economic and financial center, Belgrade
has been declared the City of the Future
for Southeast Central Europe by the Financial
Times Groupís fDi magazine.
A growing economy, with one of the largest
domestic markets in its region, strategically
situated on the doorstep of the European Union
on the most important route linking Europe and
Asia, Serbia has a lot going for it as a promising
destination for foreign direct investment.
From its position in the middle of the Southeast
Europe Free Trade Zone, it has access to a market
of 55 million people. It is also the only country
outside the C.I.S. to enjoy a free-trade agreement
with Russia, providing tariff-free access to
a market of 150 million people.
There are plenty of other advantages on offer
to investors, including macro-economic stability,
low labor costs, and the lowest corporate tax
rate in Europe.
The economy is expanding at an impressive
rate by 6 percent in 2006 and
international institutions such as the World
Bank, the European Bank for Reconstruction and
Development, and the International Monetary
Fund have lined up to heap praise on the republic
as a stand-out economic reformer.
Eight years after the end of the ethnic wars
that ravaged the Balkans in the 1990s, and seven
years on from the economic distortions and political
problems of the Milosevic era, Serbia is a fully
democratic country that is rebuilding and modernizing
its economy with a fair measure of success.
In the longer term, it is working towards membership
of the European Union.
According to the Serbian Development Institute,
Serbia could be economically ready to join the
E.U. by 2012 if it achieves the priority goals
of the National Strategy for Economic Development:
competition, a knowledge-based economy, and
development of infrastructure.
However, several vital and complex political
issues are still to be resolved. Negotiations
on a stabilization and association agreement
with the E.U. a first step towards membership
stalled over Serbias rejection
of E.U. calls for the handing over of former
Bosnian Serb general Ratko Mladic and other
key war crime suspects to the International
Criminal Tribunal in The Hague.
From its position in
the middle of the Southeast Europe Free
Trade Zone, Serbia has access to a regional
market of 55 million people
Meanwhile, a United Nations plan to set the
Albanian-dominated region of Kosovo administered
by the U.N. since Natos 1999 air raids
on Serbia on the road to independence
has been rejected by Serbia as unacceptable.
Parliamentary elections were held in January,
following the withdrawal in 2006 of neighboring
Montenegro from its loose federation with Serbia.
The elections mean a new government, and presidential
elections are to be held later this year. In
February, the E.U. signaled a slight softening
of its position, saying talks on integration
could be restarted if Belgrade takes concrete
and effective action for full cooperation
with the war crimes tribunal.
Despite these politically unsettling events,
Serbia has been attracting increased foreign
investment. The banking sector is notable for
the presence of Greek banks, such as National
Bank of Greece, Piraeus Bank, Alpha Bank, and
EFG Eurobank, and Austrias Hypo Alpe Adria
and Raiffeisen of Hungary are both well established.
Large American companies that have been investing
in Serbia include global food packaging provider
Ball Corporation, U.S. Steel, and Microsoft,
which has made Belgrade the base for one of
its five global development centers.
Short of capital, Serbia certainly needs FDI
particularly greenfield investment
to develop an export-oriented economy and create
jobs. Dramatic progress has been made towards
improving the investment climate. During 2005,
the republic attracted more than 1 billion euros
($1.3 billion) of FDI, most of it brought in
by the privatization of state-owned companies,
which continued last year with up to 500 companies
being put up for sale.
Mining and manufacturing are leading contributors
to the economy, and there is considerable scope
for increased production in agriculture, which,
together with the food and beverage-processing
activities associated with it, makes up the
largest sector. Other sectors poised for growth
include energy, tourism, software development,
high-tech industry and the automobile industry.