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The Government of the Republic of Serbia

In the service of citizens

Lemierre invites foreign investors to invest in Serbia

Belgrade, 21 May 2005

European Bank for Reconstruction and Development (EBRD) President Jean Lemierre has invited foreign investors to invest in Serbia-Montenegro, as all the necessary economic and political conditions exist.

Lemierre invites foreign investors to invest in Serbia

Opening the Serbia-Montenegrin Investment Forum, being held as part of the 14th Annual Meeting of the EBRD in Belgrade, Lemierre said that holding the EBRD Annual Meeting in Serbia’s capital represents yet another proof that Belgrade is back on the world map.

Tomorrow and on Monday, the Sava Centre will gather some 2,500 foreign investors and reporters, according to Lemierre, who also said that there is growing interest among foreign investors to invest in Serbia-Montenegro.

According to Lemierre, the country has achieved macroeconomic stability, inflation is under control, and Serbia-Montenegro has recently received a positive Feasibility Study from the European Union. He said that the EBRD is ready to help Serbia-Montenegro in the process of transition.

A few years ago, inflation in Serbia was very high and the country did not have a clear monetary system, but the situation is different today, according to Lemierre. He pointed out that law enforcement is of crucial importance and he welcomed reforms that the Serbian government is conducting.

Lemierre said that it is now time for the second stage of transition and that Serbia-Montenegro needs to restructure a large number of companies and reform public administration in order to create better conditions for faster economic development. He said that this is a very difficult process but that it must be carried out in full.

Warning that law enforcement is essential for successful reforms, Lemierre said that the EBRD is not only ready to invest in the public sector and infrastructure, but also in the private sector, primarily banking.

He said that Serbia-Montenegro has become a much more stable part of the region, which is opening up for cross-border cooperation and he added that he has recently spoken to a number of foreign investors willing to invest in the Balkans.

Finishing his speech, Lemierre invited foreign investors gathered at the Forum to invest in the region and to help create a better future for the people of Serbia-Montenegro.

Serbian Deputy Prime Minister Miroljub Labus said that Serbia has passed the point of no return on its way to the European Union.

He also said that the political situation in the country has significantly improved in the past year.

Labus pointed out that thanks to the two-track policy to joining the EU, the functioning of the state union of Serbia-Montenegro has improved and he stressed that this government, as well as every government to come, will continue with the pro-European policy, which he said is supported by more than 70 percent of Serbian citizens.

Labus said that the political situation in the country will become more and more stable and he announced that Serbia will get a new constitution by the end of the year, which will enable the creation of institutions necessary for the signing of a stabilisation and association agreement with the EU.

Labus expressed hope that Serbia will be granted candidacy status by 2008 so that it could become a full member of the EU by 2012.

He recalled that Serbia has initiated a constructive resolution of the issue of Kosovo-Metohija and stressed that the country is committed to further cooperation with the Hague tribunal.

Free trade is the main driving force of the integration process, said Labus and pointed out that the two-track approach has enabled positive progress in Serbia's accession to the World Trade Organisation (WTO) as well as the signing of the textile agreement with the EU.

"The better the trade, the more foreign investment will come, and we expect concrete investment projects from you", said Labus.

According to him, the EU countries are already Serbia’s biggest trade partners.

Labus concluded that Serbia’s main task is to ensure the base for sustainable development and a steady growth rate of around five percent a year.

European Bank for Reconstruction and Development President Jean Lemierre

Serbian Minister of Finance Mladjan Dinkic, who is also EBRD's representing Governor to Serbia-Montenegro said in his address to foreign investors that now is the right time to invest in Serbia.

Dinkic said that the Serbian government created a favourable environment for investment by granting numerous tax reliefs. He said that the value added tax in Serbia is among the lowest in Europe.

The revenues of the corporate profit tax in 2005 increased by 70 percent in relation to 2004, Dinkic said and added that last year Serbia received a favourable credit rating for the first time in history, which was improved two days ago. He announced that Serbia will soon reach the credit ratings of Croatia, Bulgaria and Romania. Dinkic said that Serbia's GDP reached $3,000 per capita, growing by eight percent in 2004.

The budgetary deficit was around 4.4 percent of GDP in 2004 and it has been further reduced to 1.7 percent, while a surplus of 0.2 percent is expected by the end of the year. According to the methodology of the International Monetary Fund, that is 1.2 percent of GDP, Dinkic said.

He said that the Serbian government aims to reduce public expenditures by one percent of GDP in 2006, and thus allow for further reduction in taxes in the next year.

In 2006, Serbia expects an additional 15 percent debt write-off from the Paris and London clubs of creditors.

Dinkic explained that Serbia's macroeconomic problem is a deficit of the current payment transactions, which was exceptionally high last year, reaching 13.8 percent of the GDP. In 2005, it is expected to drop below 11 percent.

Structural reforms are underway and conditions are being created for Serbia to increase its exports, which will result in the reduction of the foreign trade deficit, Dinkic said and recalled that in the first quarter of the year exports increased by 50 percent.

The Minister of Finance voiced hope that exports will maintain the growth rate of about 25 percent in relation to 2004.

Serbian Minister of International Economic Relations Milan Parivodic said that foreign investors should invest in Serbia because they will have many economic advantages if they do so.

Serbia is a safe, profitable, predictable and interesting country, Parivodic said and added that many who have invested in Serbia believe that they have made a good business deal.

With its free trade agreements, Serbia enabled investors to sell their goods on a market of around 650 million customers, including the Russian Federation with which Serbia has a free trade agreement, Parivodic said.

He recalled that Serbia has one of the lowest corporate profit taxes in Europe, which currently stands at 10 percent.

Parivodic presented to Forum's participants a set of new laws that introduced tighter discipline in the field of the economy.

In his opinion, the most important laws for foreign investors are the Law on foreign investment, the Law on registration of companies, the new Law on companies, the Law on enforcement procedure and the Law on foreign trade, which is to be adopted shortly.

Serbian Minister of Economy Predrag Bubalo voiced hope that foreign investors will find reasons to invest in Serbia since the state has carried out many reforms that add to a better business environment. "We are aware that much more has yet to be done, both in the economy and in the people's mind, and we will try to change many prejudices regarding Serbia", Bubalo said.

Bubalo informed the participants of the Forum about reforms carried out in Serbia to date. He announced that this year there will be 300 public auctions for the sale of socially-owned companies and 10 hotels will be privatised.

According to Bubalo, the revenues from privatisation from 2002 to 2004 total €1.4 billion, while in the first quarter of this year privatisation revenues are on the same level as in the same period last year.

Bubalo explained that the Serbian government and the Ministry of Economy plan to speed up the privatisation of state-owned companies. Also, they will call a tender for international advisors for privatisation in the telecommunications sector, the Bor mining and metallurgical complex and the Oil Industry of Serbia.

Governor of the National Bank of Serbia Radovan Jelasic said in his address to foreign investors that the most sweeping reforms have been carried out in the banking sector.

In the first six months of 2002, 66 percent of the banking sector was shut down, that is around one million accounts, and 40 percent of employees were laid-off. Today the situation is much better because the savings have increased by around €200 million since January 2005 and are expected to increase by a further €500 million by the end of the year. Last year, savings increased by around €400 million, Jelasic said.

Jelasic announced the privatisation of insurance companies that should begin in September, and the adoption of a law on voluntary pension insurance that will be especially interesting for foreign investors.

General Manager of the Delyug Serbia Spiros Pyrgidis also addressed the participants and retold his experience of doing business in this region. He said that Serbia-Montenegro is a promising country when it comes to investment and development.

Montenegrin Minister of Finance Igor Luksic said that the level of foreign investment in Montenegro is constantly rising and Montenegro's goal for this year of €150 million has already been exceeded, first and foremost owing to the sale in the telecommunications sector.