WHY INVEST IN SERBIA

•  INVESTMENT CLIMATE AND ECONOMIC TRENDS

•  COMPETITIVNESS

•  FACTORS OF PRODUCTION

•  BUSINESS SECTORS

For detailed information and technical assistance contact: SIEPA

WHY INVEST IN BOSNIA AND HERZEGOVINA

•  INVESTMENT CLIMATE AND ECONOMIC TRENDS

•  FACTORS OF PRODUCTION

•  TAXATION AND INCENTIVES

• BUSINESS SECTORS

For further detailed information and technical assistance  contact  FIPA

WHY INVEST IN SERBIA

INVESTMENT CLIMATE AND ECONOMIC TRENDS

In recent years, Serbia has been among Europe 's fastest growing economies. Following a record of 9.3% growth in 2004, last year's GDP increased by 6.8% with the forecast of around 7% for the coming years. GDP per capita of about $4,000 is coupled with rapid banking loans expansion to fuel skyrocketing local demand.

Inflation in 2006 of around 7% returned to single digits, while further reductions are projected in the long run. Macroeconomic stability is also reflected in a 0.7% state budget surplus for 2006 providing room for an unprecedented €1.7 billion national infrastructure development plan.

Serbia is a member of the Central Europe Free Trade Area (CEFTA) providing duty-free access to a regional 55 million people market. This region is also the one with the highest growth rate in Europe .

With the population of 7.5 million people the Serbian market itself is among the largest in the region. Furthermore, Serbia is the only country outside of the Commonwealth of Independent States that enjoys a Free Trade Agreement with Russia , offering customs-free access to its market of 150 million people. This fact, coupled with duty-free exports to the European Union and the United States for most products and services, is one of the key drivers for international investors to relocate their operations to Serbia .

Therefore, starting a business in Serbia means the opportunity of exporting to a 1 billion people market without paying any customs duties.  

By operating in Serbia , a company can fully benefit from having production outside the European Union , while enjoying the possibility of easily accessing the EU market. Bordering Hungary , Romania , and Bulgaria , Serbia is at the doorstep of the European Union. It is a natural gateway between South East Europe and Western and Central Europe , a place of intersection of the two most important transportation corridors, connecting Western Europe and the Middle East (Pan-European corridors No. 10 and No. 7). From Serbia , you can effectively serve your European and Middle Eastern customers thereby enhancing your profitability.

Furthermore Serbia has agreed trade preferential status with the EU and USA .

COMPETITIVNESS

•  Strong labour force
•  High level of education, multilingual and IT skilled
•  Employee's rights harmonised with EU standards
•  Overhead costs among the most favourable in the region
•  Low utility costs
•  Almost 17 000 new University graduates every year. Investor Privileges Foreign companies in Serbia are guaranteed equal legal treatment as local ones.
•  Foreign companies are allowed to invest in any industry and freely transfer all financial and other assets, including profits and dividends.
•  A foreign investor can buy real estate under reciprocity condition, and lease building land for up to 99 years.
•  Investment projects in Serbia are insured by all major national and international investment and export insurance agencies.
•  Fast and cost effective transport system (road, air, river)
•  Special investment condition for the Free Zones

Skilled and productive labour force has proven to be one of Serbia 's major competitive advantages in the global investment market.

Serbia fostered extensive relationships with western economies for decades. Siemens, Alcatel, General Motors, FIAT, and IKEA are only a small sample of the blue-chip companies maintaining strong ties with local partners. Throughout years of cooperation Serbian workers have received specific know-how and adopted advanced technology applications and rigorous quality control standards. Having vast experience in both manufacturing and management, local staff requires minimum training to adopt cutting-edge technologies and assembly processes. The skill level of local labor force is reflected in high industrial productivity rising at the 9.8% rate over the past five years.

The quality of Serbia 's intellectual capital is based on its educational system generating well educated, fast learning, multilingual, and IT literate people.

FACTORS OF PRODUCTION

GAS AND ELECTRICITY

The state-owned Electric Power Industry of Serbia (EPS) is the sole electricity supplier with the basic activities of power generation, transmission and distribution, power system management, and coal production, processing and transport. EPS bills individual customers for electricity use.

Electricity price for industrial use (January 2006): 0.0321 EUR/kWh

WATER

Organisations in charge of the water supply usually operate at the municipal level. The Water Agency of the Republic of Serbia is responsible for assuring the water and sewerage companies in Serbia and the offer of good quality and efficient service at a fair price .

TELECOMMUNICATIONS

Telekom Srbija, as the sole operator and owner of the fixed telephone network has about 2.48 million subscribers. About 60% of the telephone network has been digitalized. Under the new Telecommunications Law enacted in 2003, the exclusive right to provide almost all telecommunication services using the fixed network infrastructure will expire in June 2005.

The Serbian telecommunications market includes two public mobile telecommunication networks (GSM) and two operators: Telekom Srbija (Mobile Telephony of Serbia MTS 064), with the state holding the majority stake, and Mobtel 063, partially controlled by the state. The mobile telecommunications services are used by more than 4 million subscribers or more than 50% of the altogether 7.5 million inhabitants of Serbia (excluding Kosovo and Metohija).

Serbia is still in the early stages of the Internet, so that the number of users is growing rapidly (it is estimated at about 650,000 at present). Telekom Srbija and Verat-Net (a private provider) are directly linked with international network (four 155 Mbit/s and one 155 Mbit/s link respectively). All other Internet service providers (more than 40 of them) in Serbia purchase Internet traffic largely from Telekom Srbija and Verat-Net and sell them (together with accessory services) to the end-users (residential and business).

Information on telecommunications services in Serbia can be found at: http://www.telekom.yu and http://www.mobtel.co.yu

TAXATION AND INCENTIVES

Serbia 's tax system is highly conducive to investment featuring the following unique benefits:

•  One of Europe 's lowest corporate profit tax rates set at 10%
•  Value Added Tax (VAT), salary tax and social insurance contributions among the most competitive ones in Central and Eastern Europe
•  A 10-year corporate profit tax holiday for investment over €7.5 million and at least 100 employees
•  Tax credits for investing in fixed assets of up to 80% of the invested amount
•  State subsidies for creating new employment.  

In addition to the existing benefits, Serbia offers financial assistance for investments in the country. Based on the Serbian Government Decree adopted in late June of 2006, the non-refundable funds will be assigned according to specified criteria for investment projects in all areas, except for trade, tourism, hospitality and agriculture. Eligible companies are those involved in manufacturing activities, internationally marketable services sector and research and development sector.

Investments in manufacturing activities :

•  Available funds: starting at €2,000 up to €5,000 per every new employee
•  The minimum investment amount: between €1 million and €5 million, depending on the unemployment rate in the municipality where the investment is made
•  The minimum number of new job positions: 50.  

Investments in the internationally marketable services sector :

•  Available funds: starting at €2,000 up to €10,000 per every new employee
•  The minimum investment amount: €1 million
•  The minimum number of new job positions: 10.

Investments in the R&D sector :

•  Available funds: starting at €5,000 up to €10,000 per every new employee
•  The minimum investment amount: €1 million
•  The minimum number of new job positions: 10.

Applications are to be submitted to the Serbia Investment and Export Promotion Agency (SIEPA). All necessary documentation will be available at the Agency's web-site (www.siepa.sr.gov.yu) after the invitation for application is published.

BUSINESS SECTORS

The most attractive economic sectors can be summarised as follows: 
•  Agro industry
•  Fruits and vegetables
•  Mining and quarrying
•  Manufacturing
•  Textile yarns and textiles
•  Apparel and fur
•  Leather, leather products and footwear
•  Wood and cork products
•  Pulp, paper and paper products
•  Publishing, printing and reproduction
•  Coke and refined petroleum products
•  Chemicals and chemical products
•  Rubber and plastic products on metal mineral products Basic metals
•  Metal products
•  Machinery and equipment
•  Office machinery and computers
•  Electrical machinery and apparatus
•  Radio, TV and communication equipment
•  Precision and optical instruments
•  Motor vehicles and trailers
•  Furniture

For any detailed information and technical assistance  contact SIEPA
Serbia Investment and Export Promotion Agency
Vlajkoviceva 3/V, 11000 Belgrade, Serbia
Phone: +381 11 33 98 55 0
Fax: +381 11 33 98 81 4
E-mail: office@siepa.sr.gov.yu
http://www.siepa.sr.gov.yu

WHY INVEST IN BOSNIA AND HERZEGOVINA

INVESTMENT CLIMATE AND ECONOMIC TRENDS

Bosnia and Herzegovina started accession negotiations with the EU in November 2005 and wide-ranging political, social and economic reforms have already been accomplished. BiH's accelerated economic reform process has greatly improved the business climate and the country has the fastest growing economy in South Eastern Europe .

The economy has grown at a steady pace of 5% per year since 2000, a trend that is expected to be maintained in the future. This sustained annual increase of GDP, combined with rapidly rising production levels and export volumes, provides a clear indicator that the economy is in full expansion .

The stability of the konvertibilna marka ? Bosnia and Herzegovina 's currency ? further contributes to a favourable business climate in the country. The KM is pegged to the Euro with a fixed exchange rate ( 1 KM = 0, 51 EUR). A combination of the Central Bank of BiH's Currency Board and fiscal discipline has kept the underlying inflation rate the lowest in the region. In 2005, inflation was 2.9%; high by BiH standards but only slightly higher than the one prevailing in Euro-zone (2.2%). The introduction of VAT at the start of 2006 passed successfully with inflationary pressures maintained well under control.

 The privatisation process of state-owned companies is well underway. An estimated 60% of small companies and more than 30% of the large ones are now privately owned or publicly traded. Bosnia and Herzegovina is accelerating the privatisation process for companies of strategic importance in order to increase economic growth and enhance the volume of foreign investment.

 Additionally, BiH has new, powerful, modern bankruptcy laws that provide a flexible, predictable system for maximising the economic value of companies in financial distress, thus creating potentially valuable opportunities for foreign investors .

 Bosnia and Herzegovina has signed a number of free trade agreements with neighbouring countries and is negotiating its entry into CEFTA and the WTO . Companies operating in the country further benefit from the preferential trade regime with the European Union. This agreement allows for all goods that fulfil EU standards to be exported to each of the 25 member states without quantitative restrictions, and free of customs or other duties, until the end of 2010. Besides the EU, BiH has preferential export regimes with countries such as Canada , Japan , Russia , Turkey , and the USA .

COMPETITIVNESS

 
Advantages offered by BiH can be summarised as follows:
•  Macro-economic stability, achieved through its stable currency (the Convertible Mark - KM), linked to Euro with a fixed exchange rate;
•  Lowest inflation in the region, with the average rate bellow 1%, the forecast being that it will see no major changes in 2005;
•  Constant improvement of business environment;
•  Fully reformed and developed banking sector;
•  Considerable natural resources and potentials (wood, hydro-energy potentials, minerals, available agricultural and industrial land, construction industry, etc.);
•  Highly educated, qualified and competitively priced work force;
•  Numerous state-owned companies that are either being privatised or seeking strategic partners;
•  Significant tax incentives for foreign investors;
•  Risk protection system for foreign investors (about 30 bilateral agreements on mutual advancement and investment protection already ratified; protection through MIGA (the World Bank);
•  Favourable foreign direct investment (FDI) laws, including national treatment of foreign investors;

FACTORS OF PRODUCTION

Cost of living

Salaries

Average monthly net wages in BiH from 1995 to 2004 amounted to:

Source: Centralna banka BiH

TAXATION AND INCENTIVES

 The Corporate Income Tax Law in the F BiH enables the corporate income tax to be brought down to a percentage of the foreign investment into the company's assets for a 5-year period, under the condition that the foreign capital invested accounts for more than 20% of the total investment.

This concession includes companies where 100% of the capital invested is of foreign origin.

Generally, the level of Corporate Income Tax is 30% in the F BiH, and 10% in RS .

Foreign investors can open bank accounts in both entities of BiH and transfer abroad, without restrictions, the funds acquired from profit. They have the same rights as the citizens of BiH to invest and reinvest profit on investment into any economic sector. They also have the same real estate ownership rights as the BiH citizens.

The Law on the Policy of Foreign Direct Investments in Bosnia and Herzegovina ensures national treatment of foreign investors , that is, foreign investors have the same rights and obligations as citizens and legal entities of BiH. They can freely employ staff, own real estate and foreign investors can freely repatriate the proceeds from their investment in the country.

The country has also passed a number of other laws and regulations that simplify setting up a company, import and export of machinery and equipment , and that streamline financial services or provide for tax breaks when re-investing profits, etc.

Free trade zones , with their special regimes, provide further tax and fiscal incentives such as free transfer of profit and investment, relief from customs and other tariffs on imports and exports, which can make investing in BiH even more attractive.

 Furthermore, Bosnia and Herzegovina has signed agreements on the promotion and protection of investments with a host of countries such as Austria, China, Croatia, Hungary, Italy, Kuwait, Montenegro, The Netherlands, Serbia, and Turkey to name but a few, and the list is still growing. In addition, investment guarantees and political risk insurance are available from the Multilateral Investment Guarantee Agency, which administers the EU Investment Guarantee Trust for Bosnia and Herzegovina , and from the US Overseas Private Investment Corporation. Moreover, BiH has signed avoidance of double taxation treaties with numerous countries.

BUSINESS SECTORS

Bosnia and Herzegovina has several attractive economic sectors with a long tradition and presence in international Foreign investors have recognised that infrastructure, the construction industry, the energy sector, telecommunications, and food and beverages production are attractive for investments, as are manufacturing of clothing, textile and leather goods, production and processing of metals, tourism and production and processing of wood. markets, which offer special advantages and opportunities for doing business.

For any detailed information and technical assistance please contact FIPA
FOREIGN INVESTMENT PROMOTION AGENCY OF BOSNIA AND HERZEGOVINA
Branilaca Sarajeva 21/III
71000 Sarajevo
Bosnia and Herzegovina
Phone: + 387 33 278 080
Fax: +387 33 278 081
E-mail: fipa@fipa.gov.ba
http://www.fipa.gov.ba