Investment opportunities in Serbia


European investors have ranked Serbia among the top 25 investment opportunities globally (1).

Serbia’s advantages include:

Strategic positioning for markets in Europe, Asia, and the Middle East
Duty Free access to the South East Europe Free Trade Zone of 60 million consumers
Only country outside the CIS with a free trade agreement with the Russian Federation
Not yet an EU member; greater flexibility and investment advantages

Lowest corporate profits tax rate in Europe

Skilled labor at a reasonable cost

Highest percentage of English language speakers in SE and Central Europe
Stable economy:

Sound monetary policy and fast implementation of key macro economic laws
Simplified foreign trade and foreign investment regulations
Facilitation of company operational and start up procedures, including residency regime for foreign nationals, business registration, and customs
(1) A.T. Kearney, 2003 Global FDI Confidence Index
 Investment Opportunities
Agribusiness in Serbia

Energy sector in Serbia

Automotive and Component Production in Serbia

IT Industry in Serbia

Electronic Industry in Serbia

Textile industry

Wood and Furniture Industry

Pharmaceutical Industry

What is the size of the sector?

– Accounted for 20.65% of total GDP and 40.91% of the manufacturing industry output in 2001
– Total revenues amounted to €3 billion in 2001
– Contributed to Serbian exports with 16% in the same year
– Employed around 155,000 people in 2002 – more than 10% of the workforce in Serbia
– Encompassed 3,269 companies in 2002
– Monthly net wage averaged €161 in 2003

How could you benefit from investing?

Natural Conditions
With more than 5 million hectares of first-class soil, favorable mild continental climate and restricted use of chemical fertilisers Serbia represents one of the Europe’s most attractive locations for production of high-quality healthy food.

Human Capital
Thorough education and technological skillness notwithstanding, workforce remains extremely low-cost compared to other transition economies, making the intellectual capital a number one competitive advantage.

Market Leverage
A combination of growing local demand for food and beverages, accounting for almost 50% of household budget, duty-free export to Russia and access to the Southeast Europe free trade zone enhances the rentability of investment in agribusiness.

Recognized Image
Not only do traditional export drivers, like raspberries, beef and pork, but also excellent fruit juices, beers and dairy products bolster the favorable reputation of Serbian agribusiness on the global market.

Quality Standards
Leading agribusiness companies boast HACCP and ISO quality accreditations thereby substantiating full commitment to achieving highest performance.

Who leads the way?

Greek ice-cream manufacturer Delta was among the first to locate production facilities in Serbia with €40 milIion investment back in 1998. In 2003 agribusiness alone attracted foreign investment worth almost €1 billion. Early last year Croatian Agrokor won the tender for the frozen foods producer Frikom paying €11 million to acquire the majority stake. This acquisition was followed by two strategic partnership agreements; Europe’s leading beer producers Interbrew and Carlsberg commited themselves to invest in Apatinska Pivara and Pivara Celarevo €326 million and €53 million respectively. Finally, Philip Morris and British American Tobacco privatized tobacco producers from Nis and Vranje in €562 million and €87 million worth deals.
Automotive and Component Production

What is the size of the sector?

In the late 80’s production of automobiles excedeed 200,000 units a year
Exports totaled $41 million in 2001
Employs around 38,000 workers in 2002 (2.66% of total workforce)
Comprised of 155 companies, out of which more than 70% are privately owned
Average monthly net wage amounted to €112 in 2003
How could you benefit from investing?

Respectable Tradition
Prior to imposing economic sanctions, local automotive companies had been involved in more than 200 joint ventures with leading international producers either as their components’ suppliers, or licensed car assemblers.

Cost Efficiency
Significantly lower labor and utility costs in comparison to major FDI recipients in Central and Eastern Europe safeguard excellent prospects of reaching targeted profitability.

Intellectual Capital
Over the years of cooperation with Western companies, domestic staff has received specific know-how and adapted itself to advanced technology and rigorous quality standards.

Market Potential
Duty-free export to Russia and access to the Southeast Europe free trade zone are coupled with the urgent necessity of domestic motor pool modernization, taking into account the extremely high age of vehicles averaging more than 12 years.

Quality and Infrastructure
The vast majority of companies have ISO 9001/9002 accreditations and preserved production facilities which could be utilized for serving growing demand.


The largest automotive company in Serbia Zastava from Kragujevac commenced production of FIAT based models of cars and trucks in 1955. During the 70’s and 80’s valve producer MIV had long-term arrangements with clients worldwide, Peugeot and Chrysler being the most prominent ones. Another components’ producer FAD was a supplier to Mercedes and Ford for a long time, while IDA produced braking and engine parts for GM and Opel brands, courtesy of joint venture with General Motors.

IT Industry in Serbia

What is the size of the sector?

Annual growth rate of 18.3% and a projected five-year CAGR (Compounded Annual Growth Rate) of 16.8%.
The value of the Serbian IT market in 2003 was estimated at USD 340 million.
1,408 IT companies. The ownership structure: 95% are domestic companies, 3% are with mixed ownership and 2% are foreign companies.
9.409 employed in 2003.
Net salary costs vary from 350 EUR to 850 EUR per month for qualified and experienced personnel. The overall salary cost of a programmer/systems expert is in the range 700-1,400 EUR per month.
Key Products and Offerings

Highly-skilled engineers who are competent in a broad range of methodologies, technologies and tools supporting efficient development of high quality software and systems integration. They have expertise in developing front-end, back-end and middle-ware components, but also are very proficient at listening to client requirements and creating tailored software and systems.

Serbian software developers assume either partial or full responsibility for a client’s daily information technology needs. In many cases, they manage and improve the client’s entire information technology process which includes applications, data centers, and networks. Serbian software development experience and expertise are applicable to a variety of business areas and solutions. Subcontract work undertaken is wide ranging and includes creative web design development work for European companies, subcontracting of employees to foreign firms for specific web enabled tasks and the development of technical hardware and software solutions for major international companies such as Philips Semiconductors, Carl Zeiss, Raytheon and NCR. These software and design firms are the core of what could become a much larger specialization in the future.

The industry focus to date has been on the development of customized products for specific industry applications for the local market with the larger companies offering a wider systems integration and full technical service approach. Today, modern hardware (LCD monitors, memory modules, toners cartridges for printers, etc) are made in Serbia.
How could you benefit from investing?

Human Capital
– In this sector, given the high education levels and young age profile, Serbia has a distinct English language proficiency advantage compared to other Eastern European countries.
– As a young industry, the IT sector does not suffer from the labor inflexibility of many traditional industries. Companies have confirmed no labor disruptions. The average age of staff is in the early thirties.
– Highly skilled workforce, with 70% having completed a university level of education.

Academic Framework
– Because of the openness of the region prior to the 1990s, the education standards in the technical departments of universities in Serbia benefited from greater exposure to Western developments than other countries in Eastern Europe.
– Students from a high-school specialized in Mathematics, Physics and Informatics have won an impressive number of prizes at the World Science Olympiads.
– Over 878 of all graduates in the area of electrical engineering, organizational sciences, and mathematics institutes in 2003 are specialized in computer sciences.

Legal Framework
Serbia has done a lot to align businesses in the IT sector closer with the standards of the EU. In order to aid the quick development of the Information Society, several important laws have been adopted:
• Electronic Signature Law
• Patent Law
• Trademark Law
• Copyright and Related Rights Law
• Legal Protection of Design Law
• Protection of Integrated Circuits Topographies Law
• Protection of personal data
• Protection of consumers
• Access to information
• Amended Criminal Code
The strategy of IS development is set to be finished by the end of 2005.

Business Incentives
• The lowest corporate profit tax in Europe – 10%.
• 10 year tax holiday for investments over CSD 600 million (app. € 7.4 million) and employment of more than 100 new workers.
• Tax credit for up to 10% of investment amount for investing in fixed assets.
• Tax relief equating to gross salary plus employer contributions for every newly employed worker during a period of 2 years.
• Accelerated depreciation of environmental, educational and computer equipment.
• Import of equipment and other assets as well as construction materials representing a foreign entity’s investment is exempt from customs duties.
• Import of raw materials, semi-finished and component parts carried out for the purpose of realization of a long-term production contract in cooperation with a foreign producer is exempt from customs and other import duties.
• The liberalization of property laws made it possible for foreigners to own real estate.

Who leads the way?

In addition to major multinationals such as Ericsson and Siemens, which are present in Serbia, a number of smaller European firms have established a presence in the country, both to expand their market reach and to develop products for the region.
FinSoft London and TeleTrader, originally from Vienna, both have more than 50 developers in Belgrade – that number swells to a hundred or more during peak production times.
Austrian S&T signed an agreement for the takeover of IT banking solutions provider SITO Inc. Information Systems Engineering and Design Company.
Blue Star is one of very few companies which has daily offerings of SDR memory modules in its portfolio. Together with Samsung, their strategic partner, Blue Star offers a wide range of TFT monitors, plasma and TFT TV sets. The company also produces VGA cards (ATI and Nvidia platforms), USB sticks (64MB-1024MB), memory cards (64MB-256MB), MP3 players and TV tuners.
Bozic i Sinovi has developed a partnership with a UK-based company, Gowigroup Ltd. and signed a long term annual contract worth L500,000.
Electronics Industry


– Low share in the GDP (1.1%) in 2001, but recorded the highest growth in 2002 (72.4%)
– Contributed to Serbian export with 2.5% in 2001
– Workforce encompassed 24,700 people, or 1.84% of the working population in 2002
– 1,320 companies registered in 2001, most of them (90%) privately owned
– Net monthly salary averaged €133 in 2003


Intellectual Base
High-class technical schools in Serbia, including the School of Electrical Engineering in Belgrade which is widely regarded as one of the best in the world, yield the annual average graduate output of around 2,700 and percentage of university and two-year college employees in the sector reaches 13%.

International Links
Over decades most large Serbian electronics producers fostered extensive partnerships with blue-chip telecommunications and electronics companies worldwide.

Low Overheads
Given that the average monthly net wage of Serbian workers stands at merely one third vis-?-vis their Hungary and Czech Republic counterparts, the average savings on an annual salary bill for a 300 person operation in the sector will exceed €1 million.

Market Perspective
By setting-up business in Serbia an electronics producer may capitalize on duty-free export agreement with Russia, Southeast Europe free trade zone and burgeoning local demand, with electronics imports which is sevenfold higher than exports.

Local Sourcing
Large free capacities – the result of economic sanctions in the 90’s, could be utilized for serving both local and global demand with a full range of electronics products, while the strong domestic R&D platform may provide active support in developing advanced technologies.


Major producer of consumer electronics and home appliances in the Balkans EI Holding Corporation Nis boasts long tradition of collaboration in the form of joint ventures and industrial contracts with world top companies like Alcatel (telephony), Siemens (HF transmission), Bull (computers), Philips (color picture tubes) and Sagem (teleprinters). VF Holding, leading producer of radio, TV and telecommunication equipment, was established in 1990 as a joint venture with Siemens which eventually became the sole owner in 2001. Another joint venture, between Alcatel (56%) and Pupin (44%) – Alcatel Pupin Yugoslavia currently employs around 40 people with an asset base of almost €10 million.
Textile Industry

– Estimated share in GDP amounted to 10% in 2002
– In the same year exports reached $196 million, 70% of which absorbed by the EU market
– Employed around 100,000 people or 13% of the industrial workforce in 2002
– Dominated by private companies – 77% out of total of 1,185 in 2000
– The lowest average net monthly salary within the Serbian economy – €54 in 2002


Workforce Quality
In spite of respectable professional experience and technical skillness, gained through 15 years of work within the sector, an average textile employee in Serbia still receives merely one half to one third of the salary paid in neighboring countries, which results in high international competitiveness.

Partnership Culture
Most large textile producers in Serbia developed deep-rooted cooperation in the form of cut-manufacture-trim operations with Western companies successfully meeting their rigorous quality standards.

Cost Competitiveness
In addition to low-cost labor force, foreign investors in Serbia could also benefit from moderate utility costs and favorable tax regime envisaging numerous incentives as well as the lowest corporate profit tax rate in Europe.

Market Accessibility
Investing in Serbian textile industry means not only the opportunity to serve rising local demand, currently accounting for 8% of household budget – higher than in most transition countries, but also to gain duty-free access to Russian and Southeast Europe markets.

Geographic Position
Owing to Serbia’s strategic position at the intersection of Pan European corridors no. 7 and no. 10, the proximity of the Adriatic Sea and a dense transportation network, it takes only few hours to reach all major export and import markets.


A great number of large socially owned textile companies are yet to be privatized and one of the first to find a strategic partner was a trading company Ateks purchased by Italian Fibest at a public auction for approximately €8 million. Within the private sector jeans producer Oktan Pro represents an emerging breed of flexible and customer-oriented Serbian companies, currently exporting most of its production under the world famous brand names, such as Mango and Zara. In the mid 2003 Azira Fashion, majority owned by Italian Gruppo Real, the world’s third largest lingerie producer, launches production at Backa Palanka-based company Marina planning to employ 200 workers by 2005.
Wood and Furniture Industry

– Stable growth of production in recent years reaching 3.63% of industrial output in 2002
– Generates positive net foreign trade effect with $89 million of exports in the same year
– Comprised of 2,758 companies – 90% privately owned
– With around 33,000 employees contributed to total workforce with 2.51% in 2002
– Net monthly salary averaged €80 in 2003


Market Potential
Relocating to Serbia enables furniture producers to serve rising domestic demand, fuelled by the steady growth of household income, and seize the opportunity to capitalize on free trade agreements with adjacent countries and the Russian Federation.

Low Overheads
A combination of low average wages, ranging between €55 in wood processing and €90 in furniture production, moderate electricity, telephone and water costs, along with the lowest corporate profit tax rate in Europe enhances the prospects of achieving higher profit margins than in other FDI recipient countries in the region.

Human Capital
Qualified and experienced workforce, with almost 10% of university graduates engaged in furniture production, requires minimum training to catch up with up-to-date technologies and operation procedures.

Resource Base
Serbia abounds in high-quality oak and beech forests which cover approximately Ľ of its territory and represent an ample raw base for both primary and furniture production.

Geographic Position
Its strategic position at the intersection of Pan European corridors no. 7 and no. 10, linking southern and central parts of the continent, makes Serbia easily and quickly accessible from all major import and export markets.


As a hint of its return to Serbian market after a decade’s hiatus, Swedish multinational furniture producer Ikea has recently signed an agreement with Vranje-based company Simpo providing for delivery of mattresses worth €3 million.

Energy sector in Serbia

In order to have uniform development policy in the field of energy and provide all necessary conditions for permanent and equalized development strategy government of the Republic of Serbia has enacted a new law.

According to expectations, reforms in energy shall provide pre-conditions for more efficient operation of all subjects dealing with energy business, and corresponding institutional changes should improve their business performance. This primarily refers to the economic effects and making adjustments in order to meet market competition.

Energy sector at glance

– Serbia has produced in 2003 a total of 30 108 GWh of electricity
– Most of the electricity is produced by the thermal power plants. In 2003 thermal plants account for 72.7% of the overall electricity production in Serbia. Hydro-plants produce the remaining 27.3% of the electricity.
– A new law was passed in July ensuring more competitive energy sector primarily aimed towards better overall satisfaction of end users.
– Energy Agency will act as an independent regulatory authority ensuring healthy development and implementation of national energy development strategy.
– Households account for 58.84% of electricity consumption in Serbia.

Possibilities for development

Serbia is experiencing slight changes in the energy consumption. It has become evident, as the consumption of electricity in winter is slightly lower, whereas in the summer consumption increases. This can be explained by more efficient heating and increased use of cooling equipment.

Serbia still has not maximally utilized the renewable energy sources even though more than a quarter of the energy comes from hydro-plants. In particular smaller communities could benefit from small-scale micro-hydro-plants or wind powered plants.

Over time, it can be expected that role of gas powered plants will increase. This is primarily because of availability of gas from Russia, with whom Serbia has a free trade agreement.


Based on commercial contracts 1 667 GWh of electric power was imported, what is by 46 per cent less than in the previous year. For the first time after 11 years, we signed a contract for commercial exports of 394 GWh.

The power generation in electric power plants of Serbia and hydro power plant Piva was 34 192 GWh. The power generation of power generating facilities of EPS was 33 436 GWh, and if the share of thermal power plants from Kosmet is excluded, (Kosovo A and Kosovo B ), the output was 30 108 GWh.
Thermal power plants and thermal power-heating plants of EPS generated 24 318 GWh and achieved the greatest share (72.7%) in the total achieved annual power generation of EPS.

The hydro power plants of EPS generated 9 118 GWh, which has been, due to extreme drought, the lowest annual power generation, and therefore the lowest share (only 27.3%) in the total power generation of EPS within the last ten years.

Although a record power generation was achieved, as it had been increasing for four years repeatedly, it was still insufficient to meet the consumers’ needs. Actually, the gross consumption was 34 340 GWh of electric power. The public companies for distribution received 31 951 GWh and 1 160 GWh was supplied to direct consumers. The share of households in the total consumption was 58.84%. The maximum monthly consumption was realized in January (3 741 GWh), and the lowest in June (2 196 GWh). A peak hourly load of 6 564 MW, was marked at 6 p.m. on 13 January.

Compared with the previous year, electricity consumption for heating of premises during the winter months was reduced, but, on the other hand, it was increased for cooling purposes during the summer period.

Key benefits

Exceptional cost efficiency – low labor and utility costs, combined with the lowest corporate tax rates in Central and Eastern Europe and increasing productivity to underpin profitability.

High intellectual capital – Technologically advanced, well educated and highly cost competitive labor force available.

Linguistic skills – The best command of the English language in Central and Eastern Europe by a very wide margin, according to a survey by Gallup International.

Strong tradition in energy business – companies from Serbia, in particular those private are predominantly export oriented and represent real partners when it comes to exporting. Adding this to numerous free trade agreements, Serbia becomes an attractive location for outsourcing and that demands performance on competitive market.
Pharmaceutical Industry

What is the size of the sector?
• The sector accounts for 3.24% of the total industry (2004)
• The value of sector’s annual production is €308 mill. (2004)
• Annual growth of the sector in 2004 was 15%
• Employs around 6,000 workers in 2004
• Comprised of 49 companies (production of pharmaceutical products)
• Average monthly net wage amounted to €326 in 2004
How could you benefit from investing?
Production capabilities
Generic drugs are taking on a much greater role in the industry. This trend has created a tremendous business opportunity for pharmaceutical companies who serve the “bottom of the pyramid”. Serbian pharmaceutical companies have strategically positioned themselves to take advantage of the mentioned trends. Many of the Serbian pharmaceutical companies have invested substantial capital into development and are capable of producing quality low-cost generic drugs. If short of in-house manufacturing capacities, want to outsource small-batch production, reduce manufacturing costs, or delay/avoid capital investments in manufacturing, one should consider manufacturing in Serbia.
Cost Efficiency
Significantly lower labor and utility costs in comparison to major FDI recipients in Central and Eastern Europe safeguard excellent prospects of reaching targeted profitability. The average monthly salary in the industry in 2004 was €326.
Intellectual Capital
Pharmaceutical industry is the one with the best qualification structure of all industries in Serbia. The number of collage and university graduates as percentage of total number of employees in the sector is around 30%. Moreover, medical universities produce close to a thousand of university graduates annually. This creates an excellent base for recruitment of educated workforce.
Market Potential
Decades of presence in the Russian market has built trust and loyalty towards Serbian drugs and pharmaceuticals. Serbia enjoys a FTA with the Russian Federation which applies to almost all drugs and medical devices. Furthermore, based on the free trade agreements signed with other Southeast European countries a producer is entitled to market its goods to a 60 mill people market customs free.
Commitment to Quality
Most of the manufacturers within the sector comply with ISO 9000 quality system. Some of them acquired ISO 14000 certificate, while the leaders of the industry comply with GMP, GLP and GCP.
Companies like Hemofarm and Galenika, which have invested substantial capital into development, are expanding the frontiers of pharmaceutical industry in the Region. Other companies like the Zdravlje Actavis (owned by Actavis company from Iceland) which is one of the leading manufacturers of generics in Serbia provide access to low-cost drugs.
Hemofarm is a company with decades of experience in drug production. Today, the Group comprises a parent company and 21 subsidiaries, 12 in SCG and the rest abroad. Galenika has been producing drugs for 60 years. It was established in 1945, and soon after became the fourth company in the world producing penicillin. In 1991 it has entered a JV with ICN, which ended in 1999. Currently, the company accounts for 30% of the domestic market.

Explore posts in the same categories: South Eastern Europe

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