Pursuing sustainable growth Serbia s investment perspectives

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1 20th Annual meeting of the EBRD Board of Governors EBRD Business Forum Pursuing sustainable growth Serbia s investment perspectives Vesna Arsić State Secretary for International Economic Relations Government of the Republic of Serbia

2 Key country data Official Name: Republic of Serbia Area: 88,361 km 2 Population: 9.5 million Official Language: Serbian State Form: Democratic Republic Capital: Belgrade (1.6 million) Currency: Serbian Dinar (RSD)

3 GDP growth rate and GDP per capita (EUR)

4 Inflation (CPI)

5 First recovery in the region Average GDP growth rate GDP growth rate * Bulgaria 5,6-4,9 0,4 2,6 Romania 6,2-7,1-1,9 1,1 Hungary 3,4-6,7 1,3 2,0 Serbia 5,4-3,1 2,0 3,0 Croatia 4,5-5,8-1,3 2,0 Slovenia 4,4-8,1 1,0 1,7 *Source: EBRD, January 19, 2011

6 The basis for sustainable growth Pro-investment and export-oriented economy Reindustrialization Completion of strategic public infrastructure projects Starting an intensive investment cycle in energy sector EU and WTO accession, integrated regional growth

7 Targeting export growth and elimination of foreign trade deficit In 2010 exports rose by 24% to 7,4 bn EUR

8 Targeting export growth and elimination of foreign trade deficit Export-import coverage ratio rising from 32,8% in 2004 to 58,6% in 2010

9 Trade by economic groupings in 2010

10 Top export destinations in mn EUR

11 FDI stocks in SEE Source: UNCTAD World investment report July 2010

12 FDI origin by country and sector

13 Investments in transportation infrastructure Corridor X A major part of the Corridor X highway already built, but some sections missing: towards FYR Macedonia and Greece towards Bulgaria towards Hungary Belgrade bypass

14 National Roads Strategy 2010/11 Infrastructure is crucial for equal regional development opportunities; The National Roads Strategy envisaging further upgrade of the road network;

15 Investments in energy sector The South Stream gas pipeline The high capacity underground gas storage Construction of thermal power plants Kolubara B TENT B 3 TE TO Novi Sad Capacity expansion of existing TPP Construction of hydro power plants Djerdap 3 Great Morava Upper Drina (with Republika Srpska)

16 Serbia s Free Trade Agreements European Union EFTA Russia Kazakhstan CEFTA Turkey Belorussia USA preferential trade

17 Free Zones in Serbia Fiscal benefits (exemptions from any tax burden for FDI, VAT, company profit tax, property tax, income tax, etc.) Free of customs duties for goods, equipment, raw and construction material Efficient administration, (one stop shop) Simple and fast customs procedures Local subsides for using the infrastructure Providing a set of services to users under preferential terms

18 Supportive investment regime National treatment of foreign companies; Free transfer of financial and other assets, including profits and dividends; No industry restrictions on foreign investment; Business legislation reforms in line with the EU legal framework;

19 Favorable tax regime

20 Financial incentives overview Large-Scale Projects Manufacturing and Export- Related Services Standard-Scale Projects Manufacturing Export-Related Services Eligible Projects Capital and Labour- Intensive Projects Labour- Intensive Projects Projects Realized in Devastated Regions and Regions of Special State Interest Projects in Automotive, Electronics, IT Industries Realized in Regions of Special State Interest Projects Realized in Other Regions Projects Realized in Any Region Grant Amount Up to 25% of the total investment Up to 20% of the total investment 4,000-10,000 per job created 5,000-10,000 per job created 2,000-5,000 per job created 2,000-10,000 per job created Minimum Investment Amount 200 mn 50 mn 0.5 mn 0.5 mn 1 mn 0.5 mn Minimum Number of New Jobs 1,

Investment incentives in different regions In the municipalities of special interest for regional development: Incentives from 5,000 to 10,000 EUR for every new job created In

21 Investment incentives in different regions In the municipalities of special interest for regional development: Incentives from 5,000 to 10,000 EUR for every new job created In the most underdeveloped municipalities Incentives from 4,000 to 10,000 EUR / every new job created In other municipalities Incentives from 2,000 to 10,000 EUR / every new job created

22 Human resources 27,000 university and 2-year college graduates, and 75,000 high school graduates yearly Top quality technical education at both high school and university level A wide availability of highly qualified staff Strong command of the English language This initiative demonstrates our confidence and trust in Serbia, its industry, management competence, and the skil of its workers. Sergio Marchionne, CEO

and Transport Engineering Faculty of Technology and Metallurgy 11

23 Technical education Faculty of Mechanical Engineering Faculty of Technical Sciences Faculty of Electrical Engineering Faculty of Traffic and Transport Engineering Faculty of Technology and Metallurgy 11 technical faculties for white collar workers 71 technical schools for blue collar workers

24 Success story: FIAT in Serbia

25 FDIs in 2010/11 New comers Name Country Sector Municipality Value million Jobs Maxim BG Slovenia Metallurgy & Metalworking Inđija Credy banka Slovenia Financial Kragujevac 20 PepsiCo Marbo United States Food & Beverage, Agriculture Bački Petrovac Tigar Tyres Michelin France Automotive industry Pirot Yura Corporation - Nis South Korea Automotive industry Niš Koteks Viscofan Spain Packaging Novi Sad Dytech F&F Italy Automotive industry Niš Vossloch-Schwabe (Panasonic) Germany Electrical & Electronics Svilajnac Calzedonia / Fiorano Italy Clothing Sombor Gorenje Tiki Slovenia Electrical & Electronics Stara Pazova NORMA Group Germany Automotive industry Subotica FALKE Germany Clothing Leskovac Tatravagonka Slovakia Machinery & Equipment Subotica 8.4 Farmina Pet Foods Italy Food & Beverage, Agriculture Inđija 8 50 Yura Corporation - Raca South Korea Automotive industry Rača Valy Golden Lady Italy Clothing Loznica Harder Digital Sova Germany Electrical & Electronics Niš Bauerhin IGB Automotive Germany Automotive industry Inđija Metech Belgium Metallurgy & Metalworking Smederevo Sagemcom France Electrical & Electronics Niš Modital Italy Textile Zrenjanin Euro BB Norway Food & Beverage, Agriculture Užice Jeanci Turkey Textile Leskovac Termoprodukt Austria Construction Sremska Mitrovica Grammer System Germany Automotive industry Aleksinac Elrad WS - S Slovenia Electrical & Electronics Vlasotince 1 50 Dunkermotoren Germany Electrical & Electronics Subotica 1 50 Labod Slovenia Textile Rekovac Gruppo Fiorentino Italy Clothing Vlasotince IMP Holding / JIE engineering Germany Energetics Palilula (Belgrade) 0.5 5

risk DB5a to moderate DB4d Fitch Ratings, November 2010, from

26 Improved country ratings OECD ranking, in Q1 2010, from classification 7 to 6 Dun & Bradstreet, March 2010, from high risk DB5a to moderate DB4d Fitch Ratings, November 2010, from BB- negative to BB- stable Standard & Poor s, March 2011, from BB- to BB

27 Final remarks Prerequisites for further export-based growth Attracting competitive export-oriented investors Completion of restructuring and modernization/privatization of large domestic companies Enabling domestic private sector to grow and become more competitive Finalization of initiated infrastructure projects Construction of new energy facilities

28 Thank you! Government of the Republic of Serbia

THE REPUBLIC OF SERBIA - YOUR TRADE PARTNER

THE REPUBLIC OF SERBIA - YOUR TRADE PARTNER Slobodan Milosavljević, PhD Minister of Trade and Services Republic of Serbia Vicenza, May 2010 GEOSTRATEGIC POSITION Location: : South-East Europe, central