. The company also achieved a 57% EBITDA margin that year, making it the most profi table Serbian company. Habitfarm also had a great year in 2006, boosting its revenues by 36%, and both Habitfarm and Jugoremedija were ranked among Serbia’s top exporters that year.

Serbia’s top pharmaceuticals fi rms export around 20% of their combined production per year and are seeing

53

growing sales in the domestic market. Serbia’s pharma-ceuticals market was worth €688.81 million last year and has been growing at an annual rate of almost 50% since 2004. Top sellers on the domestic market are medicines used in the treatment of cardio-vascular diseases, followed by medicines used to treat infectious diseases or problems in the nervous system.

The top export markets for Serbian pharmaceuticals (in descending order) are Russia, Montenegro, Macedonia, Ukraine, Romania, Algeria, Libya, Iraq and Albania.

Signifi cant opportunities for EU fi rms

The Serbian market represents signifi cant potential for EU pharmaceuticals fi rms, whether they export to Serbia or get involved in production there. The top sources of pharmaceuticals imports to Serbia in 2007 were Slovenia (€71.1 million), followed by Switzerland (€54.4 million), Germany (€51.8 million), Hungary (€25.9 million), Belgium (€21.2 million), Bulgaria (€18.5 million), Denmark (16.7 million), Austria (€16.6 million), Macedonia (€12.4 million), and France (€11.3 million).

EU granted trade preferential agreements allow for Serbian pharmaceuticals to be imported to the EU if they comply with EU standards. Serbian pharmaceu-ticals can be exported duty free to Russia except for medicines in the HS 30.04 range.

Excellent choice for chemical trials

Other opportunities for foreign fi rms in Serbia’s health sector include conducting chemical trials in Serbia. Serbia has implemented the EU Chemical Trials Directive, making it particularly competitive, and also offers highly qualifi ed medical professionals and a local population willing to try new and improved medicines.

As Serbia brings its health care sector up to EU standards, opportunities for investors abound.

5454


Minister of Health Cites Priorities for Health Care SectorTomica Milosavljevic, Serbia’s

Minister of Health, recognises the

challenges the country is facing in

upgrading its health care facilities

and services, but points out that

Serbia has already made signifi cant

progress. He says, “We are doing

our best, and we have achieved some

successes. We aim to improve the

health care system in every way, and to

focus on implementing EU standards

in all aspects of the system.”Tomica Milosavljevic, Minister of Health

SERBIA

Serbia’s health care sector offers signifi cant investment potential, for example in pharmaceuticals. As Tomica Milosavljevic points out, “Serbia could play a key role in the regional and international phar-maceuticals industry.” He adds that another investment opportunity is Serbia’s rehabilitation hospital, currently with 8,000 beds, part of this will be privatised and other medical facilities to be privatised. Serbia has also positioned itself as an excellent choice for chemical trials.

Top priorities for the Ministry of Health include strengthening the national Health Insurance Fund, which had declined significantly but rose in 2007 to €260 per capita. The ministry has completed the first data base of everyone covered in the fund, and has balanced the fund’s budget after selling off around €100 million of the fund’s debts.

Other priorities include improving primary health care throughout the country, creating a regulatory body specifi cally for the health care sector, and focusing on preventive care through a new action plan the ministry has developed for the period 2008 to 2015. The plan includes anti smoking campaigns as well as new regulations to ensure that Serbian pharmaceuticals meet EU standards.

Signifi cant progress in pharmaceuticals

Privatisation in the health care sector continues. Recent privatisations in the pharmaceuticals sector include Hemofarm (acquired by Stada of Germany) and Zdravlje (acquired by Actavis), with Galenika to be next on the list. “We have improved environ-mental standards and accountability in the pharmaceuticals sector, and have created 28 new regulations for the sector in the past three years alone,” Tomica Milosavljevic explains.

Serbia is upgrading its health care sector with the support of the World Bank, the European Investment Bank, and the EU. Overall, inter-national institutions have provided around €100 million for health care projects in Serbia since 2001.

Concerning opportunities for private investors, both local and foreign, in Serbia’s health care sector, Tomica Milosavljevic says, “We have opened the door for private institutions that meet our standards. I expect that we will see increasing involvement by the private sector, including private insurance companies, as Serbia’s GDP rises.”

55

Roche d.o.o.Milutina Milankovica 11a11070 Belgrade - Serbia

www.RocheSerbia.rs


Roche

International Pharmaceuticals Leaders Helping to Build Better Health SystemGlobal pharmaceuticals leader Roche was one of the fi rst foreign investors in Serbia, establishing the fi rst licence agreement in 1968 and its represent-ative offi ce in 1991. Roche remained in Serbia throughout the war years, and became an independent affi liate in 2005 within the Roche group by both surpassing fi nancial targets set by the Roche group, as well as dem-onstrating leadership in the Serbian pharmaceutical market.

Today, Roche Serbia distributes a wide range of products manufac-tured by the Roche group. “Roche’s operation in Serbia is a kind of Greenfi eld investment. We came here and built up the business,” says General Director Vojislav Petrovic, who has been with the company since the early 1990s.

Signifi cant turnover growth

Roche achieved an impressive turnover of 36 million last year, largely thanks to increasing promotion and distribution of its oncology treatments, which, according to Vojislav Petrovic, are the main drivers of Roche’s growth in Serbia and other markets as well. “Roche Serbia focuses on quality and turnover,” he adds.

Roche’s main market in Serbia is the state healthcare plan. One of the aims is to help Serbia reestablish the health services, that are available in

Roche Serbia Management Team

SERBIA

the former Yugoslavia and that were largely diminished during the war. “We would like to see the establish-ment of a national health plan like an oncology plan. We would also like to improve a strategic dialogue between pharmaceuticals companies and the Ministry of Health,” Vojislav Petrovic explains.

Roche welcomes changes in Serbia brought about by EU integration. “When a strong and clear regulatory environment is in place here as in the EU, it will be much easier for us to do business. It will also have a very positive impact on the pharmaceuti-cals sector overall. Some local fi rms are lagging behind meeting the deadline to maintain European standards, but Roche is ready today,” Vojislav Petrovic says proudly. He adds, “The only way to make long-term changes in Serbia’s health-care sector, however, is for the economy to grow, and for the portion of the budget devoted to health care to be increased.”

Exemplary corporate citizenship

The global Roche group is known for its corporate citizenship, and in Serbia Roche has instituted free testing for hepatitis C as well as free use of Copegus, a drug used in combination with Roche’s Pegasys hepatitis treatment. Roche is also supporting public information campaigns to promote good health (for hepatitis – Am I number 12?, reumathoid artritis, lymphoma – Rebuilding Lives and can you spot lymphoma?, breast cancer – Breast Friends...) and has

provided free kits for the determina-tion of the type of breast cancer which is neccessary for setting the optimal treatment. As Vojislav Petrovic puts it, “We are not just here to sell. We are also here to educate and support the community in all relevant aspects.”

As for the future, Roche Serbia will continue to focus on its oncology and virology treatments as well as rheuma-tology and other innovative products in which it has gained a strong competitive edge, and it will continue to work to improve the local health-care system. Vojislav Petrovic concludes, “Roche played a critical role in maintaining Serbia’s pharmaceutical industry during the war. Roche was not only able to survive this period but to come out of it as a success. Based on the teamwork Roche Serbia is a true example of the sustainability and perseverance of the Serbian market!”

5656


Health Care Sector Transformed with EU and EAR SupportWhen Serbia’s democratic government came into power in 2000, the country’s health sector was in disarray after years of mismanagement and war. The EU, working through programmes managed by the European Agency for Reconstruction (EAR), has played a major role in helping the Serbian health sector to move forward. The EU’s fi nancial support for the restructuring and mod-ernisation of Serbia’s health care sector totals around €100 million to date.

Boost to local pharmaceuticals sector

One of the fi rst problems addressed in 2000 was a critical shortage in key medicines and medical supplies, for which the EU provided €20 million in funding support. This initiative supplied medicines and supplies to pharmacies and hospitals throughout the country and provided a major boost to the local pharmaceuticals sector, which produced most of the medicines. Today, the pharmaceuticals industry is one of Serbia’s export leaders.

Next, the government, the EU and the EAR developed programmes designed to bring Serbia’s health care sector up to EU standards. This effort focuses on four

SERBIA

top priorities: rebuilding the country’s health care infra-structure; making institutional reforms, for example in the National Health Insurance Fund; promoting pre-ventative health care; and developing public health education.

Among the accomplishments to date, Serbia has established a National Medicines and Medical Devices Agency, a national blood transfusion service, a Health Information System, and a new School of Public Health to train the health care professionals of tomorrow.

New health centres and modernisation of existing facilities

Serbia has also created 25 preventive health centres, and has launched projects to renovate 20 regional hospitals and four university clinical centres in cooperation with the European Investment Bank (EIB), which provided a loan of €50 million for this initiative. In 2006, the EAR provided an additional €200 million to upgrade the university hospitals in Belgrade, Nis, Novi Sad and Kragujevac. The EAR is providing guidance and technical support for these projects.

Crucially, the EAR has also assisted Serbia’s Ministry of Health in developing short- and medium-term strategies for the health care sector. This effort has involved studies of disease patterns, defi ciencies in current services, and recommendations for cost effective improvements. The studies showed, for example, that unhealthy lifestyle patterns were the cause of around 70% of health problems requiring treatment in Serbia, and campaigns to inform the public about the dangers of smoking, alcohol abuse and other issues have been developed.

Focus on preventive health care

The EAR has also supported the ministry in focusing on preventive health care strategies that matched the best European standards and practices concerning the prevention, diagnosis and treatment of such diseases as © SIEPA

57

SERBIA

diabetes, hypertension and the most common forms of cancer. The Ministry of Health’s “One smoker, many victims” campaign was awarded the World Health Organisation’s prize for the best health campaign in Europe last year.

Upgrading the country’s blood supply and transfusion services was a top priority in 2000. Thanks to €5 million in EU funds, the EAR managed projects to reorganise Serbia’s blood supplies, create new transfusion centres, purchase new equipment, pass a new law on blood trans-fusions, institute quality assurance procedures, train staff, and launch a national blood donation campaign.

Tertiary health care strategy

The EU, through the EAR, is also helping Serbia develop a tertiary health care strategy aimed at decreasing hospital beds by more than 1,000, controlling costs, and ensuring sustainability. A particular challenge is the refurbishment and reorganisation of the Clinical Centre of Serbia in Belgrade, whose 3,700 beds make it one of the largest hospitals in the world. EIB funding is supporting these efforts.

Restructuring the health care sector involved reforming health care fi nancing, and the EAR created a modern electronic health record based on EU models that

allows for better management of data and costs. It also helps the Ministry of Health devise better strategies for health care development. In addition, the EAR helped Serbia develop a new payment system for primary care physicians based on the number of patients treated.

The EU also provided €5 million in technical assistance and management to create public health laborato-ries for specifi c diseases, based on standard practices throughout the EU, and to upgrade existing laborato-ries to ensure that they are operating according to EU and WHO criteria.

Education and training

Concerning education and training, the EAR has funded the new international standard School of Public Health within the Belgrade University School of Medicine. A new EU-funded project will train some 2,000 health managers in business practices and standards to help them run health facilities effi ciently, using modern management techniques. It will also set the foundation for a School of Health Management to educate competent and accountable managers in the future.

Overall, Serbia’s health care sector has made impressive progress since 2000, and the support of the EU and the EAR has been crucial in making these advances.

Sector

SERBIASERBIA

5858


Jugoremedija

Outstanding Performance by Worker-Run FactoryJugoremedija – a pharmaceutical giant in Zrenjanin which provides pharma-ceutical products to the local market and to Bosnia and Herzegovina, Montenegro, Russia, Ukraine, Belorussia, Moldova, Armenia, Georgia, Kazakhstan and Azerbaijan -- exemplifi es Serbian entrepreneur-ship and a determination to create a functional free-market economy that is benefi cial to all citizens.

During the company’s privatisa-tion past and present workers were given the majority of shares in the Jugoremedija factory; many of these workers later sold their shares to the government or private sector, but around 4,200 remaining worker-shareholders, who controlled a total 58% share in the company, decided to retain their shares and to handle the company’s operations themselves. In March 2007, this dream became a reality, and the company has been achieving outstanding performance ever since.

Exemplary performance by worker-shareholders

Zdravko Deuric, Chairman of the Board since March 2007 and today General Manager, proudly points out that the worker-managers have already managed to improve working conditions in the factory. In March 2007 the factory had debts totalling 2.8 million, including 1.2 million to Aventis, causing Aventis to cancel its contract with the company.

SERBIA

Furthermore, employees had not been paid. Since the workers have regained control of the factory there has been a complete turnaround, “We managed to pay all the factory’s debts and sign a new contract with Aventis,” Zdravko Deuric says.

The company’s new management has also been able to reinstate contracts and licensing agreements in the Russian market which had been cancelled under the factory’s previous management, and to export 3,5 million to the Russian market this year. “We have made great strides forward in only one year, and most importantly we have managed to regain people’s trust,” Zdravko Deuric says.

At present Jugoremedija continues to fi ght off domestic businessmen’s attempts to take control of the company out of current management’s hands, specifi cally through full privatisation. If this were to be the case before the factory meets all international Good Manufac-turing Practice (GMP) standards, the shares could be acquired more cheaply and the full privatisation could be completed more rapidly. However, this would not be positive for the workers and families who depend on Jugore-medija. “After all the problems we have faced and overcome, we very much want to continue to work toward introducing GMP standards by August 2009,” Zdravko Deuric points out.

Strategic partners can benefi t from company’s regional network

To reach this goal, Jugoremedija is currently looking for a strategic partner to help the factory meet GMP standards. Such a move will require government approval. “If we achieve this and fi nd a strategic partner, the company will have a very bright future. We will be able to expand our export activities, including in the EU,” Zdravko Deuric says.

A key advantage of investing in Jugore-medija is that the company already has a well-established distribution network throughout the region and in Russia, and any partner working with Jugore-medija can use this network to distribute its own products by incorporating them into Jugoremedija’s current contracts.

Partners can also count on dynamic, committed workers and management. Zdravko Deuric explains, “We invite investors from Western Europe to invest in Jugoremedija and help us to continue to build up the company. We have already earned the trust of Aventis, and trust is very important in this business.”

Infrastructure

• Infrastructure Hub of South-Eastern Europe

• National Investment Plan Ministry Works to Generate Development

• National Infrastructure Plan Details Ambitious Projects

• Key Infrastructure Projects in the Works

60

Infrastructure

Infrastructure Hub of South- Eastern EuropeSerbian President Tadic’s decision in July this year to create a National Council for Infrastructure refl ects the government’s awareness that infra-structure development is crucial if Serbia is to achieve its economic goals. The new council will coordinate and manage infrastructure projects in a move to speed up Serbia’s economic and overall development.

SERBIA

In addition to President Tadic, members of the council are some of Serbia’s top leaders, including Deputy Prime Minister and Minister of Economy and Regional Development Mladjan Dinkic; Minister of Infrastructure Milutin Mrkonjic; Minister of Energy and Mining Petar Skundric; Minister of Finance Diana Dragutinovic; Minister of Telecommunications and Information Society Jasna Matic; Minister of Environment and Spatial Planning Oliver Dulic; Minister for the National Investment Plan Verica Kalanovic; Minister of Agriculture, Forestry and Water Management Sasa Dragin; Serbian Deputy Prime Minister for European Integration and Minister of Science and Techno-logical Development Bozidar Djelic; Chairman of the Vojvodina Executive Board Bojan Pajtic; and Dragan Dilas the Mayor of Belgrade.

Corridor 10 a top priority

High priority infrastructure projects that the new council is currently overseeing include completing the 800 km Serbian portion of the European Corridor 10 motorway, beginning construction of a new motorway from Belgrade south to

61

Infrastructure Hub of South- Eastern Europe

Infrastructure

SERBIA

the Adriatic region, and modernising Serbia’s railway network. Corridor 10 runs from Salzburg to Thessalo-niki (2,350 km). Around €2 billion is needed to complete the Serbian portion, part of which will be a high speed motorway.

President Tadic has requested all Serbian ministries to single out infrastructure projects they feel are the most crucial for the economic activities they oversee, and these recommendations will be used in forming a four year infrastructure development plan.

The council has budgeted around �5 million for building European standard roads in Serbia, and will also promote rail, air and river traffi c through specifi c projects in these areas. A key role for the new council will be to develop a strategy for investments in Serbia’s energy and telecommuni-cations infrastructures as well.

Minister of Infrastructure cites priorities

Serbian Minister of Infrastruc-ture Milutin Mrkonjic says that his ministry’s priorities are renovation, revitalisation and construction of transport infrastructure in Serbia over the coming three years. He singled out the Corridor 10 project, modernisation of rural infrastruc-ture, modernisation of the Belgrade-Bar rail line, and Corridor 7 as par-ticularly important projects.

The minister added that Corridor 10 may be completed within two years, while the rail link would be completed in four to fi ve years. Around €500 has been invested in the Belgrade rail line to date, and

an additional €100 million to €200 million is needed to complete the project.

“We have secured the funding for these projects, and Serbia has both the workforce and the enterprises capable of carrying out projects of this magnitude,” the minister says. He adds that Corridor 10 is signifi cant not only for Serbia but for the EU as a whole, since it connects Greece and Macedonia with other parts of Europe. One section of Corridor 10 in Serbia is a ring road around Belgrade, and the fi rst section of this new ring road was inaugurated on October 1 this year.

Completing Corridor 10 by 2011 will require allocating €1.3 billion for the sections to the Macedonian and Bulgarian borders, between €150 million and €200 million for the motorway from Subotica to Novi Sad, and the rest to complete the Belgrade ring road, according to Serbian Prime Minister Mirko Cvetkovic.

Negotiations with the European Investment Bank are underway for a �120 million loan to complete the ring road. As the Prime Minister points out, “Improved road infrastructure is necessary if Serbia is going to attract more foreign investment.”

Signifi cant support from EBRD

The European Bank for Reconstruc-tion and Development (EBRD) has announced it will invest €250 million to €280 million annually on infrastructure projects in Serbia, a refl ection of the bank’s confi dence in Serbia’s long term growth potential.

Completing the Serbian section of Corridor 10 will be a priority for the EBRD, but railway infrastructure will also receive fi nancing (€100 million is under discussion) to purchase new rolling stock and to modernise railways. The bank is ready to approve a €150 million loan next year for fi nancing the Nis-Dimitrovgrad motorway, and plans to invest in the Belgrade-South Adriatic motorway as well.

Expressing his own vote of confi dence in Serbia, Thomas Mirow, EBRD President, commented recently, “Serbia has a central role in the Balkan region and the Serbian government is working to improve its co-operation with the EU. This is why I chose to visit Serbia fi rst after my appointment as EBRD president.”

As Serbian president Boris Tadic points out, “Upon the completion of Corridor 10, from Hungary to the Macedonian and Bulgarian borders, Serbia will become the infrastructure hub of South-Eastern Europe.” Continued development of the country’s infrastructure will strengthen its role as a regional crossroads.

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Infrastructure

National Investment Plan Ministry Works to Generate DevelopmentSerbia’s National Investment Plan (NIP) is the generator of Serbia’s economic development and the cornerstone of its growth, according to Verica Kalanovic, Minister of the NIP. The government’s decision to devote a ministry to the NIP refl ects the plan’s signifi cance for Serbia. The ministry’s budget for 2009 is around RSD47 billion; this year, the ministry launched projects with a total budget of RSD30 billion.

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The Ministry of the NIP’s objectives are to boost Serbia’s GDP, exports, foreign direct investment, and standard of living while reducing unemployment. It also aims to increase Serbia’s competitiveness and support regional development. “For 2009 alone, roughly 3,896 projects amounting to over €3.7 billion have applied for fi nancing from the NIP. It is important to note that the Ministry for the NIP is a coordinator of the efforts by other ministries, cities and municipalities which jointly implement NIP projects,” Verica Kalanovic explains.

Close monitoring of new investments

The minister singles out transport and energy infrastructure, health care, education, and social programmes as key sectors for investment in Serbia today. She adds, “A priority for the ministry is to establish a quality system for the selection of development programmes from all parts of Serbia, as well as a more effi cient implemen-tation and monitoring of effects. Such a system will ensure that NIP projects fi nanced from taxpayers will truly secure a better and more prospective life for every individual.” The ministry will closely monitor all new investments to determine the cost-to-benefi t ratio of each one.

The Ministry of the NIP receives funding for its projects from inter-national funding organisations, European institutions, and EU pre-association funds as well as from the Serbian state. Current projects for

the ministry include the completion of the Serbian part of the pan-Eu-ropean Corridor 10 route, about which Serbia’s Minister of Infra-structure, Milutin Mrkonjic, recently commented “It is a pleasure and honour to be involved in this big project.”

In addition to the Corridor 10 project, the Ministry of the NIP will also be involved in the modernisation of railway and river transport, con-struction of seven or eight industrial zones, and investment in tourism activities. The ministry will handle regional and local projects as well as national ones. Verica Kalanovic concludes, “In this demanding labour that the ministry takes on daily, we need the strong support of other ministries, municipalities, the private sector, and also all the citizens of Serbia.”

Verica Kalanovic, Minister of the NIP

Government Building

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National Infrastructure Plan Details Ambitious Projects

Serbia’s National Plan for Infrastructure details a series of ambitious projects concerning road and rail infrastructure to be undertaken between 2008 and 2012. The projects are designed to help stimulate Serbia’s economy, strengthen its role as a regional hub for trade and transport, and attract more foreign investment, not only in infrastructure projects but in enterprises that depend on high quality infrastructure. These projects represent outstanding opportunities for foreign investors and suppliers.

Priority projects in the plan include Serbia’s portion of the European Corridor X road and rail system, with the road portion to be completed by 2011 at a cost of €1.58 billion; Serbia’s portion of the Belgrade to South Adriatic highway, at a cost of €600 million; and construction and improve-ments in regional road routes. The total cost of all road improvements outlined in the plan is €2.9 billion.

The plan states that if fi nancing is not found for all of these projects, then lower priority initiatives mentioned in the plan (including improvements to local roads) will not be undertaken. Overall, the plan anticipates the need for around €1.39 billion in loans, €100 million in donations, and €1.41 billion from public sector fi nancing to reach the total €2.9 billion.

International agencies funding upgrades

Financing for the most important project in the plan, the Corridor X road, is to come from the World Bank (a €400 million loan), the EIP (a €540 million loan), the EBRD (a €150 million loan), the Hellenic Plan (a €100 million donation), and from public funds (€395 million, including from privatisation proceeds).

Concerning the Corridor X rail project, the plan calls for modernisation and reconstruction to increase speeds substantionally, including upgrading signalling and installing double gauge tracks in some sections; this project is estimated at €1.7 billion. Serbia will partner with Deutsche Bahn (the German national railway) in this initiative. EBRD and EU pre-accession funds will be used to finance the project.

Funding is still being sought for other projects in the plan, including the Belgrade to South Adriatic highway. The infrastructure plan calls for significant revenues for infrastructure projects to come from the many privatisation projects currently underway, including of NIS and Galenika as well as the IPOs of Nikola Tesla Airport, Telekom Srbija, Commercial Bank, and the electricity sector. Municipalities are also expected to contribute their share, particularly Vojvodina, Belgrade and Novi Sad.

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InfrastructureInfrastructure

Key Infrastructure Projects in the Works

Serbia is in the process of completing a number of key infra-structure projects with the support of international donors, the public sector, and local and international companies. The priority project for Serbia is to complete the Serbian portion of the European Corridor 10 transport corridor, set for completion in 2011.

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When Serbian president Boris Tadic and Minister of Infra-structure Milutin Mrkonjic visited work in progress on Corridor 10 in July, Boris Tadic commented that when the Serbian portion of Corridor 10 is completed, Serbia will become the hub for South-Eastern Europe. Aligned with the Corridor 10 road project is a Corridor 10 rail project, which is set to begin next year.

Signifi cant road upgrades

Additional projects involve upgrading and improving the Belgrade to South Adriatic road connection (at a cost of €600 million and scheduled for 2009 to 2015; funding is still being sought), and the Serbian portion of key regional road routes, including the Kragujevac to Batocina highway (€65 million, from 2008 to 2010), the Kikinda-Ada-Novi Sad-Sremska Mitrovica-Sabac-Loznica highway (€280 million, from 2009 to 2012), the Pozarevac-Kucevo-Majdan-pek-Negotin highway, the M25 (€175 million, from 2009 to 2012) and the Pancevo-Vrsac highway (€200 million, also from 2009 to 2012).

Serbia has already completed a wide range of infra-structure projects, many of them undertaken by local firms.

Serbian firm Energoproject recently announced it would team with Austria’s Immorent and Germany’s Eureal in a bid to become co-investors in a €236 million tourist complex in Stara Planina, a mountain area. Energoproject is also involved in the upgrading of the Soroki-Dokolo-Lira road and other key projects.

Energoproject reflects the potential of Serbian firms to help in the effort to build a better Serbia.

IT & Telecom

• Telecom Minister Discusses Top Priorities

• Outstanding Opportunities in Fast-Growing Telecom Sector

• Serbia Positioning Itself as ICT Hub

“We hope that e-govern-ment will help upgrade and

streamline Serbia’s government processes, which will benefit

foreign investors.”Jasna Matic, Minister of Telecommunications

and Information Society

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IT & Telecom

Telecom Minister Discusses Top PrioritiesJasna Matic, Serbia’s Minister of Telecommuni-cations and Information Society, discusses her ministry’s key goals.ministry’s key goals.

Jasna Matic, Minister of Telecommunications and Information Society

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ET: What are your priorities for Serbia’s telecom and IT sectors?

J. Matic: We aim to improve telecommunications services in general and promote information technology on several levels, including e-government and education initiatives. We also aim to help local ICT companies strengthen their market position and grow regionally and internationally. We also anticipate additional liberalisation of telecom and IT as well as more competition, in line with EU and World Trade Organisation standards.

ET: When do you expect Telekom Serbija’s IPO to occur?

J. Matic: We want to complete the process within two years but the timeline will depend on the development related to the international fi nancial crisis. Our aim is to fi nd an optimal moment which will maximise the proceeds, enhance the international image of Serbian telecommuni-cations, and provide the best boost for the Serbian telecom market. As for Serbia’s image, we believe that the worst is behind us and hopefully international media will now focus on the good things that are happening here.

ET: What are your priorities concerning e-government?

J. Matic: We hope that e-government will help upgrade and streamline Serbia’s government processes, which will benefi t foreign investors. We have made some advances on an ad hoc basis, but we need harmonisation among government institutions. We are working on upgrading our telecom and IT infrastructure.

ET: What are the opportunities for investors in Serbia’s telecom and IT sectors?

J. Matic: We anticipate strong growth, so a number of investors are looking into the possibilities here and of course are most welcome. Since Serbia is a latecomer to the transition process, there are a number of oppor-tunities available here that have already disappeared in other places. We will be opening tendering procedures for various telecom services and we expect to attract

international bidders. Our e-society initiatives represent a signifi cant opportunity, as do various EU programmes with ICT components. The new IT park in Indjija should attract international software companies and back offi ce service providers.

ET: Do you expect Serbia to be a telecom and IT hub for the region?

J. Matic: Yes, we do, and we certainly hope to attract talent from all over the region. The ministry will offer support for this. We already have strong skills in software development. We are being told that software developed here in Serbia can be easily understood and modifi ed by other people, which is not always the case. Many Serbian software engineers are working abroad and we hope to attract them back to Serbia.

“We hope that e-govern-ment will help upgrade and

streamline Serbia’s government processes, which will benefit

foreign investors.”

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IT & Telecom

Outstanding Opportunities in Fast-Growing Telecom SectorWhen Serbia passed its new telecommuni-cations law in 2003, it began to liberalise cations law in 2003, it began to liberalise the sector and create an environment that would encourage further development and an open market.

Another major step forward was the creation of the Republic Telecom-munication Agency (RATEL) in 2005. Jovan Radunovic, President of RATEL’s board, explains, “RATEL created opportunities for new mobile operators, which has meant better service and lower prices. We were especially proud of licensing VIP Mobile, a pure greenfi eld investment.” Serbia’s mobile operators are Telenor (Norway), MTS (a division of Telekom Srbija), Mobilkom (Austria), and VIP Mobile.

RATEL hopes to issue tenders to license two more fi xed line operators to end Telekom Srbija’s current monopoly on fi xed line services. “The privatisation and liberalisation of fi xed line services has to be done carefully and reasonably,” Jovan Radunovic points out. Telekom Srbija, in addition to providing all Serbia’s fi xed line services, has a 70% share of the mobile services market. It recently

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announced it expected a 42% rise in profi ts to reach €289 million for 2008. The company is the majority owner of the second-largest telecom company in neighbouring Bosnia and of MTel, the newest mobile operator in Montenegro.

RATEL is also preparing tenders to introduce new technologies to Serbia’s telecom sector, including WIMAX and CDMA to bring better quality Internet connections throughout the country.

To date, the majority of investments in Serbia’s telecom sector have been in increasingly digitalised fi xed line services and in Internet services, including broadband. Investment in Serbia’s fi xed line infrastruc-ture rose from €62 million in 2006 to €166 million last year. Mobile telephony, which has attracted €100-200 million in investments since 2006, achieves the highest rate of return, with an increase in revenues from €580 million in 2006 to €840 million last year.

Thanks to market liberalisation, Serbia now has 159 Internet service providers, only two of which are public, with SBB, a private company, leading the market and ranked

number one in cable distribution. “RATEL’s role is to provide equal opportunities for all players in the market, and to promote competence, transparency, impartiality, and adherence to laws and regulations,” Jovan Radunovic says.

The privatisation of Telekom Srbija is clearly not the only outstanding opportunity for investors in Serbia’s telecom sector. As Jovan Radunovic concludes, “The telecom market in Serbia is open and regulated, and investments are quickly profi table. I believe there is a great potential for further investment here.”

Number of users (thousand) in

2005.

Penetration (%) in 2005.

Number of users (thousand) in

2006.

Penetration (%) in 2006.

Proportional increase in the

number of users (%)

Absolute increase in the number of users (thousand)

Fixed 2,527.3 33.7 2,719.4 36.3 7.6 192.1

Mobile 5,510.7 73.5 6,643.7 88.6 20.6 1,133

Internet 756.7 10 1,005 13.4 32.8 248.3

Cable 530.5 7 541.9 7.2 2.15 11.4

Jovan Radunovic, President of RATEL

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IT & Telecom

Serbia Positioning Itself as ICT HubSerbia is an ideal choice for ICT investment. The country already has around 3,000 highly trained IT engineers and is stepping up its efforts to ensure high quality ICT human resources; labour costs are considerably lower than the European average.

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Serbia’s ICT sector already achieves annual revenues Serbia’s ICT sector already achieves annual revenues of around 79 million and is growing by 18.3% per year; its projected fi ve year growth rate is 16.8%. year; its projected fi ve year growth rate is 16.8%.

Several multinationals are already present in Serbia, along with a number of smaller European fi rms, and ICT research and development efforts have attracted strong international participation. Serbia’s 10% corporate profi t tax adds to the benefi ts for investors.

Successful ICT investors in Serbia include Microsoft, with its thriving Belgrade Microsoft Development Centre; US based Euronet, a global leader in processing secure electronic fi nancial and payment transactions; ComTrade Group, a Serbia based ICT leader; IMP-Tel-ecommunications Ltd, a Belgrade enterprise specialis-ing in digital signal processing and more; Serbia based PSTech, known for the latest automated identifi cation and data capturing (AutoID) technologies; and BIS Gowigroup, a Serbian software developer.

Major IT business park: Indjija

Serbia will soon become the home of Europe’s biggest Serbia will soon become the home of Europe’s biggest information technology park, Ingea, in Indjija on the information technology park, Ingea, in Indjija on the outskirts of Belgrade. Indjija is being developed by outskirts of Belgrade. Indjija is being developed by Bangladore based Embassy Group, an international Bangladore based Embassy Group, an international leader in the development of business parks.leader in the development of business parks.

Indjija is budgeted at a minimum of Indjija is budgeted at a minimum of 473 million and is expected to create around 25,000 new jobs for skilled is expected to create around 25,000 new jobs for skilled professionals over the coming fi ve years. Its exports are professionals over the coming fi ve years. Its exports are expected to reach around expected to reach around 1.6 billion per year.

Business parks developed by Indian Embassy Group Business parks developed by Indian Embassy Group have already attracted leading international names in have already attracted leading international names in the IT sector, including IBM, Microsoft, HP, Fidelity, the IT sector, including IBM, Microsoft, HP, Fidelity, Covansys, LG Soft, Yahoo, Google, Lenovo, Alcatel-Covansys, LG Soft, Yahoo, Google, Lenovo, Alcatel-Lucent, NVIDIA, and many more. Ingea is expected to Lucent, NVIDIA, and many more. Ingea is expected to provide a major new incentive for international investors provide a major new incentive for international investors in Serbia.in Serbia.

Construction on Indjija has already begun and the park is Construction on Indjija has already begun and the park is expected to open in mid 2009, with everything completed expected to open in mid 2009, with everything completed by 2013. The mayor of Indjija, Goran Jesic, explains by 2013. The mayor of Indjija, Goran Jesic, explains that the municipality has provided 50 hectares free of that the municipality has provided 50 hectares free of charge for the Ingea project. The Serbian government charge for the Ingea project. The Serbian government will provide infrastructure, according to Telecommunica-will provide infrastructure, according to Telecommunica-tions and Information Society Minister Jasna Matic.tions and Information Society Minister Jasna Matic.

This major endeavour for Serbia is expected to pay This major endeavour for Serbia is expected to pay off handsomely in the long run; estimates suggest that off handsomely in the long run; estimates suggest that Ingea could some day produce up to half of Serbia’s Ingea could some day produce up to half of Serbia’s overall exports. For investors in ICT, Serbia is defi nitely overall exports. For investors in ICT, Serbia is defi nitely a top choice.a top choice.

Real Estate

• Robust Real Estate Sector Set for Continued Growth

• New Ministry Focuses on Environment and Urban Planning

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Real Estate

Robust Real Estate Sector Set for Continued GrowthSerbia’s real estate sector, which accounts for over 7% of the country’s GDP, offers significant advantages for investors as the economy continues to develop. With GDP growth averaging around 7% and per capita GDP rising to over 43,153, Serbia’s economy is one of the fastest growing in Europe. Foreign direct investment in Serbia is also rising rapidly and totalled 7 billion between 2001 and 2006. Last year, the country attracted a record 3.4 billion in FDI. Significantly, the state’s budget surplus is providing unprecedented funding for infra-structure development.

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Demand growing for offi ce, residential and retail space

All these trends mean growing demand for offi ce, residential and retail property in Serbia’s key urban centres. Demand for quality offi ce space is expected to continue to grow strongly thanks to increasing FDI and an expanding private sector, while the residential market is benefi ting from increasing disposable income and the wide availability of mortgage loans and decreasing rates of interest. Retail space is also in demand as the economy grows.

Yields in Serbia’s real estate sector tend to be higher than in other countries in Central and Eastern Europe, amounting to 9% in the offi ce market, 4% to 7% in the residential market, and 5% to 6% in the retail market.

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Real Estate

Amount of offi ce space rises 40% in Belgrade

In the offi ce market, according to a study by Colliers Inter-national in 2006, the total supply of speculative offi ce space in Belgrade had increased by 40% since the end of the previous year, bringing total speculative offi ce inventory of Class A and Class B offi ce space in Belgrade to nearly 270,000 sq m. Compared to the Class B market segment, the growth in Class A inventory was signifi cantly higher, and totalled around 145,000 sq m at the end of 2006. Most new offi ce property development in Belgrade has been in the New Belgrade district, which has accounted for almost 90% of new Class A and 80% of Class B property.

Vacancy rates for Class A offi ce space in New Belgrade were around 9% in 2006, while the city’s overall Class A and B vacancy rate was 11.7%. Available Class A and B offi ce space for rent in Belgrade at the end of the year totalled slightly over 20,000 sq m. Demand for high quality offi ce space in Belgrade is being driven mainly by fi nancial and legal services, telecommunication and IT companies, and the expansion and market positioning of existing banks. Demand for small and medium size premises remains robust as well.

Demand for high quality offi ce space growing

In 2007, the supply of offi ce space in Belgrade remained adequate but demand continued to increase, and more and more offi ce projects are being announced for the future. Average rental rates for Class A offi ce space in Belgrade reached €22 per sq m per month in the prime central district of New Belgrade. Class B buildings in the same area commanded rents of €11 and €17/sqm/month, while converted space averaged €10/sqm/month. Offi ce yield in Belgrade in 2006 was roughly 9%, higher than in other countries in the region.

Residential construction growing by 50% per year since 2003

Serbia’s residential market began to recover with the country’s new political and economic stability in 2000. Between 2000 and 2005, signifi cant new residential development occurred in Belgrade, Novi Sad and Nis. In fact, construction of multi-family homes has increased by roughly 50% every year since 2003, underpinned by strong market demand.

Two bedroom apartments account for 30% of total residential property in Belgrade, and the highest demand

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is for smaller apartments. Many new buyers prefer newer buildings, since there is little price difference between apartments in new and old buildings, and newer structures usually offer higher quality fi nishing and facilities.

New Belgrade seeing strongest demand

The supply of rental housing in Belgrade has been growing, primarily in the New Belgrade, Dedinje, Vracar, and downtown districts. Most new properties are two- and three-bedroom apartments. The average prime rent for residential property in Belgrade was €11/sqm/month as of the end of 2006. New Belgrade has seen the strongest demand and also the strongest increase in supply of new residential space, keeping rental rates steady. Yields for mid-range apartments vary between 4% and 5%, whereas for high-end apartments the level is between 6% and 7%.

Concerning retail property, numerous shopping malls are under construction or in the planning phase. The city of Belgrade continues to be the main investment destination, followed by Novi Sad, Serbia’s second largest city.

As these developments show, Serbia’s property market is set to continue to be robust as the economy develops. Companies setting up operations in the country currently have a choice of high quality properties, and investors seeking high potential opportunities will fi nd much to attract them in Serbia’s real estate sector.

Robust Real Estate Sector Set for Continued Growth

Genex Business Apartments in New Belgrade

Section is composed with help of

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Real Estate

New Ministry Focuses on Environment and Urban PlanningOliver Dulic, Minister of Environment and Spatial Planning, discusses his ministry’s key goals and projects.

ET: What is your ministry’s mission?

O. Dulic: The ministry fi nally brings together environment, construction and spatial planning under one roof, which enables us to develop these activities according to European standards and plan a sustainable future for Serbia. Our mission is to develop a cleaner, healthier, richer and more suitable environment for foreign investments in Serbia. The ministry is already working on new legislation that meets EU criteria concerning the environment and urban planning. The ministry’s goal is to reduce the number of plans and ensure greater co-ordination of projects as well as stringent controls and punishment for abuses. All companies must guarantee that they meet EU environmental standards by 2015. The ministry will soon institute new procedures that will shorten the time it takes to get permits, and will also inspect new urban planning projects to make sure they meet international standards.

ET: What are some of the ministry’s current projects?

O. Dulic: Supported by EU pre-admission funds, the ministry is working on new environmental legislation, improved systems for managing air quality, and a network of preserved natural areas. Projects for the near future include ways to manage toxic waste and chemicals, and more environmental projects.

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ET: What about meeting EU environmental standards?

O. Dulic: For us, environmental standards are not an obstacle for joining the EU, but rather one of the main reasons Serbia should gain EU membership. The ministry is charged with evaluating the environmen-tal impact of proposed projects, and new procedures will allow us to provide these evaluations in under 70 days, compared to the current 250 days. In addition, the ministry’s new environmental legislation has been drafted and is awaiting the approval of the parliament.

ET: What is the ministry doing to encourage more foreign investment?

O. Dulic: We will ensure that public land used for development can be privately owned, as stated in Serbia’s new constitution. According to the superfi cio solo cedit principle, the owner of a property will own what is built on that property. Overall, this ministry will work to reduce red tape and yet upgrade controls over new construction, to speed up the process yet also make sure that new construction meets EU standards, for example concerning energy effi ciency.

ET: What is your personal message?

O. Dulic: I invite investors to visit Serbia, talk to companies that have been successful here, and count on the Ministry of Environment and Spatial Planning as their partner.

Oliver Dulic, Minister of Environment and Spatial Planning

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Media & Communications

• Media and Communications Sector Working Toward EU Standards

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Media and Communications Sector Working toward EU Standards

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Media & CommunicationsMedia & Communications

Serbia’s media and communi-cations activities have evolved rapidly since 2000, and are set for further signifi cant changes as Serbia aims to meet the criteria of the EU Audiovisual Media Services (AVMS) Directive.

Signifi cant progress since 2000

In Serbia, the information and communication technologies (ICT) sector, the media market overall, and media legislation and implementation are still far behind the European average, and Serbia has many challenges in store as it positions itself for EU membership.

Nevertheless, signifi cant progress has been made in Serbia’s media and communications sector over the past eight years. The Broad-casting Act (adopted in 2002), the Public Information Act (adopted in 2003), the Telecommunica-tions Act (adopted in 2003), and the Advertising Act (2005) have all helped to create a stronger regulatory environment that has reassured foreign investors. In addition to this new legislation, the Ministry of Culture is drafting a law on “Preventing Media Ownership Concentration” with the assistance of domestic and international media experts.

New ministry focuses on telecom

In a signifi cant step forward, the new Ministry for Telecommunica-tion and Information Society was created in May 2007 to oversee

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and regulate media and telecom-munications in Serbia. The new ministry is mandated to help Serbia meet the criteria of the Convention on Transfrontier Television of the Council of Europe (TWF-CoE) and a number of CoE recommenda-tions for the media sphere.

Serbia has already developed a dynamic media scene. In one recent development, President Zeljko Mitrovic launched a state-of-the-art fi lm studio to help position Serbia as the hub for movie production in Eastern Europe.

Belgrade Serbia’s media hub

Belgrade is Serbia’s media hub. The city is home to the main headquar-ters of the public service broadcaster Radio Television Serbia (RTS), as

well as the RTS record label PGP RTS and the country’s most popular commercial broadcaster, RTV Pink, a Serbian media multinational known for its popular entertain-ment programmes. B92, the most popular alternative commercial broadcaster, is also based in Belgrade; it operates a television station and a radio station and has its own music and book publishing activities as well as Serbia’s most popular web site.

High circulation daily newspapers published in Belgrade include Politika, Blic, Vecernje novosti, Glas javnosti, Press and Sportski žurnal. Other dailies include Danas and Kurir. Novi Plamen is a very well known leftist magazine, while a new free daily, 24 sata, was founded in 2006.

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EU standards

New legislation is helping to bring Serbia’s media sector up to EU standards. The Broadcasting Act introduced European models and values to Serbian broadcasting and established an independent regulatory body (the Republican Broadcasting Agency); the Public Information Act outlines general provisions on media freedom and journalistic inde-pendence and regulates the means of establishing and distributing media outlets; and the Telecom-munication Act established the Republic Telecom-munication Agency (RATEL) and sets down various regulations to ensure free market conditions and EU standards.

Challenges to be faced

A number of challenges remain in Serbia’s media and communications sector. These include the need to respond to the growing convergence of traditional media (radio and television) and new media (mobile telephones and the Internet); the need for the public sector to enhance Serbia’s participation in the global information network; and the need to step up the pace of acceptance of new media technologies in the Serbian market.

In 2007, less than half of Serbia’s population (41%) owned a computer, and only 30% used the Internet on a regular basis. On the other hand, around 75% of the population owned mobile telephones. Of the Internet users last year, 74% still accessed Internet services through dial-up connections. WAP and GPRS services were used by 16% of the population last year, while 15% of Internet users employed ADSL connections. Analogue television broadcasting, in contrast, was accessed by 98% of the population last year. Digital terrestrial television (DTT) has not yet been launched, although the public service broadcaster, Radio Television of Serbia, is transmit-ting DTT trial signals.

Serbia Broadband, a cable and Internet company, was the first commercial operator to introduce satellite digital broadcasting in Serbia (in 2006) and it now serves around 50,000 subscribers. VoIP, WiMax, DTT, CDMA and triple-play are being introduced to the market this year, and 3G mobile phone services

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were being used by around 30,000 subscribers at the beginning of 2007.

The liberalisation and development of Serbia’s telecommunication sector is a top priority for the country, as is the implementation of regulations concerning Internet services and digitalisation. The Ministry of Culture and the Ministry of Tel-ecommunication and Information Society, along with independent agencies RBA and RATEL, have formed an inter-sectoral working group to develop strategies for a digital switchover. Serbia still has to adopt new laws regulating e-government, e-commerce, and the protection of personal data, but the progress it has made so far makes observers hopeful of the future.

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Ekonomist Media Group

Uncompromising ProfessionalismEkonomist Media Group (EMG) is the leading business media group in Serbia and one of the leading ones in the region. Since they launched the initial Ekonomist magazine eight years ago, they have managed to expand their activities and as a result of this growth EMG today has three different magazines under its roof (Ekonomist, weekly; Banker, monthly; Enterprise, monthly) and is co-producing a business TV show (Wallet, half hour show on economy and business running on TV B92 with national coverage).

Ekonomist magazine – the EMG fl agship

Ekonomist magazine has built a reputation of a magazine that is a benchmark for business success and competence. Its loyal readership includes the entire business community of Serbia and the region, corporate managers, government representatives, economists and socially involved individuals. In the past eight years, Ekonomist has published interviews with numerous relevant individuals, economic experts and key people in the government and political organ-isations in Serbia and in the region, as well as leaders of renowned world institutions. During the turbulent years that shook the entire region both politically and economically, Ekonomist has managed to keep the highest standards of professional ethics as well as its characteristic analytical abilities, thus positioning itself as one of the most respectable and relevant sources of information and evaluation.

Ekon:ference – conferences that infl uence the corporate world

Ekon:ference is an EMG section in charge of organising high-profi le business conferences whose content and topics, as well as attendees and participants, meet the needs of regional business community. The objective of Ekon:ference is to raise the level of business co-operation in the region to a higher level, and to gather under one roof the top managers of leading

domestic, regional and global companies. Speakers and participants of our events are competent experts with remarkable backgrounds in various fi elds of economy. With their presence and direct participation in our events they contribute signifi cantly to the quality, seriousness and relevance of the views presented.

EMportal – competent source of business information

EMportal is the web-portal of the EMG. Its mission is to inform, educate, communicate and explain economic, business and fi nancial trends on the local, regional and global levels. EMportal has several mutually supplement-ing sections that provide the visitors with a comprehen-sive and reliable view of the economic landscape in Serbia, the region and the world. EMportal features the following sections: News, Stock Market, Ekon:ference and Business Calendar, EMG Publications, EM Plus, and EMG Central – an online corporate ID card of Ekonomist Media Group and its entire portfolio of products and services. The address is emportal.co.yu

LCS – event management at the highest level

Logistics Consulting & Services is a team of top quality experts specialised for each stage of an event management project. Long-term experience, know-how and a strategic approach distinguishes LCS team members as the elite in the profession, guaranteeing that every event under

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the auspices of LCS will bear the quality of uniqueness, visibility and excellence. LCS provides a complete service from the initial planning stages, through direct consulting for all event-related issues, up to logistic and technical implementation. LCS makes it happen. The specter of events that LCS can organise for their clients is comprehensive: press conferences and briefi ngs for the media and business community, business breakfasts, cocktails, seminars, training courses, forums, conferences and congress events, as well as roundtables and business summits at all levels.

Corporate communications – a link with a world of high business performance

Department for corporate commu-nications Ekonomist Media Group

is a result of one logical sequence of activities of the company, aiming to establish better and more successful communication among businessmen and having the following groups as target ones: the public, established institu-tions, the media, those who create public opinion,... Ekonomist Media Group can create and carry out media campaign tuned to your needs, it can organise meetings with target groups you want to meet and it can also help you to present yourself successfully. Within this department there are experts who seriously work on media consulting for companies-clients, and who also work on exclusive trainings and education. Next year EMG plans to organise trainings on the following issues: public relations, media presenta-tion, crisis management, market

Ekonomist Media GroupAddress: Kosovska 1/ IVBelgrade 11000, SerbiaTel.: +381 11 333 3002Fax: +381 11 337 4050

offi [email protected] www.emportal.co.yu

analysis, corporate management, internal and external communi-cations, corporate social respon-sibility, approach to investors, placement on the market, e-gov-ernance, etc. Their goal is to improve business communication both in their country and in the region, and by doing so they plan to raise standards for the creation of a more professional and favorable business environment.

Business & Leisure

• Serbia, One of the Undiscovered Gems of Eastern Europe

• Belgrade, the Perfect Combination of Business and Pleasure

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Serbia, One of the Undiscovered Gems of Eastern EuropeSerbia, in the heart of the Balkans region, is set to become

one of Europe’s next top tourism destinations. Serbia has

something for everyone. It offers lively cities, picturesque

villages, a range of possibilities for an active holiday,

natural spas, fi ve national parks, a rich architectural

heritage, and, for the business traveller, world class

conference and meeting facilities as well as luxury hotels

that offer special services for travelling executives.

Belgrade: lively modern city with long history

Most visitors to Serbia arrive in Belgrade, a dynamic modern city with a long history. Conquered and rebuilt by Celts, Romans, Slavs, Turks, and Austro-Hungarians, the Kalemegdan Fortress anchors the city to its strategi-cally important position at the confl uence of the Danube and Sava rivers. From the fortress’s walls visitors have great views of New Belgrade – the city’s up-and-coming business and commercial centre – rising across the river. Belgrade is fi lled with lively cafés, eclectic architecture, and a rich cultural scene. It has many luxury hotels, and often hosts international exhibitions and conferences.

National Theatre and Statue of Prince Mihailo III on Republic Square

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Business & Leisure

SERBIA

Rural heartland

Visitors in search of Serbia’s rural heartland can visit many picturesque villages scattered around hills and valleys, including Kosjeric, with its rich farmland and picturesque architecture; Lucani, another agricultural centre with luxuriant forests all around; and Mionic, with its mountain streams, fruit orchards and cattle farms.

Serbia also has several “ethno villages” that celebrate traditional Serbian life and are an excellent choice for travellers who want to learn more about Serbian culture. Sirogojno is the home of the Museum of National Architecture, and contains a recreation of a traditional Serbian mountain village. Near the village of Mokra Gora is Drvengrad, the creation of world-famous Serbian fi lm director Emir Kusturica. While shooting one of his movies in the area, Kusturica noticed that even when it was raining almost everywhere else, one place was almost always sunny, so he built a village there that recreates a Serbian village of the 19th century. It has several cottages as well as a cinema, library, art gallery and shops.

UNESCO World Heritage Sites

Serbia is also known for its many monasteries, some of which have been named UNESCO World Heritage

Beyond Belgrade

Beyond Belgrade, the multi-ethnic city of Novi Sad, Serbia’s second largest urban centre, has a growing economy and a lively cultural life, although is considered more laid back than Belgrade. It is known for its art (and artists), music, food and fun, and hosts Exit, the very popular international music festival, every year in July. It enjoys a picturesque riverside location on the Danube beneath the imposing 600 year old Petrovara-din Fortress. Novi Sad is the home of the Fine Arts and Music Academy and Vojvodina Museum, which houses regional exhibits from the Paleolithic to late 19th century, with an emphasis on relics from WWI and WWII. Novi Sad’s cuisine, a unique mixture of Serbian, Hungarian, Romanian and Slovakian spices and traditions, can be enjoyed in the city’s many restaurants. Often diners are entertained by a tamburitza orchestra.

Nis, Serbia’s third largest city, lives up to Serbia’s reputation for a rich cultural life. Built on both sides of the Nisava River, Nis hosts an annual international fi lm festival in August and a three day music festival, Nisomnia. Legend says that Roman emperor Constantine the Great was born in Nis, and the remains of a 4th century villa he ordered built can still be visited. Constantine is celebrated every year in June with a popular festival. The city also has a lively shopping district, an archeo-logical museum, and a well-preserved amphitheatre.

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Sites. Decani Monastery, 17 km from the town of Pec, is the biggest medieval building in Serbia and is one of the country’s World Heritage Sites. It contains a fabulously rich collection of Byzantine paintings that depict the history of Christianity in more than 1,000 individual fi gures and scenes created between 1335 and 1350. Decani’s frescoes are described by UNESCO as “one of the most valued examples of the so-called Palaeologan renaissance in Byzantine painting, a valuable record of life in the 14th century.”

Gracanica Monastery, completed in 1321, is another World Heritage Site and is considered one of the fi nest examples of Serbian medieval art in the fi rst half of the 14th century. Gracanica’s well-preserved frescoes were painted by Greek painters from Thessalonica. Studenica Monastery is a well-preserved 13th century monastery set on the wooded slopes of Mount Radocelo and is one of the most popular monasteries in the country.

Five national parks

Nature loving travellers can explore Serbia’s fi ve national parks, including Djerdap National Park, which stretches along the Danube and offers unfor-gettable vistas of the great river; Tara National Park, set in mountainous western Serbia and an excellent choice for summertime hiking; Kopaonik National Park, home of Serbia’s tallest mountain and a growing

Business & Leisure

SERBIA

ski centre; Fruska Gora National Park with its lush forests, 16 orthodox monasteries, archaeological sites, and many vineyards where travellers can sample the wines; and mountainous, virtually undeveloped Sara National Park in the Serbian province of Kosovo-Metohija; it is the home of lynx, bear and chamois.

For sports lovers, Serbia has something to offer all year. In winter, Kopaonik has more than 44 km of ski trails and 17 km of ski lifts. The Panonian Basin is a paradise for bird-watchers, while the Drina river is a popular choice for river rafting excursions. And these are just a few of the possibilities in sports friendly Serbia.

Visitors can shop for traditional handicrafts throughout the country, relax in one of Serbia’s many spas, or just enjoy the luxurious facilities at one of the country’s best hotels. Getting to Serbia has never been easier. The country has three inter-national airports (Belgrade Nikola Tesla, code name BEG; Niš Constantine the Great Airport (INI) in Niš; and Priština International Airport (PRN) located in Kosovo Metohija province. Serbia’s national carrier is JAT Airways, which operates a fl eet of 30 aircraft and offers connections to most European destinations.

Serbia’s tourism industry defi nitely has growth potential.

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Business & Leisure

Belgrade, the Perfect Combination of Business and PleasureOne of the oldest cities of Europe and capital of former Yugoslavia, Belgrade breeds a quality of life that has inspired many expatriates to never leave again. Its openhearted spirit in combination with a myriad of attractions and vibrant social life make Belgrade the most dynamic city in South Eastern Europe.

SERBIA

The city’s historic sites include the National Museum and the adjacent National Theatre, Nikola Pašic Square, Students’ Square, the Kalemegdan Fortress on a hill above the city, Knez Mihailova Street, the Parliament building, the Temple of Saint Sava, Tito’s mausoleum, Beli Dvor (the White Palace, fi lled with priceless works of art), and the Old Palace. Museums, parks and nature preserves,

and the hilltop Avala Monument are other must-sees.

Sports loving visitors gravitate to Ada Ciganlija on the Sava River, Belgrade’s biggest sports and recreational complex. It offers seven km of beaches and facilities for sports of all kinds, from golf and tennis to bungee jumping and wake boarding. In the peak summer months, visitors can enjoy live music and overnight beach parties.

Belgrade, dubbed “the capital of cool” by the British Times, has a lively social scene year round. In summertime river clubs or so-called ‘splavovi’ provide entertainment along the banks of the Sava and Danube rivers. Spread throughout the city there is a fashionable bar scene, with one of the most popular strips on Strahinjica Bana in Dorcol.

For a taste of Serbian tradition, visitors can explore the ancient Skadarlija neighbourhood, known for its concerts of starogradska (traditional music) and its kafanas (some of the city’s best and oldest traditional restaurants). Zemun, within splitting distance from Central Belgrade, offers a convenient getaway from the busy city with a great variety of (fi sh) restaurants along the Danube.

Belgrade is all about wining and dining. Five recommended venues:

Dorian Gray Outstanding restaurant offering great selection of wine, with a large outdoor terrace facing Strahinjica BanaKralja Petra 87-89, Tel. +381 11 263 4151

MaderaRenowned Belgrade restaurant with a beautiful garden located on the periphery of Tašmajdan Park Bulevar Kralja Aleksandra 43Tel. +381 11 323 1332

¿Que Pasa? Award-winning restaurant with inter-national cuisine, part of Aleksandar Palace HotelKralja Petra 13-15Tel. +381 11 328 4764

Restaurant Zaplet Stylish restaurant with very diverse menu, located in one of Belgrade’s arty suburbs Kajmakcalanska 2Tel. +381 11 240 4142;

Restaurant Reka Offers a truly Serbian dining experience including live music, situated along the banks of river Danube in ZemunKej Oslobodjenja 73bTel: +381 63 864 8215 /611 625

Dorian GrayDorian Gray

Dorian Gray

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Report sponsored by:

Standard of Excellence.

Deloitte d.o.o.Makenzijeva 24 11000 BelgradeSerbiaTel: +381 11 3812 100Fax: +381 11 3812 101 www.deloitte.com/rs

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