Reasons to invest in serbia and wb

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Reasons to invest in serbia and wb

  1. 1. Prospering Foreign Investments The Reasons to Invest in Serbia & Western Balkans 1
  2. 2. List of Content  Key Country Data- Serbia 3  Executive Summary 4  Foreign Direct Investments 6  Investment Incentives 7  Favorable Tax Regime  Skilled and Competitive Workforce  Free Trade Zones in Serbia  Road Network 11  Rail Network 12  Danube- Strategy and Importance 13  Energy 14  Unique Export Potential- Preferential Trade Agreements 15  Western Balkans Overview 16  Case Study 18
  3. 3. Key Country Data- Republic of Serbia  Area: 88,361 km2  Population: 7.24 million  Official Language: Serbian  State Form: Parliamentary Republic  Capital: Belgrade (1.6 million)  Currency: Serbian Dinar (RSD)  Biggest cities: Belgrade (1.57 mill), Novi Sad (0.3 mill), Niš (0.25 mill)  2 autonomous provinces, 25 districts  Independency since 1878  EU negotiation since 2005  Member of CE, IMF, OSCE, CEFTA, EFTA, U N, etc.  GDP per cap. EUR 4,116 (2011)  Avg. (net) salary EUR 373 (2011) 3
  4. 4. Executive Summary  1/2 Due to high unemployment rate of 26%, there is large supply of any kind of labor. There is more than 750 thousand of unemployed.  There is existence or rental labor. This practice started recently, however well-known international recruitment agencies that offer their services in this field are present on the market.  There is huge investment in highway construction nowadays and it is expected to continue. At the moment 573km of highways and 1,197km of new highways. Planned investment in construction and reconstruction of roads until 2020 is 8.7 billion.  There are 2 international cargo airports available.  Delivery time to Munich from Belgrade with truck is 1.5-2 days. Cost for delivering goods range from 0.8 €/km up to1 €/km depending on the market- current export and import volume with the country.  In-house customs is possible in Serbia. This practice started recently. 4
  5. 5. Executive Summary 2/2  Generally, customs procedures are easy and fast.  Duty free imports and exports to a market of more than1 billion people. Free trade agreements with: European Union; CEFTA; EFTA; Russia, Belarus and Kazakhstan; Turkey and United States of America (Generalized System of Preferences).  There are 11 free zones and even more free zones are planned to be open in the future.  Numerous incentives from the State for capital and labor intensive projects. National employment service grants. Numerous tax incentives. Municipalities give additional incentives and most of them give land for free for labor intensive projects.  State offers tailor-made incentives for strategic investors.  For labor intensive projects State can cover up to 100% of investment value as there is no limit for grant amount. 5
  6. 6. Foreign Direct Investments  Since year 2001, Serbia has attracted over $25 billion of inward foreign direct Industry Investment Value (mill USD) Financial intermediation 6,339 Manufacturing 4,521 Wholesale, retail and repairs 3,673 list. The leading spot on the country list is Real estate activities 3,189 held Transport, storage and communication 2,949 investment.  Investors from the European Union top the by Austria, followed by the Netherlands, Greece, Germany, Luxembourg 666 and Norway, while major investor countries Construction 540 also Other utility, social and personal services 185 Federation, Slovenia, France and Switzerland.  Mining and quarrying Agriculture, forestry and fishing 176 The actual amount of U.S. investment is Accomodation and food service activities 121 significantly higher than the official figure Public administration and social insurance 101 due to their companies investing primarily Electricity, gas and water 58 through European affiliates. This also holds Professional, scientific and technical activities 41 for Belgium, Denmark, Israel, and a number Administrative and support service activities 26 of other countries. Education include Italy, the Russian 4 6
  7. 7. Investment Incentives • 1/4 In the municipalities that are considered the most Financial Incentives underdeveloped in Serbia: – Min. investment: 0.5 million EUR – Min. new jobs created: 50 – Incentives from 4,000 to 10,000 EUR/ every new job created. • In the municipalities of special interest for regional development: – Niš, Zajeĉar, Kraljevo and Novi Pazar – • Up to 17% of the total investment Up to 10% of the total investment Minimum investment amount 200 mill EUR > 100 mill EUR 50-100 mill EUR 50 mill EUR Minimum number of new jobs created 1,000 Eligible projects Amount of funding (EUR) For projects with investment value of over 200 million EUR and creating 1,000 new jobs the Government will provide up to 25% of total investment Manufacturing sector 4th group and devastated regions EUR and creating 300 new jobs the Government will – 150 Direct investments For projects with investment value of over 50 million provide up to 20% of total investment 300 Financial Incentives In all municipalities for Large-Scale Investment Projects: – Mid-sized investment projects Up to 17% of the total investment Incentives from 5,000 to 10,000 EUR or every new job created. Large investment projects Up to 17% of the total investment Min. new jobs created: 50 – Investments of special importance Amount of funding (EUR) Min. investment: 0.5 million EUR – Eligible projects 4,000-10,000 for each new job created 1st, 2nd and 3rd groups 4,00010,000 for each new job created Internationallymarketable services Strategic projects for tourism The entire territory of Serbia The entire territory of Serbia 4,000-10,000 for each new job created 4,00010,000 for each new job created Minimum investment amount 500,000 EUR 1,000,000 EUR 500,000 EUR 5 mill EUR Minimum number of new jobs created 50 50 10 50
  8. 8. Investment Incentives- Favorable Tax Regime 2/4 40% Tax Rates 35% 30% Value Added Tax (VAT) 25% Standard rate- 18% Reduced rate- 8% Social Security Contributions Pension and disability insurance- 11% Health insurance- 6.15% Unemployment insurance- 0.75% 20% 15% Corporate tax 10% 5% Individual income tax 0% For Legal Entities Corporate Profit Tax 10% 20% Taxes on dividends, shares in profits, royalties, interest and capital gains 20% 20% 15% Personal Income Tax Czech Republic 19% 15% Hungary 16% 16% Poland 19% 18% Romania 16% 16% Serbia 10% 12% Slovakia 19% 19% Corporate Income Tax Personal Income Tax Bulgaria 10% Croatia Country Capital gains, income from agriculture and forestry, self-employment, capital and personal insurance 10% Salary tax 12% Copyright, property, profits from gambling and other types of income 20% Annual Income Tax 10/15%
  9. 9. Investment Incentives- Skilled Workforce 3/4  Serbia's labor force combines exceptional working efficiency with sizable labor supply. With a unique combination of high-quality and low costs, it is one of the key factors in reaching a strong business performance.  Technical education is particularly strong as high school students are among the best performers at world contests in natural sciences, while Serbian engineers are well-known for their expertise.  In addition, Serbia boasts the highest English speaking proficiency in Eastern Europe. Management education has also been accelerated by the introduction of joint graduate and post-graduate courses organized by local universities and renowned Western business schools. 9
  10. 10. Investment Incentives- Free Trade Zones 4/4 • Fiscal benefits (exemptions from any tax burden for FDI, VAT and specific local taxes). • Free of custom duties on import of goods, equipment and raw material used in exporting production and construction material for building of infrastructure. • Financial benefits (free cash flow). • Efficient administration (one stop shop). • Simple and fast customs procedures (each zone has a Customs Administration Office). • Local subsidies for using free zone infrastructure (Community offers low prices and service cost). • A set of services is available to users under preferential terms (transportation, loading, reloading, freight services, insurance and banking services). forwarding
  11. 11. Road Network Route • 40,845km length of roads • Investment in highway construction is one of the priorities of Serbian Government • Highway Corridor X is expected to be finished until 2015 Length (km) Costs (mill. €) 3 (E-75 Grabovnica- FYRM) 98 605 4 (E-80 Niš- Dimitrovgrad) 83 650 5 M1.1 Kragujevac- Batoĉina 25 75 6 (E-763 Beograd- Požega) 145 850 7 E-70 Beograd- Panĉevo- Vršac 92 570 8 E-761 Pojate- Preljina 110 413 9 E-761 Požega- Užice- BIH 60 480 10 E-761 BUL- Zajeĉar- Paraćin 95 670 11 E-763 Požega- MNE 110 2,000 12 M-21, M-19 Novi Sad- RumaŠabac (public road) 120 200 13 M-24 HUN- Kikinda- PanĉevoKovin (public road) 204 220 Total new construction 1,142 6,733 Rehabilitation and reconstruction of existing road network 4,305 1,722 TOTAL INVESTMENT 5,447 8,455 • Loans from: WB, EBRD, EIB and HiPERB (Hellenic Plan for the Economic Reconstruction of the Balkans) 11
  12. 12. Rail Network • Rail network needs huge investment. • For rehabilitation of railway Corridor X investment of 730€ mill is needed. • Priority is construction of second track on some • Modernization, electrification and construction of second track on Corridor X will require 2.6€ billion. parts, reconstruction and modernization of railway Corridor X. • 3,809km of rail lines. Out of that 32.7% electrified. • Total investment in railways up to 2027- expected to be more than 5€ bill • Russian Government loan of 800€ million mainly for new locomotives, reconstruction or railway infrastructure and construction of • Speed limit of 50% of railroads is up to 60km/h due to new railways. bad quality of rail lines. • WB, EBRD, EIB loans. Minimum Scenario km mill. € Reconstruction and modernization of route BatajnicaGolubinci (project already under way) 25.3 33 Reconstruction and modernization of route Ćele kulaStaniĉenje 58.3 35.4 New double-track railroad with bridges on route GiljeĆuprija- Paraćin 8 43.4 91.6 111.8 Total • Montenegro: Railroad Bar- Serbian border (part of Bar- Beograd) needs investment in reconstruction from both Serbian and Montenegrin side. Very important line connecting Belgrade with port of Bar, length of 476km. Investment in railroad would open investment in Bar port by consortium of Serbian companies backed up by Serbian Government. Investment around 300€ mill. 12
  13. 13. Danube- Strategy and Importance • Length of Danube is 588km through Serbia. • 26 cities and municipalities in Serbia having access to Danube. • Project involves transport development, energy development, port modernization, waste water management, environment protection, tourism, etc. • Large investments will be needed in implementation of all segments of Danube Strategy. • EU initiated project. • Financing from: EU funds, IPA funds, EIB, etc. • Master plan involves 29 projects of 240€ million value. • Danube Strategy is part of Europe 2020 strategy. 13
  14. 14. Energy • The “South stream” gas pipeline (see the picture) with a total capacity of more than 10 billion m3/year. • Electric power is generated in 8 thermal power plants with 25 power blocks (total installed capacity of 5,171 MW), 9 hydro power plants with 50 power generators (total installed capacity of 2,831 MW) and 3 thermal-heating power plants comprising 6 power blocks (total installed capacity of 353 MW). • Electric power transmission is carried out through 400 and 220 kV voltage levels transmission lines 9,808.5 km long, which also includes 95 high voltage transmission stations, with 182 transformers with the total installed capacity of 17,758 MVA. • Centralized supply in heat energy exists in 50 towns of Serbia whereby total installed heat boiler capacity is 6,587 MWt, out of which 82% within the framework of residential heating and 18% within the framework of business heating. • Oil and gas production is carried out on 59 oil and gas fields, with 144 reservoirs in Serbia, and one concession in Angola • Exploitation reserves of crude oil have been estimated on the level of 20 Mtoe (million tons equivalent of oil). • Oil refining is carried out in two oil refineries: Oil refinery Panĉevo and Oil Refinery Novi Sad, with the total capacity of 7.3 million tons of primary processing per year. • Gas pipeline system in Novi Sad comprises a main gas pipeline 400 km long, running from Horgoš to the Bulgarian border, with the developed distribution network and underground gas storage in „Banatski dvor‟, with the current capacity of about 470 million m3, and the projected capacity of about 800 million m3 of gas which is under construction. • Total geological coal reserves are estimated at 24.5 bill tons, out of which 68% accounts for balance and 32% for off-balance coal reserves. • Total energy potential of renewable sources of energy is estimated at more than 3.38 Mtoe annually, as follows: biomass 2.40 Mtoe; wind 0.19 Mtoe; SHP 0.40 Mtoe; solar 0.64 Mtoe and geothermal 0.20 Mtoe. 14
  15. 15. Unique Export Potential- Preferential Trade Agreements Market Trade Regime Inhabitants European Union Preferential trade regime 494,070,000 USA Generalized system of preferences 302,558,000 Russia, Belarus and Kakhstan Free trade agreement 168,640,000 Turkey Free trade agreement 75,000,000 EFTA Free trade agreement 13,000,000 CEFTA Free trade agreement 29,990,000 TOTAL Market Size 1,083,258,000 15
  16. 16. Western Balkans Overview • Big Potential in Basic Infrastructure Bosnia and Herzegovina: Three • Excellent Location for Labor Intensive entities within one country. Business Opportunities: Products • Future Tourism Destination for Europe • Management • Croatia will join the EU Wood and Forest Mining and Metal Processing on the 1st of July 2013. 1/2 Serbia has a bilateral free trade agreement with Russia, Belarus, Kazakhstan and Turkey Business Opportunities: • Agribusiness • Automotive • Energy and Environment • Textile and Garment Business Opportunities: • Shipbuilding Kosovo is a UN-governed • Tourism entity. Business Opportunities: South Stream Gas Pipeline • Mining Existing Highway • Metals and Metal Products Highway Under Construction Macedonia: A gateway to Planned Highway Greece. Ports Under Modernization Business Opportunities: General Statistics (2011) Source: Bank of Austria, Countries‟ National Banks Population (2011) 23.5 mill. GDP total in € 124.1 bn. Unemployment 30% Inflation 3.5% • Automotive components The official currency of • Metals and Metal Products Montenegro is euro. Albania has the youngest Business Opportunities: population in the area. • Tourism Business Opportunities: • Mining • Tourism • Wood processing • Infrastructure
  17. 17. Western Balkans Overview COUNTRY LEVEL OPPORTUNITIES ENERGY & ENVIRONMENT Energy 2/2 SOFTWARE & DIGITIAL MEDIA • Excellent location for labor intensive products. Low cost of labor • Skillfull IT engineers coming from universities Power plants construction and modernization needed in • Tax holidays availability • Fast growing market for ICT solutions order to meet EU standards • • • Numerous investment incentives available for labor and capital • E-commerce and e- government solutions Construction of long distance power lines interconnecting potential intensive projects Western Balkans among themselves and with neighbouring Big potential in basic infrastructure Serbia: countries • Huge potential in renewable energy solutions • Microsoft R&D department present in Belgrade Energy strategies with focus on Renewable Energy Sources Croatia will join EU in July 2013, which means possibility for utilization • Privatization of Telekom (telecommunications (RES). RES is expected to tenfold in Croatia. At least 4% of more EU funds growth in RES is expected until 2020 in Serbia • • Bosnia: forestry and mining industry has large potential Serbia: • Opening up of electricity market is expected in following • years • LIFE SCIENCES • Bilateral free trade agreement with Russia, Belarus, Kazakhstan and • Environment protection Serbia: Turkey Old power plants and not utilized biomass potential • Serbia: company) expected • Privatization of Galenika (pharmaceutical Received EU candidacy status in 2012- more EU funds utilization Privatization of EPS (electricity company, installed capacity producer) is expected 8,359 MW) is expected in near future • Environment • Food processing industry (Vojvodina- Northern Serbia province) Waste water and solid waste solutions needed • Significant pharmaceutical production and R&D. Landfills construction for waste to energy solutions started SERVICES • CONSTRUCTION Residential and –non-residential • design and security management • Expected growth of residential constructions, new solutions Logistics center development In Croatia and Montenegro priority is for energy efficiency needed • Need for innovative technologies in transport tourism, continuous investments needed Construction of tourist resorts Civil engineering and infrastructure Bad shape of infrastructure, so huge investments are MACHINERY AND MANUFACTURING needed. Highway and railway construction and • Large textile subcontracting potential reconstruction is priority • • ”Kombinats” are planning to replace very old • Airport modernization and turning previous military airports agricultural machinery with modern into civil ones • technologies Danube strategy regarding Croatia and especially Serbiamodernization of ports, transport development, waste water management, tourism development is expected Serbia: South Stream pipeline construction will start in 2013 and expected to finish in 2015. FORESTRY • Forest biomass utilization needed. Huge potential for forest biomass Serbia: • Ministry strategy for forest management started • Plan for private forest owners organizations to get more involved • Food processing industry is booming, need for machinery Croatia: privatization of shipyards is priority and EU requirement Serbia: Automotive industry is large and increasing
  18. 18. Case Study- Nordic  1/5 Carlsberg (Denmark)  Action: It is one of the most successful privatizations in Serbia acquiring the majority stake in the Ĉelarevo brewery.  Experience: More than €100 million have been invested in the modernization of production halls, improvement of the quality of brands, expansion of the distribution network, etc.  Overview: By starting operations in Serbia, any company can take advantage of the market in a developing mode, with great GDP growth potential, along with local people, whose skills and competencies represent a true scarce resource.  TetraPak (Sweden)  Action: Tetra Pak group invested in a production facility in Gornji Milanovac.  Experience: TetraPak exports to EU countries and Russia. In 2009, Tetra Pak Serbia was distinguished as a number one factory within the Tetra Pak family of 42 member companies.  Overview: Tetra Pak is happy with its staff. Well educated and committed persons are performing well.  Other existing investments: Grundfoss (Denmark) invested in 2 production facilities, Tikkurila (Finland) bought a Serbian company Zorka Color, etc.  Future investments: IKEA (Sweden) will invest in building a 5 retail stores. 18
  19. 19. Case Study- German  2/5 Siemens (Germany)  Action: Siemens is currently employing over 700 people in two main company premises in Belgrade and Subotica, with bold expansion plans ready to exploit abundant highly skilled and committed workforce.  Experience: Local business partners proved to be of highest quality and their services are a valuable part of Siemens efforts. Local work force is an irreplaceable resource behind Siemens successful business efforts in Serbia. Strategic position of Serbia is another key factor in Siemens success story. Serbia is easily reachable from all important business centers in Europe and has few logistic and legal obstacles for those planning to export from Serbia.  Overview: Serbia is an ideal starting point for further expansion in the region. Resources are cheap and the local workforce is without match in the region.  Metro Cash&Carry (Germany)  Action: Investment of close to €100 million in five distribution centers: two in Belgrade, one in Kragujevac, Novi Sad and Nis.  Experience: Metro is especially pleased with its employees and, based on previous experience, Serbia has a large number of qualified, highly educated people with a great potential for further improvement. OECD has awarded METRO Cash & Carry Serbia as the largest regional greenfield investment. This information is significant to the potential foreign investors since METRO has a reputation of a pioneer in entering new markets and it invests only in the countries where all financial and trade regulations necessary for doing legal business exist.  Overview: in Serbia, conditions for serious investors exist and they are constantly improving and together with the region of South East Europe, represent the main growth market in the next period. 19
  20. 20. Case Study- USA  3/5 Microsoft (USA)  Action: Microsoft Development Center Serbia (MDCS) exists since September 2005.  Experience: Serbia has an abundance of educated and talented young professionals and a developed taxation system favorable to investors. Compared to other Microsoft Centers in the world the MDCS progress reports were always amongst the most impressive ones, a result that came from dedicated work of the local professionals. MDCS praises their local partners for providing top of the range services and finds them extremely professional and an immense and reliable support to MDCS operations.  Overview: MDCS can recommend Serbia for its abundance in IT talent, tax climate and various investment incentives provided by the Government.  Euronet (USA)  Action:n 2004 Euronet opened a Customer Support Center (CSC) in Belgrade, one out of two global centers the company runs and takes advantage of time zone difference between USA and Europe, as well as outstanding language skills of the local workforce.  Experience: Serbian market proved to be highly lucrative - introduction of VISA and MasterCard systems, launch of the national DINA card system and development of an ATM network in Serbia made local Euronet branch one of the most profitable business units in the whole group. CSC staff demonstrated not only excellent skills and professionalism, but an exceptionally high employment loyalty - the staff retention rate is well above the average in the industry.  Overview: The company selected Serbia over other countries in the region for the following reasons: Serbia offers Europe s lowest corporate profit tax rate, provides access to large Southeast European markets and has a large pool of a highly skilled labor. Recommendation is to use Serbia as a hub for further expansion in the region. 20
  21. 21. Case Study- Italy  4/5 FIAT Serbia (Italy)  Action: Fiat Automobili Srbija (FAS) was established on the 29th of September 2008 by a joint venture agreement between Fiat Group Automobiles (67%) and the Republic of Serbia (33%). Fiat Group will invest 940 million EUR in the Serbian Automotive Industry.  Experience: From 2010 FAS became exclusive distributer of Fiat passenger cars program. Fiat 500L will be manufactured at the new factory Fiat Automobiles Serbia in Kragujevac, which is the result of three years of extensive and comprehensive work on the total reconstruction of the 1.4 million square-meter factory.  Overview: Fiat Automobiles Serbia is today the most modern manufacturing facility within Fiat's worldwide. 21
  22. 22. Case Study- Other  5/5 Azerbaijan: Company Azvirt is carrying out a construction of highway E 763 (from Belgrade to South Adriatic) with the €300 million work being financed by Azerbaijan while concession package is expected to last from 20-30 years.  India: Company Embassy Group already started a work on a 300 million-euro IT business park in Serbia, in the city of InĊija.  The investment will take at least five years to complete and could ultimately create 25,000 jobs.  The group has chosen Serbia for its first investment in Europe to get closer to its customers, many of whom may choose the new location in Europe for software development, ICT-shared services and cloud computing. Its client list in Bangalore includes: Alcatel-Lucent (ALU), International Business Machines Crop. (IBM), LG Soft India, McAfee Inc., Microsoft Corp. (MSFT), Nokia Siemens Networks Oy, Vodafone Group Plc (VOD), Yahoo!Inc. (YHOO), and many others.  With 170 hectares of available land and 250,000 square meters of business premises in the project‟s final stage, the IT Park will turn into the biggest such center in Europe, putting Serbia on a map of preferred locations to do business in the EU. 22
  23. 23. Prospering Foreign Investments ivana.milosev@prospering-serbia.com Mobile: +381 62 250 463

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