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Foreign Direct Investment

FDI flows have been positive since 2012. According to the 2021 World Investment Report by UNCTAD, FDI inflows fell by 19% in 2020, from USD 4.3 billion in 2019 to USD 3.4 billion, as a result of the global economic crisis triggered by the Covid-19 pandemic. In 2020, the total stock of FDI stood at USD 51.8 billion. The COVID-19 crisis mainly affected reinvested earnings. The economic downturn also affected export-oriented activities, as problems in GVCs, of which Serbian companies were an integral part, led to production disruptions. The manufacturing sector was the most affected by the decline in FDI, including machinery and equipment, metallurgy and rubber and plastic industries. Despite the disruptions in trade and GVCs, the automotive industry still recorded some expansions, such as that of the Magna Seating plant and Cooper Tire & Rubber (US). In the services sector, the decline in FDI also affected a wide range of activities, including construction, trade and transport and storage. Nevertheless, Serbia remains the second-largest recipient of FDI among transition economies after the Russian Federation. The European Union is the origin of 70% of investments in Serbia, followed by Russia, Switzerland and Hong Kong. However, inflows from various FDI source countries, including Austria, Germany and Hungary, as well as the Russian Federation and the United States, decreased significantly in 2020. According to official sources, Serbia attracted USD 4.4 billion of foreign direct investment in 2021, which contributed to the opening of production plants in Zrenjanin, Indjija, Backa Topola, Belgrade, Aleksinac and Subotica, creating a total of 12,490 jobs.

The ministry of economy plans to keep providing incentives to foreign investors in order to improve the business climate in the country. Factors favourable to FDI in Serbia include the economic reforms it is undergoing as part of its EU accession process and IMF agreement, its strategic location, a relatively inexpensive and skilled labour force, and free trade agreements with the EU, Russia, Turkey and countries that are members of the Central European Free Trade Agreement, for which many investors see Serbia as an export platform rather than as a market in its own right. New tools have been introduced to keep free economic zones attractive, including health protection measures, lower rents and a shift of transactions and meetings online as much as possible. By contrast, the country’s main weaknesses are a massive and inefficient public sector, low productivity (excluding automotive), inadequate road and electricity transport infrastructure, and a large informal economy. Besides, the business environment remains hampered by red tape, corruption and political interference. Serbia ranked 44th in the latest Doing Business report published by the World Bank, up by four positions compared to the previous edition.

Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 4,2703,4694,563
FDI Stock (million USD) 43,82652,22052,775
Number of Greenfield Investments* 1144244
Value of Greenfield Investments (million USD) 4,1721,8421,488

Source: UNCTAD - Latest available data.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Country Comparison For the Protection of Investors Serbia Eastern Europe & Central Asia United States Germany
Index of Transaction Transparency* 6.0 7.5 7.0 5.0
Index of Manager’s Responsibility** 6.0 5.0 9.0 5.0
Index of Shareholders’ Power*** 5.0 6.8 9.0 5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.


What to consider if you invest in Serbia

Strong Points

Serbia has these assets to attract FDI:

  • A generally positive business environment and is much more liberal than its neighbours. This is characterised, for example, by the lowest corporate tax rate in Europe (10%). The country's 44th position in the Doing Business ranking attests to a pro-business environment.
  • A real desire for public sector reforms displayed by the government made concrete and decisive by the various agreements reached with the IMF and the EU (which the country has been seeking to join since 2014)
  • A young workforce compared to the rest of Europe, well trained and multilingual (nearly half of the population speaks English fluently) whose cost is low.
  • A comfortable level of foreign currency reserves.
  • An ideal geographical location with connections to the Rhine-Main-Danube Canal, the Adriatic Sea, the Mediterranean Sea and the Black Sea.
Weak Points

The main obstacles that may discourage foreign investors are:

  • Political instability and risks of stagnation are still high compared to other countries in the region (the conflict with Kosovo for example).
  • The trade deficit and the level of public debt remain problematic for the country's economy, which needs external financing to support its growth.
  • The lack of transportation infrastructure and landlocked country.
  • High risks of corruption and administrative burden weaken the confidence level of the business community.
  • The cumbersome and slow implementation procedures in Serbia can dampen entrepreneurial initiatives.
  • Vulnerability of the exchange rate to price changes
Government Measures to Motivate or Restrict FDI
The Serbian government has established a series of measures aimed to attract foreign capital:

  • Between 2,000 to 10,000 Euros are granted to investors creating new jobs in the fields of research and development, production and services
  • Agreements have been made with different countries to avoid double taxation
  • In certain cases, the government has set up exemptions of social charges
  • Some imports are not subject to custom duties
  • Fixed charges for companies are relatively low

Since the opening of the accession negotiations to the European Union in January 2014, the country has managed to recover the level of pre-crisis GDP, at USD 51.4 billion in 2019 (World Bank, latest data available). Similarly and in line with the program granted by the IMF, the government has implemented strong fiscal measures to reduce the public deficit and the weight of public enterprises. Of the 500 companies that the government has committed to privatising, nearly 330 were in liquidation or privatised by the end of 2016. These different measures and applications show that Serbia is above all seeking to create an attractive economic environment for foreign investors.

Some 15 free zones have been established in Serbia: in Apatin, Belgrade, two zones in Kragujevac, Krusevac, Novi Sad, Pirot, Priboj, Sabac, Smederevo, Svilajnac, Subotica, Uzice, Vranje, and Zrenjanin. These zones aim to attract investment by providing tax-free zones for business activities. Companies operating in these zones enjoy benefits such as unlimited duty-free imports and exports, preferential customs treatment and tax relief in the form of exemption from value-added tax (VAT). 


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