VIP treatment in a Serbian special economic zone

By bne IntelliNews June 16, 2014

Ben Aris in Dubai -



You can expect VIP treatment in northern Serbia as an investor. That doesn't stand for a "Very Important Person", but the Vojvodina Investment Promotion agency, which helps attract investors to a region in the northern half of the country.

Investment promotion agencies have become all the rage across Emerging Europe, and Serbia is the latest country to get into the game. Established in 2004, VIP looks to bring investors to a special economic zone that surrounds Novi Sad, Serbia's second most important city located in Vojvodina – an autonomous province within the country that has its own budget and has a lot of power in setting its own regulations.

"VIP was set up to attract foreign direct investment. We offer opportunities in agriculture, automotive parts manufacturing, which is very strong, ICT, electronic components manufacturing in general, and metal construction," Emilija Stefanovic, head of the Regents investment promotion agency, told bne recently on the edges of the Dubai International Investment Forum. "And most recently we are starting to invest in renewables."

The region has already attracted a fair amount of attention, largely because it offers cheap wages for a relatively high skilled labour force that is not very far away from the rest of Europe. Some 20 foreign companies have already sunk $320m into just the automotive sector. The temperate climate and fertile soils have also attracted significant investment into agriculture: Nestle, Coca-Cola, Pepsi, Carlsberg and Heineken have all set up operations in the region. All in all, around 50 foreign companies have invested a total of $2bn in the Vojvodina region. "We offer a great combination of cost versus quality. If you ask people why they have come, they also say they like being in Central Europe and that it is an advantage not to work in the EU," claims Stefanovic.

Serbia stands at a nexus between Western Europe, the Middle East and Northern Europe. Also as a Slavic country, it enjoys a free trade agreement with its old friend Russia that makes VIP a good location for manufacturers exporting to the vast Russian market, but at the same time it enjoys a preferential trade agreement with the EU. "The free trade agreement with Russia makes us different, as there are only four other countries [not in the Russian-led Customs Union] that have the same deal," said Stefanovic.

So far, the main exports from the region are agricultural products – things like fruits, grain, and vegetable oil. However the automotive and engineering sectors are growing fast and Serbia is becoming a just-in-time/just-in sequence supplier to companies like Bosch and Siemens.

Although Stefanovic is not keen to emphasis it, the biggest appeal is being able to find qualified workers in Europe that cost between €373-611 a month. "There's a high level of education. Novi Sad has the second biggest university in the country that is producing more than 50,000 students a year. And we enjoy a traditionally good education system," said Stefanovic, adding that the university has built ties with local industry in order to produce qualified workers for the factories.

The financial conditions are also appealing: corporate tax and income tax are both only 15% one of the lowest tax rates in Europe.

And finally transport links with the rest of Europe are good. There are motorways north and south and new roads of those being built to further integrate Serbia into the region. Western Europe, Turkey and Greece are all within easy striking distance.

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