Serbia in the Southeast of Europe offers attractive opportunities to those foreign investors who wish to gain access to a rapidly developing market. Over the last few decades, Serbia has undergone significant political and economic changes that have turned the country into a place with a comfortable business climate. Below we discuss the main properties that attract foreign investors to Serbia and in addition to that, mention some risks that a foreign entrepreneur may face in the country.
Advantages of Serbia for foreign investors
Geographic position. Serbia is located at the crossroads of important transportation venues that connect Europe with East Asia. Due to such a beneficial geographical position, Serbia offers fantastic opportunities to those who invest in transportation and logistics in the country. The country is also a member of the Central European Free Trade Agreement, which gives local companies free access to huge markets.
Low cost of labor. Labor costs are lower in Serbia in comparison to most other European countries. This factor attracts many foreign companies who want to decrease their operational costs. Investing in such sectors as information technologies, automotive industry, and manufacturing is especially beneficial in this respect.
Government support. The Serbian Government seeks to attract more foreign capital to the country and it offers various benefits and incentives to foreign businesses. The administrative reforms in Serbia have simplified most bureaucratic procedures and doing business is easy in the country today. Moreover, some Free Trade Zones can be found in Serbia as well as industrial parks designed to attract foreign investors.
Serbia’s recent achievements in the business sphere
Startup Genome and Global Entrepreneurship Network have prepared a report on global startup ecosystems for 2022. The ecosystems in Belgrade and Novy Sad in Serbia grew by 60% last year, which is impressive without doubt.
Key highlights
Between July 1, 2020 and December 31, 2022, the startup ecosystems in Belgrade and Novy Sad grew by 75.41%. By the end of the period, it was worth 1.11 billion dollars. According to the report, the local ecosystem is among the top twenty startup ecosystems in Europe as far as the number of talented players is concerned.
Serbia is famous for the talents of its engineers but Belgrade and Novy Sad startup ecosystems receive additional benefits from the innovation-oriented activities of the Serbian Government, the educational institutions and other interested parties.
A central part of their strategy is training in entrepreneurship at all levels, improving the training infrastructure, and developing intellectual support programs.
The ultimate goal is to create almost 1,200 active startups that can attract investments from all over the world.
The total amount of foreign direct investments was 4.4 billion euros in Serbia in 2022, according to the National Bank of Serbia. This is a record-breaking figure.
The Serbia Ventures program that has been developed by the Serbian innovations fund is aimed at attracting private foreign entrepreneurs as well as foreign companies that can invest in startups and establish venture funds in the country. The plan is to attract up to 5 million euros to the newly established venture funds. Omorika Ventures and The Fifth Quarter are two such venture funds that have already started operations this year.
3Lateral and Epic Games continue to develop a design project for the future campus in Novy Sad. The campus will have facilities to support educational initiatives in the business sphere.
Microsoft has signed an agreement with Catapult (a business accelerator) that gives startups access to Microsoft products. In 2022, Catapult gave support to 18 Serbian startups.
The Ninja Accelerator is a joint business acceleration program launched by Digital Serbia and the Japanese International Cooperation Agency. The program serves the purpose of building bridges between Serbia and Asian markets.
Superb IT expertise available in Serbia is a weighty reason why startups should be launched in Belgrade and Novy Sad. High technologies generate at least 6% of the national GDP in Serbia and the figure grows fast. Serbia has more than 45 thousand IT specialists and it is famous throughout the world for its world-class engineers. Computer programming is a compulsory subject in Serbia for all schoolchildren above the age of 11. There are 44 specialized IT courses attended by 800 pupils every year. 26 university departments turn out 3,300 software engineers annually.
Another important factor that contributes to the growth of startups in Serbia is the available tax incentives. The Income Tax Act offers tax deductions to entrepreneurs directly involved in research and development. This is highly valuable in the early stages of a startup. The abovementioned Act and other pieces of Serbian legislation related to taxation also gives tax incentives to startups engaged in innovative activities.
Risks for investors in Serbia
The achievements of Serbia in the area of business development look impressive indeed. However, the country does not offer only advantages to foreign entrepreneurs: business risks for investors in Serbia also exist. Below we discuss the main such risks.
Political instability. As is the case in many other countries today, the political situation in Serbia is prone to changes. An unstable government or changes in the political strategies may affect the investor and put his/ her business in a state of uncertainty. Therefore, foreign investors have to assess the political situation in Serbia as well as the risks associated with political instability.
Drawbacks in infrastructure. Even though the Serbian authorities are putting great effort in improving the infrastructure in the country, some areas still need a lot of investments. Some regions of the country do not have good roads, energy infrastructure, or logistic centers. This can get in the way of the investor’s business activities. Foreign investors have to take this fact into account when planning business operations in Serbia.
Regional tensions. Serbia is still involved in regional conflicts and it has complicated relations with some neighboring countries. This may cause uncertainty for the business. Local conflicts can be especially ripe with risks for trading companies.
However, the advantages that Serbia offers to foreign investors overweight the risks associated with launching a business venture in the country.
