Serbia is unfortunately famous for the war that happened in the ’90.
However, much has changed in the past 20 years and today Serbia is one of the most important Countries in Europe for the relocation of production of companies from the Western European Union.
Why Serbia is so attractive for multinationals? Are there opportunities also for small and medium enterprises?
INTRODUCTION
Serbia was the biggest region of the former Yugoslavia.
The Country is in the middle of the Balkans and borders with 8 other countries (Croatia, Bosnia-Herzegovina, Montenegro, Kosovo, North of Macedonia, Bulgaria, Romania, and Hungary).
The population is about 7.1 million inhabitants if we exclude the region of Kosovo (we will speak about it later).
The economy of Serbia was seriously damaged by the war (1991-2001) and from the sanctions that were applied to other Countries to Serbia.
Serbia is a poorer Country now than what it was more than 25 years ago.
However, there are interesting opportunities from business prospective in Serbia today.
OPPORTUNITIES
First opportunity: low labor cost
The main advantage of Serbia is the low labor cost compared to other European countries.
The average salary in Serbia is 500$ per month. It may vary a lot depending on the area, in rural areas is much lower than in urban areas.
It is lower than Countries in the eastern-central part of the European Union like Poland or Hungary. Only Bulgaria has a comparable level of salary in the European Union.
The low cost is not the only reason. The workforce is generally more skilled than other places at a similar cost, and English knowledge is also quite good.
Another opportunity of doing business in Serbia is public incentives.
Those incentives are more interesting and suitable for medium/large companies than foreign small companies.
The most interesting one is the 10 years tax holiday on corporate profit, it is reserved for companies that hire more than 100 employees and invest more than 8.5 million €.
You can check here the parameters: https://ras.gov.rs/en/invest-in-serbia/why-serbia/financial-benefits-and-incentives.
Second opportunity: free trade agreements
Serbia signed a large number of free trade agreements with many important Countries.
They have a free trade agreement with the European Union, with Turkey, with the USA, with the Eurasian Economic Union (Russia, Belarus, Kazakhstan, Armenia, and Kirghizistan) and they are part of the free trade agreement of Balkans. If we combine the population of all this country, it exceeds 1 billion of people.
For this reason, Serbia is an excellent base for companies that want to export production.
Third opportunity: investment in infrastructures
Serbia is in the middle of the Balkans and it is bordering with many Countries, due to that the most important roads and rails in the Balkan area are crossing Serbia.
The country is increasing investments in infrastructure, especially in roads and rails. If you are in the construction sector you should get a look if there are suitable opportunities for your business, or you should contact construction companies in Serbia to verify if there are opportunities to collaborate.
The most important project is the railway that the Chinese are promoting to connect the port of Piraeus (Greece) to Budapest (Hungary), it will cross Serbia.
Another interesting opportunity is the investment in hydroelectric powerplants. Serbia now is producing 35% of its electricity thanks to hydropower plants, but they have the potential to increase this number.
Four opportunity: high number of ISO 9001 certified companies
More than 3,000 ISO 9001 certifications have been released in Serbia. It is a huge number considering the size and the GDP of Serbia.
This could be very useful especially for companies that seek to establish a manufacturing agreement with local companies in Serbia. It is easier to find reliable partners among the high ISO 9001 certified ones.
Fifth opportunity: high number of internet users.
According to CIA, 70% of the people in Serbia use the internet. The number is very good considering that it is not a country with a high GDP per capita.
This is a huge opportunity mainly for 2 reasons:
- If you want to promote your products in Serbia, online marketing is a viable option.
- Online advertising costs (Google Ads and Facebook Ads) are way cheaper than Western Europe and there is less competition. Of course, on the other side, the average spending capacity per capita is lower than in Western Europe.
RISKS
First risk: small internal market.
Serbia is a small country with only 7 million inhabitants.
Moreover, the population is strongly decreasing. It is one of the fastest decreasing populations in the world and it’s expected that this trend will continue also in the future.
If you are planning to sell in Serbia, take into account that in general, the market size will be more or less stable in the future.
This aspect should be taken into account also if you want to delocalize in Serbia. In case of changes in duties, export rules, political situations, etc It will be difficult to divert production to the local market.
Second risk: out of European Union
Serbia is not a member of the European Union.
It applied in 2009 and it should enter in 2025. We have to consider that due to recent tensions inside the European Union this process can be longer.
Serbia is a country that can take only advantages to be part of the European Union, especially because Serbia should be a strong beneficiary of European development funds.
In the end, what is the risk? Timing. Serbia is out of the European Union for at least 5 more years.
Third risk: corruption
Corruption in Serbia is high. It is higher than any other European Union Countries.
According to Transparency International Serbia is not improving about it.
Fourth risk: public companies
Serbia was part of the former Yugoslavia and it was a socialist country.
There are still a lot of companies controlled by the public. The problem is considerable if we consider the high corruption.
Fifth risk: political tensions
The war ended 20 years ago, but political tensions are still present.
The most important is the one with Kosovo.
It is a long and complicated story. In a few words, Kosovo is the Southern region of Serbia, in this area the majority of the population is Albanian (and not Serbian).
Kosovo declared itself independent from Serbia in 2008.
102/193 Countries recognized Kosovo independent, but some important Countries didn’t and some of them are in the European Union and they are Spain, Cyprus, Greece, Romania, and Slovakia.
The relations between Serbia and Kosovo are now normalized, especially because both aspire to enter the European Union. However, Serbia still does not recognize Kosovo independent and the political risk is still present.
From our point of view, this open topic might delay entry in the European Union.
CONCLUSIONS
Serbia attracted many foreign investments in the last decade, in particular from Western European companies that delocalized their production in the Balkan country.
Like we said the advantage of delocalization is more exploitable for medium-large companies.
If you are a small company and you do not have the potential to delocalize directly in Serbia, you can look for local partners. It easier to find one compared to other places thanks to the high number of ISO 9001 certified companies and the good English knowledge.
You can check on our business to business platform if there are interesting opportunities from Serbian companies.
In the long term, Serbia can be more interesting because if they enter in European Union they will receive European Union funds to create infrastructures and improve their competitiveness. However, we are speaking about a long process of at least 5-10 years from now.
Other info about Serbia in Country Data page: Serbia Business Report
Link to data source: The World Factbook (CIA)
Globartis Research
Are you looking for partner companies in Serbia? Visit our b2b trade portal and get in touch with other business professionals.
