Direct investments in Serbia have been subsidized for more than 15 years, and during that period, more than 93 percent of the funds were approved to foreign investors.
Only 2.1 percent of supported investments are in the field of high technologies, and in the last five years, almost 80 percent of total direct investments have been placed in typically labor-intensive activities, with earnings below the national average.
Thus, the policy of support for direct investments, which was initially designed as a driver of productivity growth, modernization and improving the competitiveness of the Serbian economy, as “Business and Finance” points out, became an instrument for correcting the poor system of labor taxation.
At the end of the pre-crisis year of 2019, a total of 638 million euros was set aside to subsidize 2,912 investments, worth over 2.7 billion euros.
In the period from 2016, when the Law on Investments was adopted, until 2020, 121 agreements on the allocation of funds for investment incentives were signed.
The total value of these investments amounted to over 2.5 billion euros, state incentives for those purposes were 459 million euros, while based on the concluded contracts, it is planned to create about 46,000 new jobs.
When looking at the average value of subsidies, foreign investors were granted 6.4 times more funds per project.
Investment activity has intensified in the last two years, when about 60 percent of all incentives were approved during the previous five years, according to comparative research by the Faculty of Economics in Belgrade and the Foundation for the Development of Economic Science (FREN).
According to the findings of Milorad Filipovic, a professor at the Belgrade Faculty of Economics, the value of subsidies per employee granted to foreign investors is 30 percent higher than those granted to domestic investors.
The ratio of investment and subsidy is higher with domestic investors compared to foreign ones – foreign investors invest 43 euros for 10 euros of subsidies and domestic 55 euros, ie foreign investors receive 23 euros of subsidies for 10 euros of investments, and domestic euros 18 euros.
Most subsidies from 2006 to 2019 were approved for investments in the processing industry in the amount of 564.5 million euros, which is over 88 percent of the total approved subsidies.
The value of the subsidized projects amounted to 2.6 billion euros, and their realization created more than 78,000 new jobs in the processing industry, which is 90 percent of all new jobs created in that period.
The average value of investment in the manufacturing industry of 10.6 million euros is 2.5 times higher than investments in the service sectors, and the average value of awarded subsidies is 1.4 times higher in the manufacturing industry compared to service activities.
An average of 33,234 euros per employee was invested in the processing industry, which is 1.5 times more than investments per employee from service activities.
When investing in medium-high technological complexities that dominate in terms of investment, new jobs and the value of subsidies, most of the projects are in the field of parts production for the automotive industry.
It is most often about the production of various cable assemblies, small added value, with a large engagement of manual work of low-skilled workers, without including local suppliers in the production chain, said Filipovic, BiF reports.
