Serbia has an abundance of natural and mineral resources and arable agricultural land, giving the country the huge potential for rapid economic development. Its strategic location at the crossroads of southeastern Europe's major road and rail routes makes Serbia well placed to be developed as a transportation hub.
Economic mismanagement, economic sanctions and damage to the Yugoslav infrastructure during the 1999 NATO air strikes severely damaged the Serbian economy. By 1999, Serbia's economy was reduced to half the size it was at the beginning of the 1990s. When the Milosevic era came to an end in 2000, a new coalition government set about implementing stabilisation measures and embarked upon a wide ranging programme of democratic and economic reform. Since then, the economic progress has been significant, particularly in expanding the private sector's role in the economy. Macroeconomic stability was achieved quickly and has been largely maintained.
Economy
In the seven years since transition began, GDP growth has averaged 5.6 per cent a year, peaking at a high of 9.4 per cent in 2004. In 2007, growth remained a robust 7.5 per cent. Growth continued at 4.5 per cent in 2009, however, a severe contraction of the economy is forecast in 2009. The economy is expected to shrink by four per cent before growth recovers to 0.5 per cent in 2010.
Investment Climate
The government which was elected in July 2008, will take a more pro-EU line than its predecessors and further improvement in the investment climate is expected. Economic policy will be similar to that of recent years, with the privatisation of stateowned firms continuing to be a priority. The new government is expected to complete the sale of a 51 per cent stake in the national oil and gas company to Russian company Gazprom.
There have been significant developments in the overall business climate in Serbia in 2008. Although Serbia has been a signatory of the Central Europe Free Trade Agreement (CEFTA) for several years, many of the provision of the CEFTA did not come into force until 2008. This has opened a much wider market in the Balkans and provided better regional opportunities for growth. In 2008, Serbia had a trade surplus of $1.82 billion with CEFTA countries. This was primarily as a result of agricultural exports and steel.
In addition to these changes, the government has also taken action that has seen improvements in the business climate on a legislative level. Following a period of lengthy negotiations, Serbia signed a Stabilisation and Association Agreement (SAA) with the EU. The signing of the SAA and its subsequent Trade Agreement with the EU in April 2008, opened the door for Serbia to start systemic reforms and harmonise its legislation and subsequent implementation with EU standards. This agreement paves the way for the further introduction of international standards to the domestic market, which will further contribute to the predictability of the business climate.
In January 2009, the Serbian Parliament adopted a set of budget laws which included higher duties on some products, and an amendment to the law on customs duties which will allow the unilateral implementation of the Interim Trade Agreement with the EU.
Automotives
The automotive industry is one of the cornerstones of the Serbian economy, employing more than 35,000 people. At present, the country has the capacity to support the production of over a quarter of a million vehicles per year. There are around 100 companies directly involved in the production of automotive components and many of them export to markets in Europe and beyond. Having free trade agreements with all countries in the surrounding area and Russia, the country has some of the fastest growing automotive markets at the fingertips of potential investors and trade partners. The accumulated knowledge and experience is a foundation to be built upon and Serbia is quite capable of becoming the automotive centre of the Balkans once more.
The major potential of this sector lies in its current under capacity operation, in addition to competitive and experienced labour. This has already attracted a number of foreign companies to conduct business with domestic companies and there are a number of major players in both exports and investments. Serbia is an open door to many neighbouring markets in which the automotive industry is either developing or will develop within the next decade.
Opportunities
Serbia offers attractive opportunities for UK companies as its economy grows and the standard of living improves. The reform process has created a large demand for western-standard expertise in areas such as financial services, legal services and a broad range of consultancy. Years of neglect present major opportunities in rehabilitating the country’s infrastructure, from transport networks to energy supply, with many projects funded by the EU and other international donors and lenders. A boom in the construction sector and rapidly increasing consumer spending also offer opportunities to UK businesses.
Priority areas include:
• Power – significant investment programme to upgrade existing plants and plans for new lignite and CHP facilities. Good potential for exploitation of renewable resources, notably hydro.
• Agriculture – especially in fruit and vegetable production, processing and canning, potential for live animal exports.
• Oil & Gas – construction of oil and gas pipelines, upgrading of refineries.
• Business Services – expertise required across the board as the market matures.
• Transport – upgrade and expansion of road, rail and inland waterway networks.
• Construction – shortage of quality commercial and residential property.
• Telecommunications – opportunities as fixed line telephony liberalises and range of services expands.
• Environment & Water – major investment required to bring into line with European standards.
UK Trading Relationship
Although the UK is not one of Serbia's main trading partners, since the democratic changes occurred in 2000, trade between the two countries has grown and the country has become a significant recipient of UK investment. In 2008, UK exports to Serbia totalled £113 million. Over the same period the UK imported goods worth £80.5 million from Serbia. It is worth noting that significant volumes of British exports to Serbia are routed via third countries and therefore not captured by direct trade statistics.
Many British companies have a presence in the Serbian market, and interest from UK businesses in investing and creating a presence in the Serbian market continues to grow. A number of UK service providers are successfully doing business in Serbia in the areas such as law, banking, real estate and construction, engineering, marketing and PR. In 2007 the first steps were taken towards establishing a UKSerbia Business Council. Over 40 companies expressed interest, including PriceWaterhouseCoopers, Yugoslav Airways (JAT), Global Steel, Deutsche Bank and Inghams Ski.
KEY FACTS
Official Name: Republic of Serbia
Capital: Belgrade
Area: 77,474 sq km
Population: 7.38m (World Bank, 2007)
Major language: Serbian
GDP (current): US$40.12bn (World Bank, 2007)
GDP growth: 7.5% (World Bank, 2007)
GNI per capita: US$4,540 (World Bank, 2007)
Inflation (consumer prices): 6.8% (2007 est.)
Labour force: 2.961m (2002 est.)
Unemployment: 18.8% (2007 est.)
Monetary unit: 1 dinar = 100 paras
Exports to UK: £80.51m (HMRC 2008)
Imports from UK: £ 113.97m (HMRC 2008)
Main Industries
Sugar, agricultural machinery, electrical and communication equipment, paper and pulp,lead, transportation equipment.
Main Exports
Manufactured goods, food and live animals, machinery and transport equipment.
Main Imports
Machinery, apparatus and transport articles, mineral fuels and lubricants, manufactured goods, chemical products.
CONTACTS
UK Trade & Investment
Kingsgate House
66-74 Victoria street
London SW1 6SW
Tel: 020 7215 3090
Email: liz.herisz@ukti.gsi.gov.uk
Web: www.uktradeinvest.gov.uk
British Embassy Belgrade
Resavska 46
11000 Belgrade
Republic of Serbia
Tel: 00 381 11 2645 055
Email: belgrade.com@fco.gov.uk
Web: www.ukinserbia.fco.gov.uk/en
Embassy of the Republic of Serbia
28 Belgrave Square
London SW1X 8QB
Tel: 020 7235 9049
Web: www.serbianembassy.org.uk
Serbia Investment and Export
Promotion Agency (SIEPA)
Vlajkoviceva 3/ V
11000 Belgrade
Republic of Serbia
Tel: 00 381 11 3398 550
Email: office@siepa.sr.gov.yu
