Serbia-The Favorite Kid On The Block
Foreign Domestic Investment On The Rise
Image by Zvonko
Serbia is the largest state of the Western Balkans. Since 2014, the country has been in the process of accession negotiations to join the European Union and has made good progress towards this strategic goal by implementing an ambitious economic and structural reforms that have produced results. The country is increasingly participating in EU and international peace-keeping missions.
Currently Serbia has grown into one of the most attractive investment locations in Eastern Europe, despite its long ethnic problems with neighboring countries and the strong political ties with Russia, its traditional orthodox ally, and its permanent geopolitical rivalry with EU and US. Today even China and Turkey are interested in putting funds to work in the tiny country.
According to the European negotiator, Johaness Hahn, the EU needs Serbia as the region’s leading force. Surely, the fact that Serbia is the only Christian non-EU country in the Western Balkans is an advantage, although that fact is never admitted loudly. Foreign Direct Investment (FDI) in Serbia constitute the pillar of Serbian government’s development strategy. Its rapid entry into the neo-liberal capitalist system of the global economy has been marked by such foreign investments. World class companies and banks such as Fiat, Telenor, Michelin, Coca-cola, Microsoft, Gazprom, Intesa SanPaolo Bank, Siemens, etc, control up to 76% of investments in Serbia. Interest for large manufacturing projects – food, beverages, tobacco, petroleum products, metal products, motor vehicles, machinery, – is increasing steeply. During 2017, Serbia has been the leading state regarding employment for the Balkans. Out of 400,000 new jobs, 300,000 have been in Serbia.
The EU is the biggest investor and employer in the country. 2/3 of FDI in Serbia is coming from EU. 67% of Serbian exports go to EU member states, which have not only given financial aid and donations to Serbia, but also assistance and know-how. Italy with its heavy industry and banks and Germany with telecommunication projects are among big investors.
But other countries have their sight set on Serbia, as well, competing with EU.
China is investing 5.5 billion EUR in infrastructure projects, such as the Belgrade-Bar (MN) highway and the Belgrade-Budapest high speed railway. The big country has not only transactional ties with Serbia, China is one of the few countries to support Serbia’s position on Kosovo, refusing to recognize its independence. Some diplomats are warning that China, like Russia, could become a threat to the Balkans’ stability.
Turkey considers Serbia as a prime strategic country, regarding its position as a link between Southern and Central Europe. Turkish investments in Serbia are expected to grow in the short term, as the country offers the best conditions for FDI. Trade agreements are signed in manufacturing plants and agriculture. The common goal is to reach 1 billion USD in trade volume. Turkey is also investing in Belgrade-Sarajevo highway construction. There are other agreements on energy cooperation, such as the prospect of natural gas supplies to Serbia via the Turkish Stream pipeline, a joint project between Turkey and Russia.
Russia is one of the most important external trade partners of Serbia, thanks to the free-trade agreement between the two countries. It is continuing to help its little sister, especially with 4 billion USD investments in transport, energy, and the oil and gas industry. Over 30 Russian companies have a notable presence in the Serbian banking system. Russia is the third biggest foreign trade partner, after Italy and Germany.
Although Europe continues to press Serbia, regarding the high level dialogue between Belgrade and Pristina, which will serve to support the normalization process between two countries and Serbia’s integration in EU, it does not seem that such an issue is hindering the country to prosper through foreign investments.
Where there is good will on the part of big countries to help smaller countries to improve, the outcome is positive. The problem is how to become the favorite.